2017 Debt Payoff Update: How We Paid Off $47,029.45 in One Year

Our debt payoff journey got off to a pretty good start in 2017, and we expect 2018 to be even better.

At this point, we have our strategy down, and we’re just working the plan. We’re following the debt snowball method.

What’s the debt snowball method?

With the debt snowball method, you list out all of your debts from smallest balance to largest balance and pay the minimum payment on everything but the smallest one. Then, you put all extra money toward that smallest debt until it’s paid off.

Once the smallest one is paid, you roll all of the money you were paying on that one to the next highest, along with any other extra money, while paying minimum payments on everything else, and so on until all your debts are paid off!

It’s called a snowball because as you go along, the payments you’re able to make keep growing.

You may be thinking this snowball situation doesn’t make mathematical sense because you end up paying more interest than if you were to pay the debts starting with the highest interest rate.

Don’t worry about the math. The ultimate goal is to pay off your debt. The debt snowball makes sense, despite the math, because being able to see quick progress motivates you to keep going.

I’ll admit, though, that we’re not rigid in our execution of the snowball method. Below I’ll show you a couple times we deviated from it to suit our needs.

Our numbers

Here’s a screenshot of the spreadsheet we use to track our debt payment progress.

As you can see, March was an awesome payment month. This was mostly due to our tax refund.

We used some of this money to bump up our tithing from a raise we got in January, but the balance was thrown straight at the debt.

You can see our first deviation from the snowball method in our March payments.

My husband had a private student loan with an outrageous 9.25% interest rate. I know I said don’t worry about the math, guys, but that one had to go.

Before the tax refund hit, we had been making extra payments (the $200 I told you about here plus any extra money) on one of the higher interest rate loans.

You can see that the balance on that one is about $2,000 lower than the initial balance because of our efforts.

(I can’t recall why we started with that one. Seems a bit arbitrary looking back.)

We were making some progress, but it didn’t really feel like it.

I had read The Total Money Makeover, which teaches the debt snowball method, just before we got the lump sum from our tax refund.

When we got the refund, we decided to switch to the debt snowball method but made sure to include the 9.25% monster in the payoff.

The second deviation was in the August payoff for my car.

In June, we decreased our retirement savings to increase our take-home pay and speed up our debt payoff.

After reviewing our spreadsheet, we weighed our options with this extra money in mind.

Option 1: Continue the snowball, pay off the next three student loans in order, and free up $168 extra per month.

Option 2: Work on the car loan and free up $375 extra per month.

We chose Option 2, and we’re so glad we did.

Around this time, we submitted for reimbursement of some of our daycare expenses through our dependent care FSAs. We also got some unexpected income—a $2,000 refund from our mortgage company for overpayment to our escrow account.

We threw all this money at the car loan, which helped us tackle it faster than we had anticipated.

Once it was paid off, the extra $375 in our snowball helped us accelerate our debt payments.

My husband also got a side job in the fall, which accelerated our payments even more, as you can see from the payoff dates for the rest of the year.

Strategies for tackling debt

The debt snowball method is only one part of our debt payoff plan. Below are tips and strategies we use to tackle our debt.

1. Figure out your “why.”

Paying off debt takes sacrifice and commitment. What is your motivation? Do you want to travel more? Take a lower-paying job in a field you’re more passionate about? Stay home with your kids?

Ours is having the freedom to work less and spend more time with our family.

Figuring out your big-picture reason for getting out of debt and staying focused on it will keep you motivated.

2. Know the details of your debt.

We knew how much debt we had from our mortgage application process, but we didn’t know each specific minimum payment or interest rate.

Once we created our spreadsheet, we were able to see all this info at a glance and figure out our plan of attack.

Tip: We like using a spreadsheet because we can sort the information by different criteria, such as current balance, interest rate, or monthly payment. This helps us see where it makes sense to deviate from the plan, like we did with the car loan.

List out all of your debts and the specific details for each one. Be sure to note if you have any variable interest rates or any callable loans (loans that can be called for payment at any time the lender chooses). Those may be debts you want to prioritize for payment.

3. Create a budget, if you don’t have one.

You have to know where your money is going to know how much extra, if any, you have to put towards debt. List out your monthly income. Then, add up all of your monthly expenses.

Hopefully, the difference between these two numbers is positive. You can put this leftover money toward your debt.

If there isn’t any money left over, or if your expenses are more than your income, you’ll need to cut expenses, increase your income, or both.

If you need help getting started with your budget, check out this post.

4. Cut your expenses.

Even if your income adequately covers all of your expenses, you may still find things in your budget that you can cut out to free up more money for debt payments.

Creating a budget shows you exactly what you’re spending your money on each month.

Are there expenses for things you don’t use or don’t care about? Cut ’em.

Can you scale back on something to decrease expenses? For example, rather than going to brunch every weekend, maybe you can go every other weekend.

Can you use coupons or shop sales to decrease your grocery bill?

We are big on coupons and sales. We have a loyalty card and browse coupons for our favorite grocery store, which saves us money on select items each week.

I also use apps and websites that offer rebates, discount prices, or coupons. My favorites are

• Ibotta – You can select offers for products you plan to purchase in-store, upload your receipt once you purchase said products, and earn money. You can also earn money by accessing your favorite online retailers through the Ibotta app and making qualified purchases.

Earn $10 when you sign up using your email address through my link and redeem your first offer!

• ThredUp – This online secondhand store is amazing. I find great deals for myself and my son, and many times I can find brand new items with the tags still on them.

First-time users can receive a $10 credit through my link.

• RetailMeNot – When I’m making a purchase online, I always search RetailMeNot for any coupon codes I can use. I’ve saved on everything from pizza to a new set of pots and pans. My best tip is to search Google for “RetailMeNot [insert retailer].” You may have to try a few codes to find one that works, but it is worth the effort, especially when you’re making a large purchase.

Almost everyone can find something in their budget to cut or scale back on.

5. Increase your income.

Once you’ve identified all the expenses you can cut, you can think about ways to increase your income. Below are a few suggestions for ways to make more money.

• Take a second job. My husband’s moonlighting has boosted our debt payoff.
• Sell things around the house. I sell on OfferUp, Letgo, and VarageSale.
• Drive for Uber or Lyft (or both!).
• Rent out a room in your apartment or house on Airbnb or HomeAway.

Related: 21 Side Hustles You Can Start Today

6. Look for resources to help manage your loans.

There are lots of resources available to help manage the cost of loans.

• Autopay for an interest rate reduction. Many student loan servicers offer a 0.25% interest rate reduction if you set your loans up on autopay.

One thing to watch out for: We found that because our extra payment covers the minimum balance due on whichever loan we’re targeting, the target loan wasn’t being included in the auto payment. We have to manually make the minimum payment on that one.

• Reimbursement or payment through your job. Does your job offer any student loan reimbursement or payment programs? Check with your HR department to find out about any programs. Many companies put stipulations on these programs, such as requiring you to work for that company for x number of years. Be sure to do your research before you sign up.
• Refinance through a private lender. Many companies offer refinancing for student loans to lower your interest rate and save you money. SoFi, Credible, Earnest, and CommonBond are some of the most popular. As with anything else, do your research to determine the right option for you.

7. Make payments twice a month.

This simple trick helps to save money on interest because it reduces the amount of time interest has to accrue on your loans.

As interest accrues on your loans, it is capitalized, meaning the interest is added to your principal amount (the amount you originally borrowed). Interest then accrues not only on the principal, but also on the capitalized interest.

Taking steps to reduce the amount of interest that accrues will save you money. Mr. TMG and I make the minimum payment on our loans at the beginning of the month and then make our extra payment in the middle of the month.

8. Celebrate your progress.

Do something to celebrate the milestones in your payoff journey. It doesn’t have to be anything big or super fancy, but do something to mark your accomplishments.

Taking time to celebrate as you pay off each loan, for example, will keep you motivated to keep going.

*Bonus tip for those who share finances with significant others: Get your significant other on board.

You can’t fill a bucket that has a hole in it. In other words, you can’t make progress on your debt if your significant other is running up credit card debt or spending the extra money in your budget.

Talk to him or her about your desire to get out of debt and the reasons behind it. Working toward the same goals as a team will be much more effective than fighting every step of the way.

Related: How to Get on the Same Page with Your Spouse About Money

What’s your debt repayment plan? What other tips do you have for paying off debt?