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My Ditched Debt Story: My Shiny Nickels
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My Ditched Debt Story: My shiny nickels
Written by Anna Helhoski Senior Writer | Financial news, consumer finance trends as well as loans for college students loan credit Anna Helhoski is a senior writer who writes about economic news and trends in consumer finance at NerdWallet. Additionally, she is an authority on student loans. She joined NerdWallet in 2014. Her work has been featured throughout The Associated Press, The New York Times, The Washington Post and USA Today. She previously covered local news in 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 Apr 4, 2017 at 6:00AM PDT
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The series talks to those who have beaten debt by combining commitment, budgeting and smart financial choices. Their stories may even encourage you to .
My Shiny Nickels blogger Laura Dobbins and her husband, Randy, on a trip to Paris for a trip they could afford after getting out of debt.
In 2011, Sacramento, California-based IT manager Laura Dobbins, her husband and kids lived in an elegant home, complete with all the luxuries of wealthbut their finances revealed a different picture. They were in nearly $40,000 of debt and had charged so much on their credit card accounts that Dobbins was unable to pay for the cost of a plane ticket to a business trip.
She realized that they need to change their lifestyle. Dobbins and her husband, Randy, began saving instead of spending money and taking care of their debts. They even downsized their home and within less than 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 before you started your repayment process?
Laura Dobbins: 2011: $39,685 total which includes $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. In 2013, still no debt.
How did you end up in credit?
Ironically, it started in the year that I received my first major promotion and pay raise. This doesn't sound like logical thinking from the outside, but do you make more money, and then you're in debt? While it might sound strange it's "yes." Then we had all of this extra money, and even though we lived in a perfectly sufficient house in a beautiful middle-class neighborhood, we opted to use the extra money towards a bigger and better home in a more 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 actually being wealthy, we were financing the design of it. Every month. Debt was spiraling downwards. started.
What was the trigger that led you to begin a process to pay off your the debt?
The realization that I couldn't get the $400 plane ticket for a business trip that was coming up. For a long time, we had paid down the credit card to a point to have some available credit for things that came up. This pattern came to a halt the day my boss told me to travel into St Louis for work. I went to our credit card account to find we only had $90 in available credit (and an additional $52 on the checking account). We'd managed to hide our financial status from the world for a really long time, and then it was bubbling up to the surface. And it was terrifying.
What steps did you take to reduce your debt? What were the resources or services you use?
We realized that the first thing we needed to get rid of was the cycle of having debt "rescue" our. So before we paid down the debt we owed, we put up a $1,000 emergency fund.
We were aware that to pay down our mountain of debt in the shortest time, we needed to free up more money. This was not the moment to relax and give a mere $50 to our debt each month. This was an "hair's-on-fire and we needed to call the firemen" economic crisis so we made a big move. Literally. We sold the huge house in the suburbs, and then moved to a small 1,000 square feet home in a neighborhood that is primarily working class. This alone helped us save more than $2,500 per month. (I'll run the numbers to show you the savings: that's a savings of nearly $30,000 annually.)
We also began eating out less often and found more affordable ways to have fun as the family. With the extra cash each month, we paid off the balance using the "snowball method." We began with our lowest account balance on a credit card of $1500 to get a quick, psychological victory right away. We then paid the other debts from the smallest to largest. As we paid each debt off, the amount that used to go toward paying off 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 crazy.
What has changed in your life in a positive way after you have gotten out of credit?
We're happy. Truly, wonderfully, down-in-your-soul happy. When the debt was gone and our home costs were at a low level that we had enough money to invest in things that mattered the most. Turns out the huge home in the suburbs did not make us happy however, traveling around the world does. We have saved a significant portion of our money and have enough to splurge on the things that matter.
A several many years back, my husband hated his toxic management job. With the money we'd saved up, we bought our first business -- the one of his long-term dreams. The business was sold to him and is now his own boss , and he loves it.
The freedom from debt offers you more than just an euphoria of freedom It opens up possibilities you've never imagined.
How do you approach your debts and begin paying it off
The method Dobbins recommends is the best option for people who require small victories as motivation to repay larger debts. However, the method, in which you prioritize paying off high-interest debts such as credit cards and payday loans before lower-interest ones like student, mortgage and auto loans can aid in paying down your debt more quickly and lower the cost of interest. This will show you how long it'll be to eliminate one debt at a time.
To make it easier to manage your debt payments You should think about debt consolidation which rolls several debts into a single one that has a lower interest rate. Two options for debt consolidation are a and a . Use a to estimate your interest rate.
Anna Helhoski is a staff writer at NerdWallet, a personal finance website. Email: . Twitter: .
About the author: Anna Helhoski is a writer and is NerdWallet's chief authority regarding student loans. Her work has appeared in The Associated Press, The New York Times, The Washington Post and USA Today.
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