How My Husband and I Paid off $10, 000 of Consumer Debt in 5 Months

America is a land of opportunity. But if you don’t have a plan, it can also be a land of financial pitfalls.

I’ve been consumer debt free for 4 years. The only debt I carry is the mortgage on my home and the student loans that my husband is currently incurring in graduate school. In addition to paying off all our consumer debt, we’ve paid off my husband’s undergraduate student loans and purchased a used car with cash. Put simply, unless it’s a major investment — a house, education — I’m not going into debt over it.

This journey began with my husband and I paying off $10, 000 in consumer debt in 5 months. We also eliminated my husband’s student loan debt, about $27, 000, over the next two years, but this article focuses on the 5 month period.

Before the 5 Months Began

1. I attended a college I hated — because I got a full scholarship
Looking back, I could never have paid off my and my husband’s consumer debt in 5 months if I had college loans. It would have taken much longer. I attended a conservative Christian college and honestly, I kinda hated it, but my father kept telling me that I would be grateful for the free education when I got older. After graduating and spending a few years in the real world, I began to see exactly what he meant. Today I’m a huge proponent of INEXPENSIVE education. Scholarships, community college, city college, bypassing a more prestigious school to go to a cheaper one; all of these things help your financial bottom line.

2. In my senior year of college I attended a seminar on real world money management
It is one of the BEST thing I ever did in college, and one of the few things I remember. I studied Media as an undergrad… Can I break down Marshall McLuhan’s “The medium is the message” philosophy? NO! I have long forgotten that. But the money management lessons I learned in that two hour seminar have stayed with me for years. The most important takeaways were a.) depreciating assets, like vehicles, should ALWAYS be paid for with cash and, whenever possible, bought used b.) credit cards should ALWAYS be paid off in full lest you incur obscene amounts of interest and c.) you NEVER have too little money to start investing. These lessons shaped my philosophy on money, and helped me to stay motivated during my 5 months of intense debt payment.

During the 5 Months;

So my husband and I were about to get married, living together and broke. We’d managed to pay for our wedding with cash, mainly because a.) we had a shoestring budget and b.) we didn’t want to go deeper into debt. My credit card was all charged up, his credit card was all charged up, and we had multiple hospital bills, fines on our car, and consumer cards that were unpaid. Here’s how we got rid of our $10, 000 in outstanding debt;

3. We found out our credit scores and tracked them on a monthly basis
Signing up for a credit score service was sobering — because our scores were really crappy — and it helped us to locate some of our open debts. Don’t do like I did and sign up for FreeCreditReport.com. It’s been proven to be a scam. Instead, go with AnnualCreditReport.com, which is legitimate and federally approved.

Seeing how low our scores were really put a fire under our asses. We knew we’d need another car soon, and that we eventually wanted to be homeowners… we didn’t want dismal credit scores to hold us back.

4. We moved out of our apartment, and in with my mother-in-law
This was, by far, the biggest sacrifice we had to make. As we looked around our cute, spacious apartment, we knew that we could keep spending $800 a month on it, or move in with family and put the rent money towards our debts. So we made a deal with my mother-in-law to pay $300 a month for rent, and moved back into my husband’s old room. We slept on a twin bed and yes, we were mildly depressed. But we tacked a “debt countdown” on the bedroom door and it reminded us why we were making the sacrifice.

5. We stopped eating out, going out and buying clothes
Our gym clothes became our “default clothes”. I wore my tights and he wore his sweats to run around town. Because we didn’t really want our friends to see us like this, it eliminated another money spender — going out. No more Jay Z concerts, no more weekend trips to Michigan. We found cheap ways to entertain ourselves, like borrowing his mom’s bikes and riding around the neighborhood, renting RedBox movies and going to the botanical gardens. Someone gifted us Dunkin Donuts coupons and we used them whenever we wanted to “go out” and have a treat.

6. We paid for things with cash — and quickly learned how hard it is to spend money when you are using physical, paper bills
I will tell you this; there is a HUGE psychological difference between swiping $80 on a credit card and taking four twenties out of your wallet and handing them to a cashier. GUARANTEED you will be at that register with the cash in your hand like, “Do I REALLY need this?” Paying for goods with cash gave us an appreciation of the value of a dollar, and put frivolous spending in perspective.

6. My husband got a better job
If we wanted to pay our debt down quickly, cost-cutting was only going to do so much. Don’t get me wrong — it is a powerful way to reduce debt — but increased income is also a major factor. My husband managed to get a new job that paid significantly better, and it helped to accelerate our debt payment.

7. We decided against cosmetic fixes for our broken down car
Was it fun rolling around in a 2005 Hyundai Elantra with a busted grill AND a busted bumper, both due to fender benders I’d been in? No. Sometimes it was straight embarrassing. More than once we parked around a corner and walked a block or two to our final destination to avoid being seen in our crap car. But we made peace with it and decided that, as long as the engine was running fine, we wouldn’t bother with cosmetic fixes.

8. We let go of friends who were overly materialistic or pressured us to “Keep up with the Joneses”
The funny thing about our period of brokeness is that it tightened our circle of friends. There were people who were embarrassed for us, or looked down on our situation. Those individuals, we realized, were not worth keeping around. The friends who stuck by us didn’t feel that they — or we — were defined by possessions. We didn’t have to look cool or afford cool things to hang out with them.

9. We kept a debt counter on our bedroom door
I mentioned this earlier, and it was really a motivating factor. Every time we paid off a debt, we adjusted our tally. Seeing our debt number decreasing gave us a sense of urgency and helped us remember what our sacrifices were for.

10. We switched our money to a Credit Union to avoid predatory bank practices
Once we had enough financial cushion to actually save a little bit, we took our money out of the bank and put it in a credit union. The primary difference between banks and credit unions is that banks are aggressively for-profit while credit unions apply their profits to reduce fees and provide better rates for members. Credit unions tend not to have any predatory fines, and are far more supportive of personal financial goals. Here’s a great article that breaks down the difference between banks and credit unions.

11. We applied our tax refund to debt payment
Our refund slashed a huge chunk of our debt!

12. I followed early retirement blogs and forums
Not because I wanted to retire early, but because they are CHOCK FULL of cost-cutting and savings advice! They are populated by Americans who want to either retire or gain full financial freedom early in life. It was motivating to learn from people who were so financially disciplined, and it really put my situation in perspective — Did I want to be a slave to my debt forever? Or did I want to make tough choices to gain my freedom. My favorite early retirement site is Early Retirement Extreme.

13. We accelerated our car payments by paying more and applying it to the principal
With the money freed up from our decreased rent, we opted to pay off our car loan more quickly (in addition to paying down credit cards and miscellaneous debts). We did this by tacking on an extra $50 to $100 to the payment each month, and making an explicit request that it be applied directly to the principal. If you accelerate loan payments, but do NOT specify where you want the surplus to go, it will be applied primarily to interest. We made sure that our bank knew exactly where we wanted the extra money to go.

14. We did NOT throw out our credit cards! But we only used them for essential items
Remember how I said that we wanted to improve our credit score? For better or for worse, we needed credit cards to help us do this. Instead of getting rid of our credit cards, we put a recurring bill on one — our cell phone service, and used the other for groceries. At the time we did not trust ourselves to use credit for anything non-essential, so we paid for goods in cash. Now that my discipline has improved, I do have a credit card that I use for both essential and non-essential items. It is a mileage card, so we earn miles that we can reimburse for travel. But it is paid in full at the end of each month.

After about 5 months of living with my mother-in-law, we had eliminated $10, 000 in consumer debt and began focusing on saving, investing and paying down my husband’s undergraduate student loans, which we slashed in another 2 years.

My story is not unique. I’ve read countless debt payment stories, and they almost always involve extreme austerity measures over a short period of time.

Mommies, what tips would you add for aggressive debt payment?