How We Paid off $20,000 in Credit Card Debt

I’ve been meaning to write this post for awhile. I don’t talk money a lot around here… actually most people don’t like to talk about money. But paying off credit card debt is a huge accomplishment, especially when you’re in deep. It all started when my husband and I both lost our jobs within the same month back in 2008. Worst time of our lives. We had a 1 year old daughter, a mortgage payment, 2 hefty car loans, no savings and no income.

By the time we both found new jobs, we were deep in debt. Then add a couple rounds of infertility treatments and our grand total came close to $20,000 in credit card debt. Then it hit us. If we ever want to retire and not live paycheck to paycheck, we had to do something. And not next year, not next month… but NOW.

So how did we pay off $20,000 in credit card debt in 6 years?
Pay attention. It’s about to get good.



How to Budget?

1. We made a monthly budget spread sheet.

I’ve had the same Excel spreadsheet since 2008. Not even joking. I can look back at every month over the past 6 years and see exactly how much money we earned and how much money we spent. I update it everyday and plan for 3 months out at a time. This way if I have a major purchase in the future, I can easily plan for it in the budget.

2. Pay off your credit cards fast.

The most frustrating part of trying to pay off our credit cards in the beginning was paying $100 towards every credit card, then having $50 go right back on in interest rates. Annoying. So Ben and I used Dave Ramsey’s snowball plan to pay off our credit cards, yes… all $20,000. Basically we paid off the cards with the smallest balance first. We paid a minimum on the rest of the cards to put as much as we could towards the smallest credit card each month. It was the BEST feeling the world to knock out a credit card one by one. Yes, it took some time to complete this process but seeing big chunks of debt disappear into the abyss kept us motivated.

To help the process, we cut up every single one of our credit cards except for one with a $500 limit (and the credit card company asked us repeatedly if they could raise the limit and we told them NO). We would never use this credit card, but just keep it as a parachute in case of dire emergencies.

3. Look at your balances daily.

I’m kind of obsessed with budgeting, checking my balances daily, and paying off debt. Looking online at my daily credit card and checking account balances helps me keep my budget spread sheet up to date (I like to color code things to know what charges are pending and what has cleared). If I check daily, it’s almost impossible to miss a purchase I forgot to write down or have any surprises or overdraft fees.

4. Negotiate interest rates.

Did you know you can call your credit card company and sometimes negotiate your interest rates? Yep, we did this. After Ben and I both lost our jobs I noticed we were paying close to 30% interest on some credit cards. Yikes. Basically threatening to switch credit card companies helped get that number down. You should also have an easier time if you’ve had a long working relationship with the same credit card company. Use this to your advantage.

5. Use cash.

The best way not to overspend? Use cash for everything. If it helps, distribute your paychecks into envelopes: mortgage, utilities, gas, groceries, entertainment, etc. My husband liked to buy energy drinks at the gas station back in the day. When I told him he only had $75 for gas stations every week, that habit was quickly squashed.


Where to Cut Back?

6. Eating out.

Ben and I used to both eat out everyday for lunch. That added up to nearly $70 a week! I know sometimes it’s just so darn convenient… I totally get that. But we didn’t need to spend $7 on a French dip drive thru lunch. Now we take our sack lunches almost everyday. I cook a little extra at dinner to provide lunch for the following day. If a group from our office is going out, of course we splurge. We’re not hermits. But if we go out together we’ll often split an entree or have Ellie eat off our plates. No alcohol with dinner either.

7. Groceries.

Now that we were not eating out as much and saving tons of money from our daily fast food visits, it was time to get our groceries in check. First plan of ours was to use everything from the freezer, fridge and pantry. It’s amazing how much food you collect and never actually eat. This is why there are so many “pantry makeovers” out there. Because we buy stuff, forget about it, and then run out of storage space. Yes, dinner got quite creative during this time (tuna mixed with macaroni, peas and carrots) but it got us into menu planning: buying what we only needed for the week, and nothing extra. And if you know what meal you’re preparing next, there’s no need for the last minute fast food run to Taco Bell.

8. Cell phones.

Yeah, I know everyone in the world seems to have a SmartPhone. If you’re really looking to cut costs, scale back to an old school phone without all of the apps and data packages. That can save you a pretty hefty penny each month.

9. Cable or satellite TV.

I believe once upon a time our satellite TV bill was around $170 a month. Not even joking. Then it all of a sudden hit me that we don’t even watch that much “live” TV. Most of our shows are on Netflix these days since we like to serial-watch older seasons. While we didn’t completely get rid of cable, we were able to knock our current bill down to $55 (and it seems like the only reason we keep it at this point is to watch Cardinals baseball and Big Brother, ha).

10. Entertainment.

While date nights are important, we don’t feel the need to go out once a month for a pricey dinner and movie. If anything we’ll cook something special in (we switch turns for cooking) then snuggle on the couch with a movie or one of our TV show marathons. If we’re looking for some weekend fun, we search online for festivals, events and special outings that don’t cost a lot of money. Plus a lot of our favorite activities are free, including hiking and music concerts at the local park.

11. Insurance.

When we purchased a new home this past year, one of the things we double and triple shopped was insurance companies. It was unbelievable the savings we earned when we lumped our automotive and homeowner’s insurance together. We found a company to work with through Dave Ramsey’s Endorsed Local Provider program. When we closed on our home, the mortgage company underwriter even mentioned to us the fantastic rate we had and asked for our contact’s number!

12. Health insurance.

Oh boy, we’ve been dealing with this topic in our home this past month. Ben, Ellie and I have always been on an insurance policy through my company. Well August 1st it was up for renewal and I decided to see if we could save a couple bucks by switching Ben to a policy through his own company. Turns out switching him and Ellie will now save us $135 a month!!! And this is with bumping up the life insurance policy on all 3 of us. Shop around people. See what is available to you! If you need help, check out Dave Ramsey’s health insurance ELP Program.

Another thing we use every year is our Benny Card (flexible spending account). It’s pre-taxed dollars taken out of my paycheck and put on a debit card to be used for out of pocket medical expenses (co-pays, dentist visits, prescriptions, etc.). I was nervous about putting $2,500 aside for a family of 3, but if you know you have big medical expenses coming up like the birth of a child or lasik surgery, it can really help! You never miss it out of your paycheck, I promise.

13. Car loans.

As I mentioned, when Ben and I both lost our jobs we had 2 hefty car payments. OK, probably not hefty to the rest of the world but it seemed like it to me.Well one of our cars was pretty much worth what we owed (like worth $6,500 and we owed $6,000). Instead of keeping with the monthly payments, we decided to sell it and pay it off. Then we used a little bit of cash and bought a junker. A 1999 Lexus with 175,000 miles on it. Yeah, we knew it wouldn’t last forever but it would last us through this rough patch. And that saved us from a $400 a month car payment. Turns out this car was the best purchase we ever made and lasted us 3 years.

Also remember that cars are horrible investments. They quickly lose value and cost a lot in upkeep, especially the expensive ones! Ben and I vowed to never purchase a brand new car again, and to never take out a full 100% loan on a car. We will pay cash when we can. Plus, just think what we could do with the $400+ car payment money each month!

14. Clothing.

Ellie recently needed white polo shirts for her school uniform. Target had some for $8 each… not too shabby, right? Uh no. I shopped around and found some for $3 each online. $40 compared to $15 for a week’s worth of shirts. $25 in savings might not seem like a lot, but it will quickly add up.

I don’t go out and buy new clothes just to shop either. My closet is filled with plenty of outfits and pairs of shoes. If I need something specific like a new swimsuit I will go out to purchase that one item. I do give myself two shopping sprees a year; one for fall/winter clothes, one for spring/summer clothes. And yep, that keeps me content.

15. And all the little things that add up.

Is that gym membership really worth it? How about walking around your neighborhood instead. Having a birthday party soon? Check out 10 Ways to Save Money on Your Kid’s Birthday Party. How about your Friday night bar ritual with friends? Yikes, those bills always scare me. How about inviting a group to your house instead, BYOB style. Or swap babysitting with a neighbor to keep up with date nights so you don’t have to hire out. You can find little ways to save money.


Be Thrifty

16. Shop garage sales, thrift shops, Craigslist, second hand stores.

Yes, you can get awesome items and deals when shopping at thrift stores, garage sales and second hand stores. Furniture, clothing, accessories, home decor… you can find it all at a discount. If you need some tips, check out How to Thrift Like a Pro tips.

17. Ask questions.

If you are buying through Craigslist or a local flea market, ask for the discount! You never know if you could save a buck until you ask. Also, don’t be afraid to ask if a sales associate knows when an item is going on sale.

18. Shop clearance racks.

Whenever I enter a store, I head to the clearance racks first. Honestly. There is pretty much nothing I will pay full price for, especially clothing. But don’t head there unless you’re looking for something specific. Otherwise you’re just looking to spend cash for no reason!

19. How to save on gifts.

With 20 nieces and nephews, it seems like I buy a birthday gift every other weekend. That money can really add up fast, especially if you don’t budget for them. One of my favorite gifts to give are framed printables. Otherwise get crafty and make something with love.

20. Shop around, including online.

I never buy something the first time I see it in a store, unless I’ve done my research beforehand. Case in point are my couches in the new house. I found 2 couches and 2 chairs at a local store that I simply loved and were fairly cheap. But what did I do? Went back home, researched online, and found them for 20% cheaper. Plus I found a free shipping coupon from the online store when the local place would have charged me $150.


Work it Girl

21. Find extra income wherever you can.

When we first lost our jobs we received unemployment checks that didn’t come close to covering all of the bills. And of course it was during the recession so there weren’t a lot of jobs out there to quickly put us back on our feet. My goal was to find a job and find it fast, no matter what it was. Some money is better than no money.

I ended up creating some websites for local companies and picking up extra graphic design jobs where I could (birthday party invites, school newsletters, etc). When I finally found a full time job again, I decided to keep the side business. Why not make extra income while I’m able and willing? This helped us get back on our feet much faster than I ever thought possible. Yeah, working two jobs with a kid is no fun, but I knew I wanted to climb out of debt as fast as possible (whether it would have been through babysitting, cleaning houses, painting furniture or whatever I could find).

After we lost our jobs Ben decided to go back to school full time. He had never gone to college and this gap in employment gave him a great opportunity to go back and get his degree. It was actually cost effective for us for Ben to stay home during the day with Ellie (daycare was about $1,000 a month before that) and then he worked at a restaurant part time on nights and weekends. Yes, it was a tough time to be apart and work opposite schedules, but we did what we had to do. I was bored out of my mind being alone nights and weekends and decided to find a hobby (and that’s when How to Nest for Less was born).

22. Do It Yourself (DIY).

Doing things around my house has saved us a bunch of money: transforming old furniture with a coat of paint, installing our own moldings and millwork, building a fire pit or patio dining table. If you can’t DIY with the best of them, maybe you have a friend that will lend a helping hand. Just make sure you can return the favor in a different way (if I help a friend with her backsplash, then she helps me plant some flowers because I hate to garden!).

23. Use coupons.

I’m not talking about extreme couponing here and buying everything you can in bulk. But why not clip a few coupons from the newspaper or an online source to save some quick bucks? Even if it knocks $10 off my weekly grocery bill it helps.

24. Saving around the house.

There are tons of ways you can penny pinch around the house: install a programmable thermostat, turn off the lights before you leave a room, install LED light bulbs, keep your air ducts clean, buy energy efficient appliances, etc.

And I promise you, I don’t buy expensive furnishings. Every single piece of furniture in my home is from Goodwill, Craigslist, some online bargain outlet, or from local discount stores like Value City Furniture.

25. Make a 5-year and 10-year plan.

After losing our jobs and feeling like we would never climb out of debt, nothing felt better than hitting our 5-year goal: paying off those hideous credit cards. Our next goal (the 10-year plan) is to have no car payments, no school loans, and to have most of the house paid off.


Yeah, we still have a loooong way to go.

But I never thought 5 years ago we would be where we are now. We were upside down on our house, unemployed, with $20,000 in credit card debt.

And here we are now. Baby steps, people.

If you want to live the debt free and get on the money saving path like us, you can sign up to get free information from Dave Ramsey’s Endorsed Local Provider program. See how much money YOU can save. I promise, it will change your life!




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