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I’m here to tell you that you can have your cake and eat it too. I know, that might not be true, but it is. Within a year, my wife and I paid off a ton of debt and saved up to buy a house. That year we learned to get out of debt and save money.
Save Money And Get Out Of Debt
A few years ago we met our friend who is also a financial advisor. We told him we were working like crazy to get out of debt and put every dollar toward paying off more student loans. There is no point in putting money into savings if we are in debt.
Personal Finance And Money Management
He answered with a short story. When you’re in debt, you dig yourself all over the place. If you work tirelessly to pay off your debt, you will get paid. The faster you fill it all in, the faster you’ll get out of debt and back into balance.
But you are really standing on flat ground and there is nothing to show for it. Instead of putting every shovel full of dirt in the hole, why not throw a shovel or two to the side to increase your savings? Then when you’re out of debt, you’ll have a pile of savings or investment waiting for you.
That’s the path we took and I’m so glad we did. We paid off $29,500 in student loans in one year and saved money for a down payment on our house. Here’s how we do it.
I won’t go into all the details of creating a debt snowball table here. If you want a step-by-step guide to creating your own debt bubble chart, you can find it here. You can also download one with complete instructions here.
Ask Away Blog: How To Get Out Of Debt (from Someone Who Has Done It)
When we first started dating, Jenna and I were paying $921.91 a month on five student loans, which was just the minimum payment. Very foolishly, I calculated this amount to be 21% of our monthly income.
If you’ve been following me for a while, you probably already know that I’m a big fan of Dave Ramsey’s Debt Snowball Chart. Debt Snowball helped us get out of debt faster than we thought. It also helps put every dollar toward our student loans.
During the first few months of repayment, the debt snowball chart helped us build the mental strength to “get it done.” One by one, our debts were paid off in full, and each time it made the process of getting out of debt easier. And we started believing in our plan to get out of debt faster.
To give you an idea of the amazing impact, our massive student loan debt went from $30,500 to $13,100 between May and December! We are talking about expedited payments!!!
Should You Save Money Or Pay Off Debt?
Now we definitely have other factors at play, though, that help us kick some serious butt!
As teachers, we have no additional income other than about 2% to help with the rising cost of living. Sometimes we don’t even realize it. However, because Jenna is a science teacher, she received a bigger raise. Minnesota has a shortage of qualified science teachers, so the Department of Education is giving raises to science teachers because it’s a “hard-to-get” position.
Because of this, an additional $3,500 was added to his salary just for being a science teacher. (Sadly, social studies teachers don’t get the same love) And it has a big impact on our monthly salary!
Another contribution to our income is to get more positions in our school. We both helped coach the volleyball team at our school, and I coached the boys’ basketball team.
How To Stay Out Of Debt (and Save Money, Too!)
I really like being a coach, so it’s usually not extra work for me. Being a high school coach is not a glamorous position with a huge salary, but we put an extra $1,800 into all the coaching.
The key word is more because everything goes towards paying off our debts. In addition to training, Jenna plays a leadership role in planning school events, our core curriculum and assemblies. He has done so much to make our school a better place and he received almost $1,000.
One of the biggest differences between our first and second year of marriage was working in a restaurant and earning tips. Last year (our third year of marriage) was no different. The restaurant we work at is located in the tourist area of town and attracts visitors in the summer.
The first year we worked at the restaurant for eight months and made $13,360.45 (again, this went towards our loans!).
Pay Off Debt Or Save Money First?
The big difference this year is that Jenna was promoted to night server. He used to be a daytime server and host, so this was a big promotion because the night shift was what made the money.
The restaurant tends to be busier at night and the meals on the dinner menu are more expensive than lunch. This promotion alone paid off an additional $6,000 in our student loan payments and brought our total second job income to $22,320.84 (the rest of the increase came from working a full 12 months vs. 8) .
With this kind of income, it’s safe to say that our second job helped pay off our debts in no time! Unless you have a second job or side hustle, I highly recommend getting into the restaurant business! It’s worth it!
Instead, we choose to prepare meals on Sunday and cook meals throughout the week. I hate cooking so this is a good thing for me. If I can do that and cook it all in one day, it means I don’t have to cook all the time for the rest of the week. All I need is a microwave and I’m ready to enjoy a warm, delicious meal!
Pay Off Debt Or Save For Retirement, Per Finance Experts
It makes it easier to avoid eating out. It’s hard to justify spending $30-$50 when I already have a full meal waiting in the fridge. We save between $50-$150 per month by not eating out. We only spend $60 a week on food, which our friends say is too little.
We find that our money lasts longer when we shop in bulk at SAMs Club and buy the same items every week. If you want to save money on your food budget, I wrote a whole post on the subject.
I know what you’re thinking, buying a home is not a mortgage payment. You’re right, it doesn’t, and it hinders our ability to pay off more debt. But remember when I said you can have your cake and eat it too? It was a sweet victory for us.
We saved a little each month for years to buy a house, then went overboard when our dream house sold.
Frugal Ways To Save Money And Get Out Of Debt
We ended up sacrificing about $4,500 in debt payments and got out of debt a few months ago. But we love our home and we are not changing.
Although we were not completely debt free when we bought the house, we worked hard and put off this purchase for a few years.
It was a difficult decision, but I think it was the right choice for us. It may have slowed down our goal of paying off our mortgage, but it helped us achieve another goal of becoming a home owner and finally getting a dog! 🙂
It’s still hard to believe that we paid off $29,500 on our loan. In the grand scheme of things, that’s 39.6% of our total revenue (did I mention I’m a geek and love spreadsheets?).
How Much Of Your Paycheck Should You Save?
At the same time, it was hard to believe that we had saved enough money to pay for our dream house. It’s been a good year for us and I appreciate the advice from our financial advisor. He encouraged us to learn how to get out of debt and save money.
Our budget and goals have changed our lives, and they can change yours too. If you want the same debt snowball chart we used to pay off $73,000 in student loan debt in 4 years, tap the button.
As a personal finance coach and blogger, Jamie has helped hundreds of families learn how to budget, save money, and pay off debt (go here to subscribe and start your debt-free journey ). Read our debt-free story, “How We Paid Off $73,000 in Debt in Four Years.”
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How Much Money You Should Save Every Paycheck
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