It felt strange writing a blog post titled “How I Paid Off Almost $60k In Debt in 16 Months and 4 Days.” Not because it didn’t happen (because it did: the precise amount was $59,043). But because to see it there in black and white was surreal.
I’ve read a lot of posts with similar titles that always felt to me as if they were describing what was possible for other people, not me. And yet, here I am.
Is this what you’re thinking? Are you reading this saying to yourself, “of course, she could do it since she [fill in the blank]”? Well, it’s true there were many factors working in my favor during my debt-free journey (which I discuss below). But I also think there were actions I took that anyone could take to—at the very least—improve their financial situation.
How I Came to Be Almost $60k in Debt
The easy answer to the question of how I came to be almost $60k in debt at age 43 while making just over $100,000 annually is that I went back to school in my 30s, financed a car, took a few trips, had a few home repairs, etc.
The real answer is that every time I got a promotion, I just spent more instead of prioritizing paying down the debt I already had and avoiding taking on new debt.
For example, I remember when it came time to start paying back my student loans picking the payment plan that offered the cheapest monthly payment even though it meant paying on the debt for the longest period of time. I told myself it would give me “flexibility.” You bet it did: flexibility to live like my finances were in better shape than the actually were!
If there is a positive in all of it, it’s that the mistakes I made that got me into debt—lifestyle inflation and mindless spending—made figuring out a solution to my situation that much easier: lifestyle deflation and intentional spending.
Living the Low Life (~68%)
While the media may celebrate those living the high life, there is a lot to be said for living the low life. In my case, cutting back on every day spending accounted for the bulk of what I paid off (∼68%).
Of note, lifestyle deflation didn’t mean a state of extreme frugality for me. I still ate out some but not near as much and often choosing a less expensive menu item. I also didn’t travel and rarely bought clothes or shoes (although I did buy some new items).
Lifestyle deflation meant using cash a lot more, window shopping, waiting to watch movies until they became available on streaming services, getting books from the library (which was actually a real treat), and finding other free or low-cost activities to keep me busy. (If you want to learn more, see this post for My Favorite Tips to Save Money.)
Mindful spending also had its positive aspects. For example, if you know you have a limited clothing budget and that you need a new sweater, shopping for it becomes a quest and not just a trip to the store. Have you ever left Target without buying something? I have, and more than once. That is the power of becoming a mindful spender.
Taking My Emergency Fund Down to $1,000 (~25%)
When I decided to get out of debt, I had just over $16,000 into a Roth IRA that I considered my emergency fund since the tax laws allow you to withdraw contributions to a Roth IRA without paying a penalty (there are other rules too so if you are thinking about doing this, consult your CPA or a tax attorney).
I withdrew $15,000 of this money for a couple of reasons. First, at the time I was listening to Dave Ramsey and it is what he recommends as part of his total money makeover program. In the program, his first step is to save $1,000 in your emergency fund and, if you already have that or more, to take any amount above $1,000 and put it toward your non-mortgage debt.
It especially makes sense if the interest you are earning on those funds is less than the amount you are paying in interest on your debt. In my case, because I planned on putting this money toward credit card debts and a higher interest home equity loan, the return was generally less than what I was earning, especially after factoring in inflation.
However—and this gets to my second reason for withdrawing the money—by using this money to pay off debt, I created enormous momentum that was helpful in keeping me motivated.
My third reason was that withdrawing this money was really uncomfortable. I hated to see this money that I had spent years saving gone in seconds. But I needed that uncomfortable-ness because it made the mess I had gotten myself into more real. In the end, I think this more than anything (except, perhaps, my travel moratorium) will help me stay out of debt in the future.
Throwing Everything Else I Could At It (~7%)
The last thing I did was to throw everything else that came my way at my debt. This included bonuses, my tax returns, random reimbursements from work for travel-related expenses, etc.
This was probably the suckiest of the three tactics because who would ever get excited about sending “found” money straight to your student loan company, right? I’ve never been someone who intentionally gets a big tax return but I typically get something back and I usually spend it on fun things like a trip or a new purse. But these last two years? It all went to debt.
Factors that Worked in My Favor
As mentioned above, there were factors that worked in my favor during my journey, the biggest of which was that I make a good salary.
I don’t think I could have “frugal-ed” my way out of $60,000 in debt in 16 months if I made significantly less, no matter how much I wanted it. I know me: I think it likely that before too long I would have felt deprived and that eventually I would have rebelled and gone on a spending spree.
A second factor that helped me on my journey is that I didn’t really need anything. I had a car that didn’t need any major repairs, quality furniture to sit on, plates to eat off of, appliances that kept humming along, a closet full of clothes, etc. This isn’t going to be true for everyone working to get out of debt in a short period of time.
The third factor was that, because I had a large emergency fund, I could pull from it to create instant momentum.
Finally, I didn’t have any surprise medical costs pop up. More than once, I have read about co-pays or prescription drugs disrupting a debt snowball. Fortunately, that didn’t happen to me.
If I had made less, or if some big expense had cropped up during my debt-free journey, would it have meant I couldn’t have gotten out of debt? Nope. Only that I probably would have gone with a less aggressive timeline for paying everything off.
Are You Ready to Take the Plunge?
Now that you’ve read my story, what do you want to do next? Are you ready to start your journey? What additional encouragement or information do you need? I would really love to know so write it down in the comment section below!
Nice work! Seriously.
So I am contemplating putting my ER fund in a Roth but I also like having it accessible in a money market account, partly because it includes my next car fund and I have an older car. Do you keep any money in a money market account?
Now that I have paid off my debt, my plan is to rebuild my emergency fund but in a high-yield savings or checking account. I think I can find one through a site like nerdwallet one that is competitive with a money market fund. For my day-to-day banking I use one bank and for everything else, including the $1,000, I use Capital One (started when it was still ING). They have a higher yield account but I am going to check out my options first. Once I build up my emergency fund, I am not sure what I will do with the extra. I’m leaning toward investing it in low-cost index funds through a brokerage account and not a money market.
I was looking at your information regarding savings goals and wondered do you recommend financial advisors at all ?
That’s a good question. If you need help understanding something, or want someone there to prevent you from making bad decisions during a roller-coaster market, a financial advisor who is a fiduciary (meaning they are obligated to act in your best interest), could be a good thing. I agree with Suze Orman, however, when she says no one will ever care about your money more than you. As such, it is worth your time to educate yourself so that you can manage your own money in a way you are comfortable doing so. This is the route I have taken. Thanks for the question!
Okay, thank you. That is basically what I am doing.
Great–sounds like we’re both on track!
Dropping down to a $1000 emergency fund to pay off debt is something that’s always made me uncomfortable to think about, but I think you’ve nailed it in that being uncomfortable with it gave you that much more incentive to pay everything off faster. A large cash buffer makes more debt feel okay, even when it isn’t. Well done!!!
Thank you! I am itching to get it back up there because it is uncomfortable. Should be able to build it back up by fall!
What a motivating story Jenny!
I’m so happy you contacted me and shared it. This victory will motivate you to keep winning with your money.
Best of luck with your aggressive savings goals!
Thank you, Andy! I learned a lot about myself in the process. Lots to do in the future but I believe it will happen!
Inspirational article. All the very best for future. Thanks for sharing such an valuable article.
Thank you! I am glad you liked it!
How do you pay back your $1,000 emergency fund when you use it for an emergency?
Great question! I was really fortunate not to have anything unexpected crop up during the 16 months that I couldn’t cash flow—no health, home or car emergencies—so it stayed at that $1k level. Now that I’m out of debt, I’m building my emergency fund up to it’s full amount, $16k. Once it’s built up, if I have to use money from it, I expect that when I’m able to start contributing again, I’ll do so until it’s back up to $16k. My goal is to never again have to rely on credit cards to cover an emergency.
Great to hear someone accomplishing what I am starting to tackle as well. Enjoyed you putting the percentage of how each suggestion contributed to getting rid of the debt. It helps knowing how useful each tip was.
Glad it was helpful!