How we paid off $19,550 of Credit Card Debt in 13 months!
Happy tax season guys! Since this is the time of year when finances are at the forefront of our minds, I thought this would be a good time to share some super good news. As of this past December, my husband and I are officially CREDIT CARD DEBT FREE! Our ultimate goal is to be completely debt free but seeing as though we have only been married for a year and a half now we are really excited to have accomplished this one huge one step towards our ultimate goal.
Now this may not sound like a big deal but for us this is major. According to my google search, the average American has between $5,000 and $8,000 worth of credit card debt. Of course, $5-8,000 would not be that bad if that were the only kind of debt we have. This number does not include mortgages loans, car loans, or student loan debt, which many of us have as well.
The reason that credit card debt is so major is because of the insanely high interest rates. It is so easy for a swipe here and there to turn into owing thousands of dollars on what seems like a never ending treadmill of payments, interest, and late fees. But we found a way out and most importantly, we decided we are NEVER returning.
I am writing this blog because we consider it a huge blessing to be without credit card debt. I know that every single blessing God has given us is intended to bless others as well. Therefore, I want to share this info with you guys in hopes that it will bless and remind you of God’s faithfulness.
On October 14th, 2017 my husband and I got married. Our wedding day was filled with happy tears, meaningful words, lots of laughter and dancing with our family and friends. Honestly it was one of the best days of my entire life. The one thing we learned really quickly was that marriage starts AFTER your wedding day. One beautiful day does not sustain a lifetime commitment. When you do a little research you will find that one of the biggest causes of divorce, right up there with infidelity and communication, is finances. It might sound a little ridiculous but when you really think about the stats, it makes perfect sense. We are talking about two different people, most of the time with two paychecks, and two different spending habits coming together trying to agree on one way of doing things. My husband and I wanted to make sure we took steps to prevent our finances from ever being a major issue in our marriage. So the first thing we did was talk about our vision for our future family and what we want our collective financial goals to be. Together we decided we wanted to pay off all of our combined credit card debt within our first year of marriage. Here’s a few reasons why this was at the top of our list.
1) We both were tired of paying unnecessary interest. It’s one thing to spend your money on what you need/want, but it’s another thing to still be paying above and beyond the purchase amount for years after the purchase was made. To be honest, we can’t even remember what some of the original purchases were, which is insane considering we thought those purchases were important enough to put on a credit card in the first place.
2) We wanted to make sure that before we had any children we would be credit card debt free. Children are a huge financial responsibility and we want to do our best to prepare to financially and become as debt free as possible before they arrive. We also want to teach them wise spending habits. You can not teach what you do not practice yourself.
3) We want to buy a home, and with a home comes another set of responsibilities. We do not want to enter into a home with unnecessary bills that will take away from our quality of life as homeowners.
4) Lastly, I truly believe debt is a curse. Most families struggle with debt. You can have everything you need and still have difficulty gaining financial freedom. There are so many factors that contribute cause families to struggle. Debt continues to be an ongoing problem, especially in the black community. The cycle will continue until we, as a community, make a conscious effort to break it.
The first step after creating our goal was to put a plan in action. So about a week after our wedding we sat down and put together a budget that included our monthly income & expenses to figure out what we had left over. Now this was kind of tricky because as you may or may not know I work for myself. I am a freelance photographer. I don’t get a paycheck unless a client books with me, so my income fluctuates a lot. Just after I got married, I moved across the country and left all of my clients in Chicago. So there was no way to predict my income. It is a good thing that my husband is in the air force. He has a consistent and reliable paycheck every two weeks. Because my income was high one month and low the next we decided to create our budget solely on his income and use mine as the icing on the cake.
After all of our bills, gas, food, and essentials were accounted for, we calculated what we had left over to put towards our credit card debt. It was then that we realized our budget of paying off our debt in one year didn’t seem attainable. At that point we owed roughly $14,500 on our credit cards. That number grew significantly with all of the unexpected emergencies that kept arising.
According to our budget, we only had about $900 extra monthly income. That meant that we MIGHT be able to pay the debt off in about a year-and-a-half using his income. At first this was discouraging, but we decided we were not changing our goal to match our circumstances, partly because we knew that change would shift our mindset as well. We wouldn’t work as hard to make our goal happen if we downgraded our goal. And lastly, we have a secret weapon, God. We got busy praying about what we wanted even though it did not appear to be possible, and I do not mean that we prayed just once. We prayed throughout the entire 13 months it took us to pay it all off. It’s important to be practical. That’s why we made a budget but never underestimate the power of God.
Transparency is something I live by in all areas of my life, including relationships, business and even my blog. I don’t want to share good news and blessings without the sacrifices that was required. God is not a genie. You can’t just ask for things from him and sit back and do nothing to get there. God’s blessings require us to be active participants to receive them. Remember that faith without works is DEAD. So here are the five (5) ways we put our faith to work to reach our goal.
1) Live below your means at all times.
We had to make a conscience decision not to spend money unnecessary, because that money should be going towards our debt. For us that meant that we needed to move to a smaller more cost-effective apartment. When we went apartment shopping we knew we could afford a more expensive apartment on the higher end of our budget, but we chose the smaller, cheaper apartment that literally saved us $500 + a month. We also decided to share one car until after the debt was gone. Shopping was also very scarce. It was hard guys but we had to make sacrifices to reach our goal. Just remember ‘No sacrifice no reward’.
2) Pay off one card at a time.
If you have multiple credit cards your first instinct may be to split up the money you have allocated to pay off debt between all of the cards. But I learned that is counterproductive. I randomly had a conversation with a banker who “off the record” told me that it takes longer and all the cards are still gaining interest a long the way. Instead it’s better to figure out which credit card has the highest interest rate and the highest balance and start there. Another option is to see if you have cards with low balances that you can pay off completely within a month or two. Put the bulk of your money on one card while paying the minimums on all the other cards until that one card is paid-in-full. Once you’ve paid one card off then move to the next card. Every time you pay off a card, you now have more money you can allocate towards the remaining debt, because you now have one less minimum payment to make. I cannot tell you how good it feels to see a zero balance on the first card. There is a sense of accomplishment that pushed us to keep going.
3) Stop pretending like you have a “savings.”
I am aware that you may give me a little bit of a side-eye, but this is the other part of what the banker told me. If your goal is to pay off debt, then focus on the debt and not saving. When he said this, my stomach was in knots because the frugal, penny pincher in me is not comfortable with having no savings to fall back on. I am queen of having a stash of money somewhere. But then he put it into perspective for me. A savings account is supposed to be for emergencies and big purchases, but the savings is counter productive when you have a ton of credit card debt, like we did. Credit cards accrue large amounts of interest every month. The item you purchased will double or even triple the longer your debt is not paid off in full. So it’s wiser to pay off your debt faster, which is gaining interest monthly, than to have money sitting in your savings account not gaining (or barely gaining) interest. When you owe large sums of money with high interest that savings account really is just a security blanket that provides no real security. So we decided to go an entire year having absolutely nothing in our savings so that we could put everything we had into paying off our debt. It was hard but it made sense for us.
4) Learn how to use credit cards correctly
So I know what your next question is. If you have absolutely no savings, then what if an emergency happens before you finish paying off your debt? Well that’s exactly what happened to us. Our tire blew out on the expressway when we were two (2) hrs away from home. Then when AAA came to put the spare on, we found out all of our tires were terrible. We couldn’t even make it back home without buying a whole new set. So I get it, emergencies happen. So we ended up getting yet another credit card when we were less than $5,000 away from paying off the rest of our debt. Honestly, it was so frustrating, BUT we were using our credit card for one of the card’s intended purposes, an emergency. The reason we got a new credit card instead of just charging it to one of the cards we already had was because this new one gave us 1-year-no-interest. So we had time to pay the balance off before they stuck us with added interest charges. So we charged the tires and added it to the back end of our budget. 😩🙃 Oh and just for the sake of sharing valuable information, the other 2 reasons to use credit cards are to build your credit and to benefit from the rewards many credit cards offer, of which we are now experts.😆
5) Change “the way you think” about money
There is a one major thing that separates people with wealth from people who struggle, and that is “the way they think.” Don’t get me wrong. There are other things that play a part in when you want to excel financially but the way you think about money is right up there at the top. Here’s an example: If you give a broke person a million dollars but they have no idea what to do with it or how to make that money last for a lifetime, more than likely they will be broke again within six (6 years). The same principal applies when paying of debt. If you don’t correct the behavior and the mindset (the way you think about money), you will most likely end up right back at square one. For us, the first another important thing was that we had to learn the difference between a “need” and a “want.” Everything we see or like is not meant to be ours immediately. We didn’t want to let impulse spending be what kept us from our long-term goals.
Also, once we finished paying off the debt we did not operate with the mindset that we now have more money to spend. We created a new goal and a new budget that included saving rather than paying off debt. We also continued to live below our means so that we could move forward with our new goal of saving for a house. In order for our finances to change we had to change the way we thought about money, as well. We had to break the cycle.
So lets fast-forward to December 2018. After the emergency new tire purchase, we also had an unexpected $700 laptop repair AND I needed to upgrade my camera for work, which ended up costing us about $4000. 😩However, we still managed to pay off all of our debt. Including the tires, the computer, the camera and our original debt, we ended up paying off approximately $19,550 in 13 months. Our original goal was 12 months with $14,500, but remember we didn’t think that number was possible. So even though it took us one (1) extra month to pay off an extra $5,000 we weren’t complaining.
I know you guys are wondering how we did it, because we only had $900 a month to put towards our debt. It doesn’t add up. Well let me make it even more miraculous by adding that about a month or two into being married we also made the decision to start consistently tithing 10% of every paycheck to the church. That money could have been used to pay off the debt, but instead we decided to give it back to God. Sounds pretty crazy right! But we felt like what we were asking God for was just as crazy. We were praying for him to move a mountain in our life, so we wanted our faith to match what we were asking him for. We considered our tithes as one of our monthly bills, so it did not take away from the $900 we allocated for debt. I am certain that putting God first in the equation is what helped us reach our goal in the timeframe that we did.
I ended up having my best year in business so far in 2018! Despite moving across the country and having very few clients in my new hometown, I was still able to make more than I ever had in previous years of business. So, almost every penny I made we put towards our credit cards. I mean we were paying off cards months before we planned. It was amazing to see God come through like that. My husband was also given an unexpected bonus from his job, which helped out as well. So though we did everything in our power to reach our goal it was the blessing and favor of God that actually help us accomplish our goal.
Oh and I do want to add that our first year was not ALL about work and paying bills. We actually enjoyed our first year of marriage. We went on dates every few weeks. We found special ways to celebrate our birthdays and our first anniversary. We also traveled, A LOT. I went home to Chicago at least five (5) times. Mostly for work but the bonus was getting in some much-needed family time. We also visited his family in San Antonio twice, and most shocking of all is that we found a way to go on our very first overseas vacation to Europe (Germany, Italy and Spain). Oh and we found the perfect way to celebrate our accomplishment. The weekend after we finished paying everything off we went on a special, dressy dinner date to the nicest restaurant in town to celebrate (the pictures are below). I am so proud of what we accomplished, and it is all because we believed we could do it. I am so excited to see what’s next!