How does one pay off $100,000 of debt in three years or less? Well, here’s how we did it:

1. We fostered a belief that it could be done–hope is the great enemy of fear, and it fights off depression that debt can bring on. We had hope because we ran the numbers and made, sometimes hard choices to reduce our spending so we could increase the amount of money we paid towards our debt each month.
2. Develop a singular focus of mind and will to address your debt emergency! People don’t play when there’s an emergency going on, they do what must be done to ameliorate their debt problem. If your significant other isn’t on board, you’re going to have a hard time accomplishing your goals. Sit down with them and share your values, share your concerns, and use “I feel” statements like “I feel unsafe when we have $100,000 in debt”. Or “I feel secure when we can put back X amount of money each month in investments and savings.” Or “I feel like I’m taking crazy pills when we go on spending our paychecks when we are loaded down with debt.” Maybe don’t use the last one, but you get the idea.
3. We developed a frugal spending plan. Since debt is an emergency, we cut out most–but not all–fun money or extra expenses. We gave ourselves 1 night a week where we’d go out to eat for dinner and limited the amount of money we were willing to spend (oftentimes we’d share meals).  We had friends over instead of going out. We got rid of our second car in graduate school and became a one-car family. We reduced our clothing budget. We reduced our meat and dairy consumption–lost weight and had to buy new clothes, which admittedly was an unforeseen cost. We said “yes” to select social events and “No” to last-minute unplanned frivolous extra spending events–in those situations we often asked for an alternative solution (i.e. come over, or we’ll come over to your place to spend quality time). We got our groceries at Aldi, and we planned out our meals weekly to reduce cost and waist–all meals were made from scratch–so that last night’s dinner became lunch for the following day. I was lucky enough to have a job that covered housing costs, and several meals covered each week  (but this also came with the downside of getting paid very little money–$30,000 per year gross pay!).
4. We used Dave Ramsey’s envelope system and paid in cash for almost everything. A key component to the envelope system is to always pay in cash—at least until you get out of debt and have learned to use your credit card like a debit card. The reason why you will want to pay in cash is not because cash is king, but because it’s more psychologically relevant and present in your life when you have to exchange the money physically from your hands to the merchant’s hands. You see the money dwindle in your purse / wallet. It stings a little to see it go. You also are more aware of its absence than a mere line item on a budget sheet. The psychology and emotional reality behind paying in cash is why you need to pay in cash. You’re developing your CENTSability.
5. We chose our freedom date–the date we would be debt free. This allowed us to know what we would need to pay each month to hit the target date. Here’s the post-it note I used to figure up how much debt we had and when we might reach our debt free goal…before we added the car loan which added an additional 6 months of debt-enslavement!

    

6. We took over half our income and put it towards our debt each month. Because both my wife and I worked–she made $35,000 and I made $30,000–we took my whole net salary plus some of hers and we put it towards the $97,402 we owed. To be clear, $78,402 of it was school loans and the rest was a car loan we picked up about a year and a half into the three year journey. Some months we were able to put back more than others, but after about a year we settled on $2,477 per month. I know, it’s a completely random number; it’s not a nice and neat number, but that’s exactly what we could afford, down to the last $7.00 per month. Again, some months we were able to put back more if we underspent in some other categories of our spending plan
   1. Side Note: Even though we were aggressively paying off student loan debt, we had already started a habit of setting back a little money each month for our 401(k), IRA’s, and a European trip–on the salary of 65-66k a year. In 2013, before we had paid off our loans, we used the money we had saved up to take an anniversary trip to Ireland. Did this make the most CENTS? No, but it was emotionally healthy, healing, and it provided us the psychological reward to continue on our quest to reach debt free status. Again, the personal finance game is not all about numbers on a page, it is also a deeply psychological game. Sometimes you really do need a reprieve from “normal” life.
   2. The side benefit for having already put back a little bit in our 401(k)’s and IRA’s is that once we were done paying off debt, all that money could more easily just shift over towards our investments without any lag time. Don’t underestimate the benefit of a mere $50 each month in your 401k’s and IRA’s. The habit of investing is an important one to develop even when you’re in debt. Again, it doesn’t make financial sense to do it this way, but it makes psychological/emotional sense–you can check your balance and see that even if you feel like you’re not getting anywhere with your debt, you have a little bit going towards retirement that you can watch grow over time.
7. We used the Snowball method of paying off debt, because at the end of the day, this is a psychological/emotional battle and not a mere numbers game. Most of humanity is not a heartless engineer or computer technician who can coldly go about the world in some smug inhuman stoic state. You’re a human, it’s okay to name that and what you’re experiencing and how that relates to your finances–this will actually help you in your quest to become debt free. When you can name the emotions behind why you want to purchase a good or service, you can start to address the underlining and more real issues at hand. Again, this is a psychological/emotional game. For this reason I set the automatic payments on all the loans except the one we were aggressively paying down. For that loan, the debt we were trying to kill, I paid it off manually–it’s good to have the psychological satisfaction and sadness that paying off the debt brings. Satisfaction because you’ll see the principle go down, and when you finally get to pay off one loan and apply all that money you were paying to the old loan to the new debt, there’s a sense of empowerment that can come with it. But, there is also a sense of sadness because you realize how depressing it is to have mounds of debt hanging over your head and that if you weren’t in debt you could be investing that money for a better future–you will never, ever, want to go into debt again after this experience!
8. In a relatively short amount of time–approximately 3 years–we paid off $97,402 in debt and threw a party to celebrate!