2 years and 6 months. That is how long it took my wife and I to pay off our combined student debt of $71,000. Initially I was the sole breadwinner while my wife was a full-time graduate student. Our loans were paid off 4 months after my wife graduated and we had become a dual income household. So how did we do it?
Dave Ramsey’s Baby Steps Actually Work
During my final year of undergrad, I borrowed my soon-to-be father-in-law’s copy of Total Money Makeover famously authored by Dave Ramsey. Staring down the barrel of $33,000 of my own student debt, this book was a revelation to me.
For those unfamiliar with Dave Ramsey’s 7 Baby Steps, it is summed up as a program to help people get out of debt as fast as possible with the end goal of gaining and maintaining wealth. The first baby step is to set aside a small emergency fund, while the second step is to pay off ALL debt.
After reading his book in a span of a few days, I quickly told my soon-to-be-wife that I was really interested in the idea of living debt free with the end goal of experiencing financial peace. The reality of my debt situation did not fully hit me until summer of 2017 when my first student loan payment of $339 was due.
It was at that point we decided to actually start the Baby Steps. We took our savings account down to $3,000 and started aggressively paying on my student loans. During the next 26 of 30 months of our student loan debt payoff, we lived on a single income while my wife continued her studies.
Our excel spreadsheet had a place for every dollar that came in. After tithe, bills, and other necessary expenses we managed to pay on average about $1,000 a month on my student loans (including the $339 minimum monthly payment). There were difficult months when we had hardly anything left over, and there were great months, read: tax-refunds, where we could pay upwards of $4,000.
Practical Advice in Retrospect
- Avoid Lifestyle Creep
- Have SMART Goals
- Know that this is temporary
You will not find a list of “10 SMALL DAILY MONEY HACKS TO PAY OFF YOUR DEBT!!!” because contrary to popular belief, the real secret to getting out of debt or achieving any financial goal is not solely won or lost based on where you procure your morning coffee, but rather a combination of contentment, patience and self-discipline.
Avoid Lifestyle Creep
For almost the first three years of our marriage we were living off my income alone while my wife finished graduate school. When my wife started working we did not treat this as an opportunity to increase our standard of living. Rather, we applied her every paycheck to our loans.
“We live solely off my income. Every paycheck my wife earns goes toward our long term financial goals.”
We live solely off my income. Every paycheck my wife earns goes toward our long term financial goals. Yes, I would love to upgrade my 2009 Crown Victoria that has 180,000 miles on it. But I refrain, because the car starts every morning and is completely paid off.
This brings up the idea of lifestyle and contentment. Did we eat out every weekend? No. Did we take vacations? Sure one or two a year but always local and no longer than a weekend. Were we happy and content? You bet! Living within your means (meaning your expenses are less than your take-home pay) taught us to enjoy the things we have as well as find inexpensive ways to enjoy ourselves.
Date night frequently includes homemade hot chocolate followed by a walk in a local park, and topped off with me losing a game or two of Gin Rummy. We both love it and will continue to keep this up in the future. Hopefully I can win a game or two!
Have SMART Goals
SMART: Specific, Measurable, Attainable, Relevant, & Time-Based. Which sounds better: “I want to get out of debt really bad”, or “I plan to pay off $10,000 of my student loan debt in 12 months.”? The first statement is passionate but vague, while the second has a specific goal for a predetermined timeframe.
A few months after graduating from college, I evaluated our budget and determined on average we would have between $500 and $400 left at the end of each month. Including the required monthly bill on my student loan of $339, we could realistically put between between $739 and $839 towards my student loans each month.
“The first SMART goal was to pay off $10,000 of student loan debt within 12 months.”
With this math, we estimated paying off $10,000 in a year ($10,000 / 12 = $833.33). Thus, our first SMART goal was to pay off $10,000 of student loan debt within 12 months. This was realistic given our budget and could be measured and tracked on an excel spreadsheet.
The beauty of SMART goals is that you are working towards a realistic number in a reasonable timeframe. Instead of throwing money at an abstractly large number ($33,000 seemed like a lot of money!), we set smaller sub-goals that we knew were achievable .
We would track our progress each month. Some months we could only afford the minimum payment of $339, while on exceptionally good months we could manage to pay $4,000. After 12 months we managed to pay off closer to $12,000 which was a huge confidence boost to keep going. After the first SMART goal was met we made another one and kept at it.
Know that this is temporary
Dave Ramsey is very vocal that Baby Step 2, getting out of debt, is the most frustrating of all the baby steps. I would have to agree! My wife and I had to say “no” to a lot of things over the past three years. No to saving for retirement, no to saving for a house, no to concerts, no to everyday Starbucks.
The items listed above are not bad, it is just that we placed a higher priority on getting out of debt. The days of putting each excess dollar towards our student loans is now over! Because we said “no” to the things listed above, we now have the freedom to take hold of our future “yes” in the form of home ownership, retirement savings, and enjoying our money.
“The freedom from student loan debt has given us a $724 monthly raise as the monthly payment of $339 from my loans and $385 from my wife’s loans has now disappeared.”
The freedom from student loan debt has given us a $724 raise as the monthly payment of $339 from my loans an $385 from my wife’s loans has now disappeared. The combined $724 a month that we would be paying towards our student debt will now be directed into a money market account with the end goal of buying a house.
When we clicked the “Payoff Amount in Full” button there were no loud trumpets. The heavens did not open. Life continued as normal. Yet with each day that passes the feeling of satisfaction and optimism continues to grow. The last 2 years and 6 months have put our retirement savings behind the average millennial. And yes, we do still live in an apartment. Yet the financial contentment, patience and self-discipline that my wife and I learned through all of this has been well worth it.