Today, I am going to share with you a story from our financial journey.  It’s about our debt payoff journey and how we overcome financial struggles that shaped the financial life we have today.

If you think that our financial lives were a smooth ride, you’re wrong. In spite of being a personal financial adviser now, once we struggled to repay debt.

This is our story.

Unavoidable Circumstances and Wrong Decisions

Like many others, we started our married life with debts and bills. Apart from credit card bills, we both had student loans. At some point in time, our family also had a mortgage loan, a car loan and some additional unsecured loans.

After we got married, we decided to buy a decent house and invest in a property instead of spending our hard-earned money on apartment rents.  So, we took out a mortgage loan.  At that time, we didn’t have much idea about how to manage personal finances efficiently.  Today, being a personal financial adviser, I would say that we didn’t take out a good mortgage loan.

On top of that, we had personal loans due to marriage celebrations.  Like most other young people, we also didn’t pay heed to advice to repay the outstanding credit card balance each month. What can be the possible result of this? A significant amount of credit card bills!

This is what I would always suggest you not to do. Try to repay your credit card balances off each month. You can even make additional payments from time to time, to keep your credit utilization ratio within 30%.

It might help you a lot to take out loans at suitable interest rates in the future as your credit report and score will be good.

Our Debt Situation

So, coming back to out credit card debt that I was calking about.  We had:

• Credit card A with $11,000 @ 9% interest
• Credit card B with $14,000 @ 11% interest
• Credit card C with $15,000 @ 11% interest

So, all total our outstanding credit card bill amount was about $40,000. The minimum payment per month in total was about $810.  And, after paying back a certain amount, the outstanding personal debt amount was in total $24,000.

Our total amount of unsecured debt was around $64,000.  Fortunately, we were current in out student loan payments and we usually didn’t miss our payments.

Something About Our Financial Life – How It Was At One Point In Time

Both of us were earning money, though it wasn’t much and I didn’t get any job satisfaction.   We didn’t have an emergency fund or a retirement fund. Actually, we didn’t pay heed to have a retirement fund before hitting thirties.

That was a mistake. I now advise everyone to start saving for retirement right from the time they get their first paycheck.

The Ultimate Debt Payoff Journey

I would always say that you try to avoid debt at all cost.

However, if at some point, you find yourselves in debt, don’t worry. You can always overcome your debt crisis.

Let me share with you all a real-life example of how we overcame debt, even with limited income.

The Decisions That We Made to Overcome our Debt

There were a few big decisions and some not-so-big decisions to save money and repay debt.

Mortgage Debt

I found that the current mortgage rate was relatively lower than what we were paying. So, we refinanced the mortgage loan at a lower rate. We opted for a longer term as well, as this helped to make the monthly home loan payments even lower.

Childcare Debt

During this time, we were blessed with two kids, the greatest happiness ever.

Since one of us had to take care of the kids, I opted to stay at home. I left my regular job and opted for freelancing job opportunities. It helped me to save dollars on daycare. Plus, I loved spending time with the kids. (Here’s a health care option to consider if you’re a freelancer.)

Better Debt Management

This time I took more interest in managing personal finances effectively. Apart from doing some work from home data entry jobs, I also started blogging about personal financial issues. I wrote for several websites.

My husband switched jobs so that he could earn more money. Often he had to travel to different states, too.  Some other decisions that we made to better manage our debts:

• We canceled our gym membership – We opted for enjoying time at the park with two of you. I liked the hiking trails with both of you in the prams. Believe me, it’s more enjoying than working indoors.
• We restricted eating out at restaurants – We started enjoying home-cooked meals. We used to go out but only to celebrate special occasions. This way, we could manage money to celebrate your birthdays, though they weren’t elaborate ones.

The Debt Payoff Calculations

Now, a bit of math and the financial calculations we used to get out of debt.

My husband and I discussed and decided that it was difficult to repay the entire outstanding balance along with staying current on our mortgage. We had paid back our car loan by that time. We only had one car.

We were getting collection calls for our personal loans. So, I started negotiating with the collectors to settle the debt.  After a few months, we reached an agreement to reduce the payoff amount to $15,000.  By that time, we had saved about $9,000. I used that amount and settled one of the personal loans. It took another 3 months to settle the other personal loan.  For the credit cards, till that time, I was somehow managing to make the minimum payments and a bit extra whenever possible.

After getting rid of the personal loans, I had a talk with my partner and decided to consolidate bills into one payment. We opted for balance transfer method as I had a credit card in my name with a much lower interest rate but a good credit limit.

Our Debt Payoff Journey

The entire debt payoff journey took about 3 years of time.

We don’t want to do the same struggle what we’ve done in our lives. It is our duty and we’ll always guide you to manage your finances efficiently.  We are on the way to achieve financial independence and hopefully, if everything goes well, we’ll reach it within a few years.

Good Nelly is a senior member of the Debt Consolidation Care Community and runs the personal finance website, My Way of Viewing.