9 minute read

Have you ever felt like it’s too late to make a positive change in your life?

When you feel like you’re beginning your financial life way behind, it’s easy to think to yourself, I’ll never catch up.

That’s how I felt when I finished grad school and entered into my working career.

Like most others, I didn’t graduate from college debt free.

Not to mention, we also made some stupider decisions after graduating from college, such as:

  • Instead of house hacking, we bought a house that was way too big for us.
  • We took out a $12,000 line of credit from the bank to finance our backyard.
  • We were spending over $1,000 eating out each month!

Here’s What We Were Dealing With

ACS Student Loans$9,000.00
CitiBank Student Loans$13,000.00
Great Lakes$41,620.00
Line of Credit$12,000
Total Accrued Debt$101,226.25

We weren’t making traction with our debt payoff, and we certainly weren’t making traction with our savings and retirement.

We found ourselves exhausted at the end of each month and had nothing to show for it.

So, finally one day we decided to make a change.  We discovered the concepts of financial independence, the power of being debt free, and that we could indeed make some huge changes in our life for the better.

But it came with a sacrifice.

What Did It Do For Us?

Before we dive into the meat and potatoes, I think it’s important for you to know where we’re at right now.  Taking the steps to pay off our debt helped us to grow in several ways.  As a result, we’ve been able to see many “fruits” arise from this growth.  These include:

  • My wife went from working full-time to part-time (California’s still pretty expensive ya know)
  • Less stress from finances
  • More time to spend with our family
  • We are beginning to invest in real estate
  • More margin to take some calculated risks
  • More wisdom and insight

So, with all these wonderful new benefits, let me share with you what we did in order to pay off $101,000 in student loans while cash flowing another $40,000 in 3 years.

Accept Your Situation and Get Organized

First, we took a sober look at our financial situation.  If you can’t admit that you have a financial problem, then you can’t expect to make any progress.  So, we took an inventory of all the debt.

In order to take an inventory of all our debt, I created an account with Personal Capital.  Personal Capital allows you to connect all of your external student loan accounts (NelNet, Great Lakes, Sallie Mae, etc…) and credit card accounts into one place.

This way, you can see everything in one place which will help to track debt payoff over time.

Personal Capital is great for helping you stay organized.

Devise a Plan That Works For You

Once we got everything organized and into one place, we had to come up with a strategy for paying of the debt.  And in order to implement this strategy, you need to determine what your plan of attack is going to be.

My best friend and parter in real estate, David Greene, gives the analogy of lining up dominoes.  In order to knock over the last (and biggest) domino, you don’t just start from the first domino and work your way ahead.  Instead, you look at the last domino and determine, by working backwards, how will you be able to knock over the last domino.

For debt payoff, there were basically two schools of thought for devising a payoff strategy:

  1. Pay off the loans with the highest interest rate first (because this can save you money in the long run)
  2. Pay off the loans with the smallest balance (but you may still be paying high interest rates)

While there are pros and cons to both of these strategies, we chose option #2: Pay off the loans with the smallest balance.  If we would have chosen option #1, it would have taken me much longer to pay off the loans with the highest interest rate.  And because of this extended length of time, I most likely would have given up on my debt payoff because it felt like it was taking too long.  I did better when I saw the smaller loan balances quickly becoming zeroes.

Cut Out The Biggest Expenses First

After getting organized and developing a plan, we began to cut down on our highest expenses.

For us, our biggest expense was our mortgage which equaled $2,800/month.  We weren’t in love with our current home.  And there was no real reason for us to stay. It was way too big for our family of three.  So, we decided to sell our home and downsize.  We sold our home and moved into a 900 square-foot halfplex to rent for $1,280/month.

Downsizing was remarkable!

We could breathe again.  We immediately had an extra $1,520 each month that we could throw at our student loans.

Your biggest expense may be something else.  And you may not necessarily need to move or downsize in order to improve your financial situation.  Consider what you should or could sacrifice instead?

  • May your car payment is too high and you need to sell your car.
  • Or maybe you’re spending way too much on eating out and entertainment.
  • Maybe you’re spending thousands of dollars on daycare and it may actually be cheaper to have a spouse stay home part of the time.

Whatever situation you’re in, look at your highest expenses first and determine how you can reduce that spending.

Start Budgeting With Cash Envelopes

For my family, the areas where our spending was out of control was:

  • Dining Out
  • Entertainment
  • Groceries
  • Personal Spending Allowance

So, we started using the envelope method in order to keep these expenses from getting out of control.  The envelope method consists of using cash for different categories of your budget, keeping that cash in the allotted envelope.

For example, if your grocery spending for the month is $400, at the beginning of the month you would put $400 into the envelope (or $200 if you budget 2 weeks at a time).  And when you go grocery shopping, you are paying with the cash from that envelope.

And once the cash is gone, it’s gone!  No more spending for that category for the rest of the month.  This helps tremendously to mitigate against thoughtless-swiping of your debit or credit card.

The reason why this method is so beneficial is that you can visually and tangibly see how much money you have for the rest of the month. Having this physical experience with your money causes you to think twice before overspending and helps you stay on track with future spending.

Start Holding a Monthly Budget Meeting

According to one survey, nearly two-thirds of all marriages start off in debt and financial issues are the 2nd leading cause of divorce.

If you happen to be married, sticking to a budget can be very difficult.  When you’re single, you have only one person that needs to be held accountable.  But, when you have two people with two sets of ideas, opinions, beliefs, dreams, and spending habits.

That same survey also stated that 94% of married couples who say they have a “great” marriage discuss their money dreams with their spouse.  There’s something to be said about that.  If you and your spouse can come together and align your goals with a mutually beneficial relationship, then you’re going places.

With this, we began having monthly budget meetings.  We’d usually set a coffee date the first weekend of each month and we’d do two things:

  1. We reviewed our performance from the month before
  2. We reviewed our overall net worth (how much did our liabilities decrease and our assets increase?)
  3. We reviewed our goals for the next month and for the year

By getting together to review our financial performance on a monthly basis, it allowed us to start dreaming about the future together.  Additionally, it allowed us to bring up any issues that needed to be expressed while keeping the lines of communication open.

Do The (Side) Hustle

Another surefire way to quicken your debt snowball is to earn extra income.  If you’re living within our means and following your budget, any extra income that you earn can be thrown directly at your debt.  This can make things happen real fast.  Here are a few of the things we did to earn some extra income:

  • Picking up extra shifts
  • Freelancing
  • Web Site Design
  • Garage sales
  • Consulting
  • Health Coaching

Cut the Cord

For a long time, we had satellite television.  And it wasn’t just satellite television.  It included all the premium channels and sport subscriptions you could think of.  At one point, we were paying about $119 per month for our TV subscription.

When we first thought about cancelling our TV subscription, there was some resistance.  Some of the thoughts that came through our mind included: Well, if we cancel, I won’t be able to watch _______ anymore.  We had convinced ourselves that television was a necessity in our household.  Hey, we work hard during the day, so we deserve to “veg out” a little bit in the evenings.  No harm, no foul, right?

Well, after much discussion and thought, we actually came to a few conclusions about our television viewing habits which helped us to eventually cut the cord:

  • $119 per month is too expensive for television
  • Watching less television would actually allow us to focus more on engaging activities such as read, write, or prayer
  • Watching television does not actually allow us to “unwind” or “destress”
  • If we stopped watching a particular television show, we probably wouldn’t miss it after a week
  • Streaming options such as Netflix and Hulu provide viewing options just as good as our satellite provider, not too mention they’re much less expensive
  • Many sporting events are live-streamed online as well.

After recognizing all these factors, it was pretty easy to see that watching television wasn’t doing anything positive for us.

Next Steps

Paying off this exorbitant amount debt allowed us to make some positive changes in our life.  And while your financial or family situation may be different, you can still take the steps necessary to pay down your debt so that you can start pursuing financial independence.

One quick-and-easy step you can take right now is to join our growing tribe of men and women who want to be relentless, not only in their financial lives, but with their entire life.  Fill out the form below to get signed up!

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Kyle Renke is a Sacramento-based real estate agent with Keller Williams Realty and The David Greene Team. Kyle is the primary author and contributor behind RelentlessFI.com, an online community and blog dedicated to those who are relentlessly pursuing financial independence. A lifelong learner, Kyle holds two Master’s degrees, coached college basketball, and has taught himself to develop websites and cloud-based software. Kyle loves teaching, coaching, writing, watching basketball, and going on hiking adventures in the Sierra Nevada's with his wife and two children.