My path to debt freedom

Getting out of debt is simple in theory. Earn more than you’re spending. Use discretionary income to pay down debt. Become debt free. It’s that easy. No really it is.

That said, the path to executing those steps is often not easy; financially, emotionally, or otherwise. I’ve now been debt free longer than I was in debt so I rarely touch on the topic. Today, however, I thought I’d share the ways I got out of $28,000 student loan debt in 2.5 years.

Spend less than you make. 

You have to start here. If you are living paycheck to paycheck, or worse, using a credit card to float from one meal to the next, you gotta get something figured out. Either cut your expenses (if you can) or take on a part-time job. The only way your debt can be paid down is by having a buffer.

Save some money. 

Dave Ramsey says save $1,000 before you start aggressively paying off your debts. That’s cute and all, but it didn’t jive well for me. Paying off car loans is great, but liquidity, in my opinion, is greater. At one point I had $17,000 in the bank and only $15,000 in debt. Looking back, I wouldn’t have been so aggressive with saving money, but don’t feel bad if you want to work towards $5,000 in the bank before you really get serious.

Remember, a paid off student loan can’t put food on the table, but a healthy emergency fund will. Liquidity is king.

Decide how much you want to punch your debt in the face.

I made minimum payments for a few months after graduating. It wasn’t until I realized that only $20 of my $179 payment was actually reducing my student loan balance that I needed to get my stuff together. That meant over the course of a year I’d pay $2,148 to Sallie Mae, but only $240 of that actually improved my financial picture.

I got pissed. There was no way I was going to make minimum payments. So I started making double payments. I did that for about six months, then started making triple payments. As my income grew, I started paying $1,000/month to Sallie Mae. It wasn’t until a few months before my wedding that I decided I really wanted to kick Sallie Mae in the uterus.

Girl Ninja was debt free, and I didn’t want to be the one responsible for bringing debt to our marriage. In May 2010, I took $10,000 out of my savings account and paid Sallie Mae off for good.

Decide if you even want to be debt free.

One of the things that’s been fun for me lately is meeting PDITF readers when I travel. They often start sharing their financial situation with me shortly after we’ve shaken hands – kinda weird when you think about it since I’ve only known the person for 2 minutes.

It’s not uncommon for them to say something like “Well I have a car payment, but it’s only because my other car broke down and the dealership gave me an incredible deal on this car.” I typically stop them mid sentence because I get the sense they think I’m judging them.

Do I have a car payment?


Do I think they’re dumb for having a car payment?


Car loans aren’t my cup of tea, but who the heck am I to tell them they can’t afford one? If having a $150 car payment makes you sleep easier than writing a $10,000 check and paying cash, I have no problems with that.

Contrary to popular belief, you can be both financially stable AND have debt.

Move on.

Paying off my debt WAS NOT a significant part of my personal finance journey. I thought it was at the time, but now that I’m a few years removed from the situation I can tell you it’s not. Paying off your debt is just one of the many challenges you’ll face.

Maintaining an emergency fund, saving for retirement, creating multiple streams of income, investing for the mid-term; the journey never ends. Paying off my debt was just one small drop in my massive personal finance bucket.

Hear this… You need to have personal finance goals outside of debt freedom.

That’s all I got.

How would your list differ from mine?

p.s. my favorite nail from yesterday: Sexy Beast


11 thoughts on “My path to debt freedom”

  1. Make more money. Just as simple as “spend less than you make.” if you don’t make enough to pay for the bare necessities such as food, clothing, shelter, and transportation, you will have a hard time paying off debt, saving, etc. I find that too many PF blogs don’t realize that so many people don’t make that much money because of one reason or another. One can only hustle so much or have a certain amount of luck in life. Bootstrapping requires both BTW.

  2. I love me some Dave Ramsey…for his common sense and promotion of self-control. However, I also disagree with the super low emergency fund or driving a “beater.” We have money in the bank to pay off at least one of our cars..but we’re comfortable with the payment and love the freedom it gives us to handles real emergencies…like needing a new roof and furnace in the same year. We’re saving so much by paying for those in cash it more than makes up for the interest payments going to the car loan this year.

    I think you need to have common sense, control yourself, spend less than you earn, and decide where your money is most beneficial! That being said…my husband and I have agreed that the only things we will take out loans for is 1) a mortgage 2) cars 3) possibly our children’s education.

    • I’m with you – Dave Ramsey has a lot of good advice, but the e-fund of just $1K would not cover many emergencies. We too have enough money to pay off our remaining car loan, but since the rate is so low (1.9%, so it’s costing us barely $300 in finance charges over the course of the loan), I have no problem with staying liquid & keeping our money in the bank for a rainy day. That being said, now that our e-fund is fully funded to cover several months of expenses, we’re tossing as much extra money as we can at our highest interest debt – the mortgage. We’re also refinancing. The refinanced mortgage will lower our monthly payments by about $225-300 (depends on where the appraisal comes in), and we’re planning on keeping our payments about the same. Currently, we’re paying about $180 principal extra each month, so after refi, that would have us paying at least $405 principal extra monthly. It will feel SO good to see that principal balance drop by an extra ~$5K each year. If the property value gods are smiling upon us, that may mean we’ll finally be above water mortgage-wise within 3-4 years, hallelujah!

      I agree with Ninja’s list & general advice, but I do have to note that for dual-spending households, both adults need to be on board for any of this to work properly. I’ve made progress in converting my DH from a habitual spender with no fiscal clue to a somewhat habitual spender with somewhat of a fiscal clue…but we certainly would be making more progress on debt payments and would have hit our (my?) savings goals sooner if I wasn’t the one always saying, “NO, we shouldn’t spend money on ordering in or take out food multiple times a week, we should make dinner & bring lunch to work more often.”

  3. For some people having debt doesn’t limit their abilities to be financially responsible but for others (like myself) debt can be a slipperly slope. I came out of school with loans that I didn’t plan on paying off for 15-20 years and so charging a few things to my credit card here and there just seemed like a drop in the bucket. I wouldn’t be in the black in the next decade anyways, so I might as well live it up, right?

    So $65K in debt later I smartened up and paid it all off. I get what you’re saying about paying off debt not being the most significant part of your journey, because being on the other side I see investing and other steps having a greater impact as well. But I see paying off debt as the first step in a long journey, and without that first step I would have never gotten to a +$250K networth.

  4. Contrary to popular belief, you can be both financially stable AND have debt. . . . Paying off your debt is just one of the many challenges you’ll face. . . . Paying off my debt was just one small drop in my massive personal finance bucket. . . . You need to have personal finance goals outside of debt freedom.

    I have been saying similar things off and on for quite some time on this website. The current obsession with debt, fueled by hucksters like Dave Ramsey and Suze Orman who are primarily out to gain your unquestioning allegiance (and your money), obscures a rational approach to managing your finances on a holistic basis. Debt has to be looked at not in isolation but in relation to your total assets and your ability to manage your income. (Do I have a car loan? yes. Do I have a mortgage? yes. But my overall debt is under 5% of my total assets, and my required payments are less than 1/4 of my monthly income. I’m not worried about my debt.)

  5. This was an Awesome post.

    My mom recently told me about her friend who bought a new vehicle. With the low interest rate she is only paying 600 dollars over 5 years in interest.

  6. I fit into the “financially stable AND have debt” category. I have a car payment, and I have more savings than I do debt. I could pay off my car in one swoop, but I don’t want to, because having liquid cash makes me feel more comfortable. I think you are completely right about that part.

  7. I work well with debt. I am highly motivated when paying down debt, so I use that to my advantage. I borrow to invest so that I force myself to shamefully pay down my loan. Works for me!

  8. You’re right. You can have financial security and debt. However, there are a lot of people (and you were never one of them) who have more debt payments every month than they can afford. So for them the first step IS to get rid of the debt (or at least a substantial part). And the process of doing this helps them to learn how to live within their budget.

    I’m totally okay having student loan debt (mine is at 2.5%), but am not okay with credit card debt. Because for me the credit card debt is a symptom of my lifestyle not being in check with my income. The student loan debt is low interest and less than the rate of inflation, so I’m okay paying that off over time without “gazelle intensity”.

    The bottom line is that the person needs to develop habits to help them live within their means and for a lot of people this means complete elimination and annihilation of their debt to get used to living on a budget and then having the liquidity in their budget to be able to save.

  9. From my experience I have found that there are two features that have significantly improved people’s lives and cash flow. First the use of bill pay by your bank. Since most people have a bad time trying to budget this essentially does it for you. Set up your bills for autopay. This ensures they go out on time (your credit score will thank you for it) Additionally I have set my bills to go out a little bit every week. This alleviates large payments at one part of the month. I was finding it was the large payments that was stressing me out. You also can get aggressive with it. If you payment is $100. Try posting $30/week to it. See where you are and maybe go for more. I only recommend this on installment type loans that don’t have a tax deductions benefit ie car loans, credit card loans. You want to pay your student loans and mortgage related loans last since they offer a tax benefit if you are itemizing. And that is the second topic, realize the difference between “good” debt and “bad” debt which is essentially its tax deductible status. I have friends who have no “bad” debt but when they want to buy make purchases they have a HELOC that acts like a revolving account they make the purchase pay it off when they like and the interest still falls in the mortgage interest category

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