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How I Ditched Debt: My Shiny Nickels
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How I Ditched Debt My shiny nickels
By Anna Helhoski Senior Writer | Financial news, consumer finance trends as well as loans for college students loan and debt Anna Helhoski is a senior writer covering economic news and trends in the field of consumer finance at NerdWallet. Additionally, she is an expert for student loans. Her work was published by NerdWallet in 2014. Her work has appeared in The Associated Press, The New York Times, The Washington Post and USA Today. She has previously covered local news from New York for the Daily Voice, as well as local news in New York metro area for The Daily Voice, Daily Voice and New York state politics for The Legislative Gazette. She holds a bachelor's diploma in journalism from Purchase College, State University of New York.
Published April 4, 2017 at 6:00 AM PDT
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The series talks to individuals who have overcome debt by combining determination, budgeting, and smart financial choices. The stories of these people may motivate you to .
My Shiny Nickels blogger Laura Dobbins and her husband, Randy, on a trip to Paris and a trip that they could afford after they got free of debt.
In 2011, Sacramento, California-based IT manager Laura Dobbins, her husband and two children resided in a luxurious home that had all the luxuries of wealth- but their finances told a different story. They were nearly $40,000 in debt, and had billed an excessive amount on their credit card accounts that Dobbins couldn't front an airline ticket for an upcoming business trip.
Dobbins realized they needed to make some lifestyle changes. Dobbins along with her husband, Randy started saving instead of spending money and paying off their debts. They even reduced the size of their house and within less than 2 years they were debt-free. She now provides money-saving tips and outlines her debt repayment techniques on her blog . Here's the story.
What was your total debt before you began your repayment journey?
Laura Dobbins: 2011: $39,685 total, including $17,000 in credit card debt, $15,000 of auto loan debt, and $8,000 in personal loan debt.
What is your current total debt?
In 2013, became debt-free. To date, there is no debt.
What led you to end up in credit?
It was ironic that it began the year I got my first major promotion and an increase in my salary. It doesn't seem logical from the outside; you earn more money and then you're in debt? While it might sound strange, the answer is "yes." We suddenly were able to accumulate all this extra money even though we were in a perfectly sufficient home in a lovely middle-class neighborhood, we decided to use the extra money towards a bigger and better home in an upscale neighborhood. With that came the "need" for more furniture and a professionally-designed new backyard and an SUV just like the neighbors had, a gardener, and ... well, you get the idea. Instead of becoming wealthy, we were financing the appearance of it. Each month. Debt was spiraling downwards. had begun.
What was the reason that prompted you to get out of debt?
It was a realization to realize that we was unable to get the $400 flight ticket for a business trip that was coming up. For so long, we have paid down the credit card only to have some credit to cover any eventual expenses. That pattern finally stopped the day my boss told me to travel to St Louis for work. I checked our credit card account to find we only had available credit for $90 (and an additional $52 on the checking account). We had managed to conceal our financial situation from everyone for quite a long time, and then it was finally bubbling to the surface. And it was terrifying.
What steps did you take to reduce your debt? What tools or resources did you utilize?
The first thing we needed get rid of was the cycle of having debt "rescue" us. Therefore, before we paid down all debts, we saved the equivalent of a $1000 emergency fund.
We were also aware that to pay off our debts in the shortest amount of time, we needed to make more money. It was not the time to just throw a measly $50 at our debt each month. This was a "hair's-on-fire, call-the-firemen" situation, and we had to make a major move. Literally. We sold the massive house in the suburbs and relocated to a little 1,000 square foot house in a neighborhood that is primarily working class. This change alone saved us more than $2,500 per month. (I'll do the math to show you the savings: that's a savings of more than $30,000 per year.)
We also ate out less and found cheaper ways to have fun as an entire family. With that extra cash every monthly, we paid off the debt by using the "snowball strategy." We started with our smallest credit card balance of $1500 to get a quick, psychological win right away and after that, we paid all the other debts from the smallest to largest. When we paid each debt off, the money which was used for paying those monthly bills was applied to the next debt on our list. The "snowball" of money which was going to the debt each month increased like insane.
How have your lives changed in a positive way after you have gotten out of debt?
We're happy. Truly, wonderfully, down-in-your-soul happy. After the debt was paid off and our house costs were at a low level we could spend on things that mattered the most. The huge home in the suburbs did not make us happy, but traveling all over the globe did. We can save a good portion of money, yet be able to spend money on the things that matter.
A couple of years ago, my husband was unhappy with his job as a toxic manager. With some money we had saved up we purchased our first business -- an important part of our husband's long-term goals. The business was sold to him, is now his own boss , and he is awed by it.
The freedom from debt offers you more than just a feeling of freedom and opens doors to opportunities you've never imagined.
How to approach your own debt and start making payments to pay it off
The method Dobbins suggests is ideal for those who want to use small victories to repay larger debts. But, the strategy, in which you prioritize paying off debts with high interest like credit cards or payday loans before lower-interest ones such as mortgage, student and auto loans will aid in paying down your debts more quickly and lower the cost of interest. This will show you how long it'll take to pay off each debt one at a time.
For a better way to manage your debt payments You should think about debt consolidation which combines multiple debts into a single one with a lower interest rate. Two possible methods for consolidation are a or a . Use a to estimate your interest rate.
Anna Helhoski is a staff writer at NerdWallet Personal Finance website. Email: . Twitter: .
About the author: Anna Helhoski is a writer, and NerdWallet's expert on student loans. Her writing has been featured in The Associated Press, The New York Times, The Washington Post and USA Today.
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