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How I Ditched Debt: My Shiny Nickels
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My Ditched Debt Story: My shiny nickels
Written by Anna Helhoski Senior Writer | Economic news, consumer finance trends as well as loans for college students loan debt Anna Helhoski is a senior writer covering economic news and current trends in consumer finance at NerdWallet. Also, she's an authority for student loans. Her work was published by NerdWallet in 2014. Her work was featured throughout The Associated Press, The New York Times, The Washington Post and USA Today. She has previously covered local news from the New York metro area for The Daily Voice, Daily Voice and New York state politics for The Legislative Gazette. She has a bachelor's degree in journalistic studies from Purchase College, State University of New York.
Published April 4, 2017 6:00AM PDT
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This series by NerdWallet speaks to individuals who have overcome the burden of debt through a combination of commitment, budgeting and wise financial decisions. These stories might encourage you to .
My Shiny Nickels blogger Laura Dobbins and her husband, Randy, on a trip to Paris, a vacation they could afford following their getting free of debt.
In the year 2011, Sacramento, California-based IT manager Laura Dobbins, her husband and children lived in an elegant home, complete with all the trappings of wealth -- but their finances were a different story. They were in close to $40,000 debt and had charged an excessive amount on their credit card accounts that Dobbins was unable to pay for a plane ticket for an upcoming business trip.
She realized that they need to alter their lifestyle. Dobbins and her husband, Randy, began saving instead of spending, and then taking care of their debts. They even reduced the size of their house and, in just two years, they had become debt-free. She now provides money-saving tips and details her debt payoff techniques on her blog . Here's their story.
How much was the total amount of debt you owed at the time you began your repayment journey?
Laura Dobbins: 2011: $39,685 overall, including $17,000 in debit card balances, $15,000. of auto loan debt and $8,000 of personal loan debt.
What is your total amount of debt today?
In 2013, became debt-free. To date, there is no debt.
How did you end up in credit?
In a strange way, it was when I was offered my first major promotion and a pay raise. It's not logical from afar; do you make more money, and then you're in debt? While it might sound strange it's "yes." Then we had this surplus money, and even though we were in an excellent home in a lovely middle-class area, we decided to put that extra income toward a bigger and better house in a posh 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 actually being wealthy, we were financing the design of it. Every month. The downward spiral of debt had started.
What triggered your decision to get out of credit?
It was a realization to realize that we couldn't float the $400 plane ticket to a business trip I was planning. For a long time, we had paid off the credit card just enough to have some available credit for things that came up. That pattern finally stopped the day my boss told me to travel into St Louis for work. I went to our credit card account and found that we only had $90 in available credit (and an additional $52 on the checking account). We'd been able to hide our financial situation from everyone for a very long time, and then it was bubbling up to the surface. And it was terrifying.
What steps did you take to lessen your debt? What were the resources or services you utilize?
We realized that the first thing we had to do was break the cycle of being in debt to "rescue" us. Therefore, before we paid down the debt we owed, we put the equivalent of a $1000 emergency fund.
We were aware that to pay off our debts in the shortest amount of time, we needed to be able to earn more. This wasn't a time to sit back and give a mere $50 to our monthly debt. This was an "hair's-on-fire, call-the-firemen" financial crisis, and we made a big move. Literally. We sold our huge home in the suburbs and moved to a tiny 1,000 square foot house in a neighborhood that is primarily working class. This alone helped us save more than $2,500 per month. (I'll do the math to show you the savings: that's an amount of nearly $30,000 annually.)
We also began eating out less frequently and looking for cheaper ways to enjoy ourselves as a family. With that extra cash every month we paid off the debt by using the "snowball technique." We began with the smallest account balance on a credit card of $1500 to get a quick, psychological win right away and then paid the other debts from the smallest to largest. After we paid each one off, the amount that was used for paying those monthly debts was applied to the next one on the list. The "snowball" of cash that went to debt each month grew like insane.
What has changed in your life in a positive way since you got out of credit?
We're happy. Truly, wonderfully, down-in-your-soul happy. After the debt was paid off and our house expenses were low we could spend on the things that mattered the most. It turns out that the massive home in the suburbs did not make us happy, but traveling all over the globe did. We save a lot of our money and have enough to splurge when it's needed.
A couple of many years back, my husband hated his job as a manager that was a nightmare. With the money we had saved up, we bought our first company -- the one of his lifelong goals. He quit his job, is now his own boss and loves it.
Getting out of debt gives more than just an euphoria of freedom It opens up possibilities you've never imagined.
How to tackle your debt and begin paying it off
The approach Dobbins describes is best for people who require small victories to pay off bigger debts. However, the method where you prioritize paying off debts with high interest such as credit cards or payday loans before lower-interest ones such as mortgage, student and auto loans can assist you in paying off your debt faster and save on interest. This will show you the time it will be to eliminate each debt one at a time.
To better manage your debts, consider debt consolidation, which combines multiple debts into one one with a lower interest rate. Two options for consolidating debt are a or a . Use a to estimate your interest rate.
Anna Helhoski is a staff writer for NerdWallet Personal Finance website. Email: . Twitter: .
About the author: Anna Helhoski is a writer, and NerdWallet's expert in the field of 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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