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How I Ditched Debt: My shiny nickels
By Anna Helhoski Senior Writer | Consumer finance, economic news, trends, student loan debt Anna Helhoski is a senior journalist who covers economic news and trends in consumer finance for NerdWallet. Also, she's an expert regarding student loans. The company was founded by NerdWallet at the beginning of 2014. Her work has appeared in The Associated Press, The New York Times, The Washington Post and USA Today. She was previously a reporter for local news in The New York metro area for the Daily Voice and New York state politics for The Legislative Gazette. She holds a bachelor's diploma in journalistic studies from Purchase College, State University of New York.
Published Apr 4, 2017 at 6:00 AM PDT
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This series by NerdWallet talks to individuals who have overcome debt using a combination of commitment, budgeting and wise financial decisions. The stories of these people may encourage you to .
My Shiny Nickels blogger Laura Dobbins and her husband, Randy, on a trip to Paris and a trip that they could afford following their getting out of debt.
In 2011, Sacramento, California-based IT manager Laura Dobbins, her husband and kids lived in a luxurious home that had all the trappings of wealth -but their finances revealed a different picture. They were in close to $40,000 debt and had billed so much on their credit card accounts that Dobbins was unable to pay for the cost of a plane ticket to an upcoming business trip.
Dobbins recognized that they had to alter their lifestyle. Dobbins and her husband, Randy started saving instead of spending and paying down their balances. They even reduced the size of their house and within less than 2 years they had become debt-free. She has since shared money-saving advice and details her debt payoff techniques on her blog . Here's the story.
What was your total debt before you started 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 of personal loan debt.
What is your total debt today?
In 2013, became debt-free. Today, still zero.
How did you end up in the position of being in
Ironically, it started in the year that I received my first major promotion and a salary increase. This doesn't sound like logical thinking from the outside, but do you make more money, and you end up in debt? Although it may sound odd it's "yes." We suddenly were able to accumulate all this extra money, and even though we were in an excellent home in a gorgeous middle-class neighborhood, we decided to put that extra income 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 funding the look of it. Every month. The downward spiral of debt had begun.
What triggered your decision to get out of debt?
It was a realization to realize that we couldn't get the $400 airfare to a business trip I was planning. For a long time, we had paid off the credit card only to have some credit for any unexpected expenses that occurred. That pattern finally ended when my boss instructed me to fly from St. Louis to St Louis for work. I looked over our credit card accounts to discover that we had credit of $90 (and the balance was $52 on our bank account). We'd managed to hide our financial status from the world for a really long time, and now it was finally bubbling to the surface. It was a nightmare.
What steps did you take to lessen your debt? What resources or services did you use?
We knew the first thing we had to do was break the cycle of having debt "rescue" our. So before we paid down any debt, we saved up a $1,000 emergency fund.
We also knew that in order to pay down the debt we accumulated in the shortest time, we needed to make more money. It was not the moment to relax and only throw $50 at our debt each month. This was an "hair's-on-fire and call the firemen" financial crisis, so we took a huge leap. Literally. We sold our huge home in the suburbs and relocated to a small 1,000 square foot house in a neighborhood that is primarily working class. The move alone has saved us more than $2,500 per month. (I'll calculate the numbers on your behalf: It's a savings of nearly $30,000 annually.)
We also started eating out less and found cheaper ways to enjoy ourselves as a family. With the extra cash each month we paid down the debt by using what's known as the "snowball technique." We began with the smallest credit card balance of $1,500 to gain a quick mental victory immediately and followed by paying the rest of our balances, starting with the smallest and ending with the most expensive. When we paid each debt off, the amount that used to go toward paying off those monthly debts was applied to the next one on the list. This "snowball" of cash which was going to the debt each month increased like insane.
What has changed in your life to the better after you have gotten out of debt?
We're happy. Truly, wonderfully, down-in-your-soul happy. When the debt was paid off and our house expenses were low that we had enough money to spend on things that mattered the most. It turns out that the massive suburban house didn't make us happy and we enjoyed traveling around the world does. We have saved a significant portion of money, yet enjoy the luxury of spending it when it's needed.
A several many years back, my husband was unhappy with his job as a toxic manager. With the money we'd saved, we bought our first business , which was the one of his lifelong desires. He quit his job and is now his own boss and is awed by it.
The freedom from debt offers more than just an euphoria of freedom It opens up possibilities you've never imagined.
How to approach your debts and begin paying it off
The method Dobbins recommends is the best option for those who need small victories to pay off bigger debts. But, the strategy where you prioritize paying off debts with high interest such as credit cards and payday loans before lower-interest ones such as mortgage, student and auto loans will assist you in paying off your debts quicker and reduce interest. This tells you how long it will be to eliminate one debt at a time.
To better manage your debts, consider debt consolidation, which combines multiple debts into one new one with a lower interest rate. Two possible methods for consolidation are a and 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 authority 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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