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They Paid off $30,000 in 3 Years on a $60k Salary

“I still have worries in life, but none of them are money-related.”

Daniel and his wife paid off $30,000 of debt in three years, and it was all about choices. He said, “It's not about finding one place to save $100. You try to find a hundred places to save $1. If you can find a place to cut back, that's a place where you can use that money to move yourself ahead in life …”

Now, with a load of debt gone and an Age of Money of 50 days, life is feeling a lot sweeter in Daniel’s household. Tune into this episode of Debt Stories to find out exactly where he and his wife decided to save all of those dollars—did they turn up the air conditioning or cancel Amazon Prime? Find out ...


Welcome, everyone. This is Episode 4 of a new YNAB podcast series: Debt Stories: Real People Beating Debt & Winning Financially.

In today’s show, we’ll meet Daniel who, along with his wife, paid off a formidable $30,000 of debt in just a little over three years.

So, let’s go back to the beginning. In 2011, Daniel and his wife were married. In 2012, they purchased their first home in Newburgh—a town just outside of Evansville, Indiana—and,
by 2015, they were greeting their newborn daughter.

Daniel: Yeah. We were down here in 2012 and very shortly thereafter we bought a house. Did an FHA loan, which I think at the time was 3 or 3.5% down, which we actually had to get from my wife’s family.

So colossal mistaken number one there!

A down payment of only 3 percent meant more mortgage to repay and, therefore, more time stuck with debt payments.

… and, it was at about that time that Daniel started car-shopping.

Daniel: We had already been talking about maybe having kids in a few years, so I thought, in my infinite wisdom of “Hey, I’m never going to be able to get a real sports car any time in the … uh … future … I’m going to be in the future, at least for another, say, 18 years or so. So I sold the car I had for barely what it was worth, maybe even less than what it was worth. Ended up buying a sports car, and the guy lived in eastern Pennsylvania. He picked me up at the airport in the car. I gave him the cash. He directed me to the highway and I drove back home.

Colossal mistake number two there.

He didn’t actually have the cash and, since the car was older, Daniel didn’t qualify for an auto loan. Instead, he’d taken out a higher-interest-bearing personal loan from the bank.

The total I think on the loan was maybe $4,000. It was an old car; it was 1989. I got home. Made my first payment on that and that’s about the time it dawned on me that I had made a mistake. You know, Dan, this is really stupid. I started thinking about how do I pay this off a little quicker? We were still living paycheck to paycheck and not able to really pay any extra between a bunch of credit card debt. I think we had close to $13,000, maybe a little more, credit card debt at that time.

Daniel: Can I afford to buy this car was never a thought that really crossed my mind. It was I need to have this car; I’ll just make it work.

Daniel: Spoiler alert – I didn’t need to have the car.

Daniel: I carried on paying minimums on everything for a little while. Always in the back of my mind was we’re not getting ahead. We’re spending every cent that comes in, a lot of it is going for interest, what are we going to do?

In addition to paying their minimum debt payments, Daniel and his wife had a household to run, including the expense of their daughter’s daycare while they were at work. They each earn a modest salary—Daniel’s degree is in computer science:

Daniel: I do QA. QA doesn’t seem to be quite the great way to make money that actual development, software engineering is. But it’s plenty to pay the bills with I suppose.

His wife is a teacher.

Daniel: She teaches high school chemistry let’s see, this year she’s teaching chemistry, biology and physics, I think.

Living paycheck to paycheck just wasn’t cutting it (read: it was incredibly stressful), so Daniel’s interest was piqued when he stumbled across YNAB.

Daniel: Again, buried my head in the sand and kept going. I was actually on Steam, the video game. Actually, YNAB popped up. It was part of the Steam sale in 2014, is when I bought it.

I had heard a little bit about it on the personal finance subreddit that people saying they’d used it before. I was like, what the heck; we’ll give it a try. I started reading everything that was available on the website. I was like alright, this guy is making a lot of sense. So gave it a shot, and many, many arguments and adjustments later, we are starting to be able to pull ourselves out of a hole.

Daniel: It was mostly me reading all of this and taking it in, and I didn’t really involve her in the process until I had already started. I started playing with numbers, and I was being the no-you-can’t-do-that guy and that [11:00] very well.

Arguments, or as I like to call them “thorough discussions” can flare up a bit for couples that are brand-new to budgeting, especially when one partner has to win over the other, but they always pay off …

We have a lot of, now, good conversations and worked out how we can make this whole thing work.

… worked on a lot of problems and our hang ups around money and really started making progress. My wife had to give up getting her hair and nails done as often as she liked, but we’re working back towards that actually.

Of course, Daniel sacrificed some things, too.

Daniel: I have a big obsession with really anything with a Nintendo label on it, old video games, new video games, really anything in that realm. That and a long time ago, my brother got me into working on cars and so I got a little bit into doing performance-related stuff, new wheels and upgraded suspension and exhaust. An old car I had, it just had to have that new $900 turbo. So I gave up a lot of car and video game stuff in the meantime.

Even before they started using YNAB, the couple kept things simple with joint-accounts:

Daniel: We had one checking account, one savings account, everything would go in there and then we would just run that thing down by the end of the month.

As for “savings”, Daniel says:

Daniel: That had, if I remember correctly, about $50 in it and that was it. That was all that it ever had.

And then there was their debt: the mortgage, the car loan, student loans and their credit card … which, by this point, they were managing with their budget.

Daniel: Grand total I was looking at, yeah, about $13,000 from just credit cards starting out. By the time I really started gaining footing with YNAB, I think I had about $3,000 left on the car. Since then, we started doing biweekly payments on the house. We paid about an extra $3,000 or $3,500 there. Then more recently, just within the past three months, I think you may have seen it in the bio thing I sent, we paid off $12,000 worth of student loans, not all in one go but one chunk a month, about $4,000 a month.

You heard that right, they made three $4,000 monthly payments on the student debt! But how?

Daniel: Yeah! We had been saving up because we wanted to get on a better footing with the house because we were still paying more in interest than we were in principal every month, and for almost five years at that point. I was like, you know what? Let’s go crazy. Let’s refinance to a 15-year loan while interest rates are still low.

So we’ve actually started saving up money because we weren’t sure if we were going to be able to hit that magical 20% loan-to-home-value ratio. So we’d saved up almost $10,000 just from any little windfall that would come in. If she got a three paycheck month, that whole thing would go straight into saving. If I got a bonus at work, which is generally once a year I’ll get one and it’s a paycheck and a half to two paychecks, we’ll say, that would go straight into it. Then we’d save every month; any little bit of extra cash would go straight toward that.

Then right before we started refinancing, we got a letter in the mail from the County Assessor and our home value had actually shot up.

With the increase in their home’s value, Daniel and his wife were able to reach a 20 percent loan-to-value ratio which enabled them to refinance on better terms, with a 15-year loan. So they went for it …

And we didn’t end up having to put anything into it, so we had almost $10,000 at that time just sitting around. I said alright, you know what? Let’s chop off one of these loans, so I picked the highest interest one and killed that. Then the next month, killed one more because we still had enough money left over to do that. Then we got a check in the mail from our previous mortgage servicer, our escrow refund, which I had completely forgotten about and that put us over enough to be able to kill one more loan and that put us at like $11,965, super close to $12,000.

That all totaled up to around about 30 grand over the course of … it seems insane because we just started using YNAB in June of ’14 so a little over three years and that amount of extra debt gone is just insane to think about now.

That unexpected $12,000 was a great start, most certainly, but now let’s hear how Daniel and his wife cut back to pay off the full $30,000.

Daniel: It was a little crazy. If it’s hot out, we generally have the air conditioning off unless it’s absolutely unbearable. So things are a little sweaty in our household and it sucks as much as you can imagine it sucks. I’m trying to think of what else we did that was extreme. We live technically outside city limits, we’re in a county so trash service costs us I want to say $25, $30 a month. We canceled that and I take the trash to the dump myself. It started getting a little extreme. We could probably start trash service back up at this point in the deal.

Daniel: Other than that, we dropped our cable. We do internet only now. Our cellphone plans used to be with a … we used to have unlimited data on Verizon back when we first got married. And that was actually one of the first things to go. We’ve cut that down now to about $55 a month for the two of us combined, where it used to about $160 or $170. We use Republic Wireless.

Daniel: Then we canceled a gym membership because we weren’t it enough and that was close to $70 a month.

We used to eat out all the time. We would easily spend $300 to $400 a month just on dinners for the two of us, not including going out to eat on lunches or waking up on Saturday morning and going, I don’t want to make eggs. We stopped going to the movie theater. That was always going to be our thing. We would go the movies all the time. Now it’s Netflix or Redbox. And we do have an awesome drive-in theater that we still go to probably once a month during the summer.

Daniel: The people I work with think I’ve either gone insane or that I joined some sort of cult by doing the budget. They like to, jokingly, invite me out for lunch every couple of days. They’re like, “You going to lunch or is that not in the budget.” And I go, “No, not in the budget.”

They also mind their grocery budget.

Daniel: We try to keep it around $500 for two adults and a small child. We’re doing okay with that. Generally, we’ll have some left over at the end of the month that I will roll toward a debt payoff or something like that, to try to keep from inflating it too much as we go.

Still, Daniel and his wife have agreed that some things are non-negotiable.

Daniel: Let me look at my budget here. We make sure we have fast internet, we have new phones, we both want to have late model phones. We basically refuse to give up anything that would directly benefit our daughter. She does tumbling classes right now, so that was a red line. She is going to tumbling. She will do something fun. Us saying we don’t have enough money is not an option for that.

Then our guilty pleasure is we still have Amazon Prime, which we try not to use extensively. Prime Day got a little expensive in our household. Prime Day got a little expensive in our household …

I’m actually doing this from our dining room and I can look across to the kitchen and can see an instant pot right now, which we actually got this year on Prime Day.

They’re still paying off their home, and have about $37,000 of student loans to repay which, Daniel estimates, will take another four years but things are looking up. As Daniel explains, their efforts are snowballing …

Now, they aim to keep a cushion in the checking account, and they were even able to pay cash when a household emergency popped up.

Daniel: Yeah, after cutting all those expenses back and finding a thousand places to save a dollar, we’re starting to make some headway. One credit card payment has gone so that just freed up a load more that can still go on the next one and the next. Very quickly it gets out of control to where we were able to start actually saving. When the new roof popped up, it wasn’t the end of the world. I’d much rather just thrown that at the student loans but a leaky roof has got to be taken care of.

Daniel: … we try to keep at least 10,000 in checking right now. [27:42] is our monthly expenses we’re fully buffered. Age of money right is 50 days, as of today.

With a load of debt gone and an Age of Money of 50 days, life is feeling a lot sweeter these days …

Daniel: Oh yeah, it’s night and day. I still have worries in life but none of them are money-related.

Now I worry about having enough saved up for my daughter’s college education or being able to make fun memories while she’s young, that sort of stuff.

Decreased financial stress has made their marriage happier, too. Money conversations are …

Daniel: Completely different. We have our budget meeting, and I try to budget mainly on the weekends or right after a pay day. I’m basically in charge of the budget but she has, essentially, veto power on whatever. [29:09].

Daniel says that the biggest mindset shift was realizing just how much every bit counts.

Daniel: It’s not about finding one place to save $100. You try to find a hundred places to save $1. If you’re getting by now, and by getting by I mean you’re spending basically down to zero every month, then you’re making it work. You’re just not making any progress. The progress you can make from there is just going to snowball. It’ll keep getting faster and better.

Some people might be in the situation where they’ve cut all they can and they’re still barely getting by, so I don’t have good advice for that situation. But if you can find a place to cut, then that’s a place where you can use that money to move yourself ahead in life, as opposed to what we used to do. We would say “we had an extra 30 bucks so let’s treat ourselves.”

We try to think of extra money coming in as something we can use to improve our lot in life instead of another place to spend.

If you’re feeling overwhelmed by debt, Daniel’s advice is:

Daniel: Just keep at it. Just Rule 3 it until you make it through. We started out barely making it by. I think we both have a salary in the mid-30,000 range.

Every time you get a bit more money, instead of thinking I deserve this or I need this, think, how can I use this to put myself in a better position.

The most important thing is to just get started! Life is full of unexpected twists—and some of them will be in your favor. When you’re actively working towards paying off debt, you’ll be positioned to make the best use of any windfalls …

Daniel: … every time we find a way to move ourselves forward, it seems like a new door opens and we find another way to move forward a little bit more.

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They Paid off $30,000 in 3 Years on a $60k Salary