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How I Got Out of $59,496 of Debt (Partly While Broke)

How can I pay off my debt when broke? I want to share with you how I got out of debt (and how I got into it to begin with). Buckle up – as with any debt payoff journey story, this is a long ride!

woman on bed with mug, reading on phone

How to pay off debt when broke?

I'd like to share my own debt story with you today, which partly covers paying down my debt at the beginning of my career.

I graduated college in 2005 with a diploma, my 193,845-mile Chevy Cavalier, $2,000 in the bank, and approximately $36,000 in student debt.

The $2,000 was saved from four years of working at a minimum wage job (that's why I know how to save money on minimum wage), two years of Saturday morning Amish market runs, various summer jobs, and graduation party gifts.

My husband, Paul, had almost $22,000 in debt from a new car he purchased when he got out of the Navy.

And then after that, he added on a $3,000 engagement ring loan from asking me to marry him.

Fast forward almost six years after he and I got together, and not only have we paid off all of our $59,496 in debt, but we have a positive net worth.

So, what's our debt-free story? Just how did we get from Point A ($59,496 in debt) to Point B (positive net worth)?

Well, any good “how I got out of debt” story starts from the beginning…or, at least in the weeks after finding out I had $36,000 in student loan debt and had graduated college.

How Can I Pay Off My Debt When Broke?

When you graduate college with $36,000 in debt, you start asking yourself questions like “How can I pay off my debt when broke?” and “How can I get out of debt fast”?

It seems like an impossible uphill climb. But I assure you, it's not.

Here's how I tackled paying off my debt while broke, plus what “broke” looked like to me.

Strategy #1: I Continued to Live Like a College Student, on a Salary

If you can continue living like a college student – you know, getting free food where you can, driving a beater car, splitting rent, etc. – when you first earn a salary, then you can really start to tackle your debt payoff.

Two weeks after graduating college, I started work as an International Sales and Marketing Specialist at $40,000 a year. The job was in my college town, and perhaps that is why it was so easy for me to continue to live as a college student. I found a roommate who was in her senior year at college. Her parents were renting her an apartment in town instead of living on campus.

My share of the rent was just $350 per month, and because the roommate’s parents were on the lease, no one asked me for a deposit. Also, since my roommate was still in college, I got the apartment to myself for the summer months and winter break. It was the perfect setup!

Living expenses were extremely cheap; I had been ultra-frugal my entire life and really did not know how to spend the huge amounts of money I was now raking in every two weeks.

I did this for one entire year after college. Here's what my bills looked like:

  • Gas: Once a month I filled up my gas tank (I lived just two blocks away from where I worked).
  • Laundry: I washed my clothes at the Laundromat. Once a week it was two loads of wash.
  • Food: I would go grocery shopping just two stores down from the laundromat. My grocery spending consisted of approximately $75 the first and third weeks of the month, and $25 the second and fourth weeks of the month. By the time I was finished shopping from my list, my laundry was finished. I then folded, loaded up my car, and drove the three minutes home.
  • Other Costs: Since I was living with a roommate, I only paid half of the internet, cable, and electric bills.
  • Furniture: As with any apartment or home, we needed furniture. Once again I was extremely fortunate because my roommate was more than glad to furnish the shared areas of the apartment with IKEA furniture (I think her parents paid for everything). I traded my desktop computer for a nearly new, full-sized mattress and box spring from my sister. I also brought several items from home: my boom box (still have it!), a small television and VCR from my high school days, tons of books, a few plants, my clothes, a bedside table, my bicycle, a gorgeous painting Paul had bought me while in South Korea (now above our fireplace!), etc. Everything was complete when we found a futon that was being given away for free outside of a posh home in Washington D.C.

Strategy #2: I Spent Very Little Money

For that first year out of college, I lived in a small town on the shores of the Chester River. Aside from a cute farmer’s market, a niche bookstore, a craft store, a grocery store, a Laundromat, a movie theater, a bowling alley, etc., there was really nowhere to spend money.

The closest “mall” was a cluster of outlet stores about 40 minutes away. This, on top of the fact that I don’t have a huge appetite for things, meant that I did not purchase very much.

I can remember clearly some of my “large” expenditures that first year out of college:

  • I purchased two curtain rods (now in our guest room)
  • two green silk curtains from Bed, Bath, and Beyond
  • a juicer
  • an iron coat rack (still have in our house)
  • an iron planter (still have, but currently not using)
  • a $99 Down Comforter (on our bed, along with the duvet cover I originally purchased)
  • a dresser from IKEA (sagged under the weight of my clothes)
  • a $20 desk from the local dollar store
  • some clothes from Old Navy
  • a desk chair
  • a brand new Alpine CD player for my car

Those were all my major purchases on that $40,000 salary. Which means, I was able to stash away the surplus earnings.

Strategy #3: I Stashed the Surplus Money

For the first four months of my salaried paycheck, I was living without a budget, without a savings account, without a retirement account, and just kind of taking it all in.

After a few months, I noticed that my checking account had swelled to a little over $4,000.

It’s not that I had a plan and was saving a certain amount of money each month; in fact, I had no budget at all. This was left over naturally from a nice income coupled with my frugal living.

But I knew that I needed to work a plan out and give my money some purpose.

I opened up an IRA account with Vanguard and stuck $2,000 in there. I also set up an automatic monthly withdrawal into this IRA account. Then I opened up an ING Savings Account and set up automatic withdrawals from my checking into my savings account.

At around the same time, I began receiving lots of credit card offers. I knew that I needed to work on building a credit history (though I suspected that my student loans counted towards this).

I signed on with Citibank, which gave me a $100 gift card for bed, bath, and beyond. With the gift card, I purchased a three-drawer wicker stand (now in my office).

I gave myself a budget of $400 per month for gas, groceries, travel, and anything else I wanted to spend. My budget was spent on this card, and then I religiously paid off the balance each month.

Strategy #4: I Decided to Tackle My Debts with a Consolidation Loan (but with a Twist)

Finally, it was time for me to tackle my student loans.

I took a look at all of my paperwork: I had a private student loan for $6,000, and the other loans were subsidized through the federal government.

It just so happened that this was the time when the consolidation rate for student loans was amazing.

However, after researching consolidations, I found that if I put my $6,000 private student loan with an interest rate of 9% in with my other student loans which had interest rates of between 2-6%, then it would raise the interest rate on the whole bundle.

Therefore, I consolidated all of my loans at an unbelievable 2.25% interest rate and left the $6,000 loan out of the bundle.

The $6,000 loan I decided I would pay it down extra fast.

And then…I Was Laid Off

By the morning of June 6th, 2007 when I was pulled into my boss’s office and told that I was being let go, I had a savings account with $10,000, an IRA account with several thousand dollars, and one year of experience under my belt.

Still, unemployment was tough.

When I lost my job, I lost my identity.

I had no idea how much work was tied into my true self until I spent almost an entire week waking up, eating breakfast, laying on the couch, and watching movies from the local library. I lost my rhythm because I lost my reason. I was depressed.

Still, I was in a good position financially because of the money I had saved. Every day I searched for jobs to apply to, and even though I had one year of experience under my belt, I still fell into that endless loop of “they won’t hire me because I don’t have experience, and I won’t gain experience because they won’t hire me”.

Fortunately, a month or so after my lay off my aunt and uncle had recently moved to Palm Beach Gardens, FL, and they invited me to visit their new home and possibly apply to the company where my aunt was working. South Florida was a paradise complete with palm trees, manicured highway medians, teal and aqua waters where you could see your feet and exotic flowers. In a word, it was heaven.

After three interviews and two tests, I was offered an entry-level position in market research. It was by far the best opportunity I would have to gain experience and a skill set, and I decided to take it.

A Setback with Cost of Living + I Feel a Clash of Values

Moving to a state and an area at the age of 24 where people only dared to live once they had amassed a lifetime's worth of retirement money was such a dream to me.

However, I was an outsider from the few people my age who lived in this retirement and vacation paradise because they were generally ‘from money’ (hence why they grew up there), were into trendy clothes, nice (leased) cars, partied at expensive and posh clubs, etc.

I'm just not that kind of person!

Still, I found my niche. I made some great friends in their 40s, which is who I could relate to better. I spent some wonderful times with my aunt and uncle, who fortunately would take me out to eat often (which I would also feel bad about, and bake them things like apple pie or key lime pie, or make them homemade guacamole).

And I also spent a lot of time outdoors. Each weekend I would hike a different trail, head to the beach to lounge in the sun or canoe, go alligator-spotting, or snorkel (for free!) with a group of friends my aunt and uncle had put me in touch with.

The area was truly a paradise; I felt like I was on vacation in some exotic location every weekend!

There's a Huge Cost of Living Increase

Everything in Palm Beach Gardens was more expensive.

I had an inkling before moving there that it could be more expensive, as my aunt and uncle’s place was quite nice. But I didn’t know that I would be forced to spend more money than I was comfortable with just to get by. In other words, I had not thoroughly researched the cost of living, and how it would affect my personal finances (this is definitely one of the best life lessons about money that I had to learn the hard-knock way).

On top of this, I took a pay cut of $5,000 for the first eight months of working in my new position until I could prove my worth to them as an employee.

For the first five months, I moved in with a psychotic roommate (literally; and I later found out that she was selling her anti-psychotic medication on the black market for extra cash), and so my rent was bumped up to $550 per month from the $350 I had been paying before.

Then I found an apartment and moved in with my boyfriend. The idea was that we would split the rent, except that he never found a job and after a series of very unfortunate events, we split and he moved back up to PA.

Now my rent tripled from my first apartment to a whopping $950 for 850 square feet.

I also needed to “furnish” the place, so I purchased:

  • a desk for $50
  • a futon couch for $199 that dubbed as a guest bed
  • I went without a kitchen or dining room table and instead bought a patio chair for $16 and a small patio table for $12 (had to take advantage of that Florida sun!)

My apartment was complete.

Fortunately, my work was once again one block from home, so I only had to fill my tank of gas once a month.

Strategy #5: I Paid Down More of My Student Loans

It had been a few years now since I graduated college and it really began to sink in that I was paying on this debt at rates that would take me 9 years to pay off!

Even though I had a nice savings account, it dawned on me one day that so long as I owed this money to other people, it truly wasn't my own.

I looked to my future and really didn’t like the idea of still paying off my college debt into my 30s, so I decided to take some drastic measures.

I paid off a lump sum of $2500 at the beginning of 2008, and then I paid off the entire $6,000 private loan in 2008 as well.

Even though I had raised my negative net worth some because of paying down student loans, by the time I left Florida two years later (after being laid off again), I had $10,000 in my savings account.

Honestly, I felt like I was just treading water. In my first year out of college, I was able to accumulate $10,000 and had expected to be able to do this at least each year from then on out.

By my calculations, I should have accumulated over $25,000 by now! True, my goal of paying down my student loans had progressed, I had added several thousand dollars to my retirement account as well, and I had replenished my savings from the move and settling costs…but it felt as though I had just worked almost two years of my life for nothing.

This is because it is not about how much you earn; it is all about how much you keep.

In my eyes, I had not kept anything because my savings account had the same dollar value. And did I mention I was laid off again?  Ouch.

We Rekindled an Old Flame…

Paul and I had originally met one another in 2003 while I was studying abroad in Japan and he was stationed in Yokosuka as a cryptologist in the Navy.

Can I say love at first sight?

The exact moment that we laid eyes on one another is actually filmed as someone who had a video tape recorder at the time. I will not bore you with the details, but suffice it to say that we were quite smitten with one another. We held onto a whirlwind, long-distance relationship for several years by flying back and forth to Japan every three months (not cheap, but completely worth it). It ended with his being stationed in Bahrain for two years, an island that was shut off to U.S. citizens at the time.

Several years later, I got up the nerve to email Paul. It turned out that his enlistment was completed the next week, and he would be returning to Norfolk, VA, and then Houston!

We decided we needed to see one another right away, and he flew down to Florida from Virginia after several more phone calls. A relationship began to blossom.

About eight months into our relationship, Paul was laid off from his job in Texas. I hate to say it, but I was so happy because it meant that he could come to Florida and be with me for a while, which is exactly what he did.

He set up an office in my bedroom where he applied to jobs and completed interviews over the phone while I was at work…that is, while I still had a job. Precisely two weeks after he had arrived, I came home with my box of belongings and a tear-soaked tissue.

I had been laid off.

We were now free agents.

Strategy #6: Split Expenses and Share Debts

The day that I came home with that box, Paul and I went for a walk.

He came up with a brilliant idea.

“Let’s go to Disneyworld, Amanda.”

And that is exactly what we did. I booked us a free hotel off of my frequent hotel stay points from business trips, and the next morning we woke up and drove about 2.5 hours to the happiest place on earth. What a great time!

When we got home, I started to feel that old pang of depression kick in which I had experienced during my last unemployment.

Fortunately, Paul was with me. We sat down and had a serious discussion about our future.

We decided that we would both be comfortable with moving to Colorado, the Washington D.C./Virginia Area, or Houston. It solely depended on who could secure a stable, good job AND where there were good job prospects for the other person.

Paul was the first to secure a solid job, and so I packed up my apartment and moved to his apartment on Old Spanish Trail.

After a year of living together, Paul proposed to me and our futures became one. We sat down shortly after and discussed our finances with one another. Each of us had paid down a significant amount of debt before getting back together (we calculated that our individual debts used to be $59,496).

At this time, it turned out that between the two of us, we still had $25,000 in debt.

Each month $950 was leaving our bank accounts to service these past debts, of which $75 was interest.

Here is the breakdown:

  • Student Loans: $10,000 at 1.25% interest
  • Car: $12,000 at 6.325% interest
  • Engagement Ring: $3,000 at 0% interest (if paid off within 12 months, which we did)

We decided that we wanted to pay for our wedding and honeymoon in cash, purchase a home, and pay down our debts…all by the summer of 2010.

Paul’s Perspective on Overcoming Debt

“Things were really starting to fall into place for us. I was back in Houston after spending the last six years of my life overseas. Amanda and I were living together and happier than we ever thought was possible. Our apartment was great and we really loved the neighborhood. Everything was perfect, and we were looking towards our future together. There was only a small inkling in my stomach when Amanda first asked me that fateful question, ‘So sweetie, what are your savings goals for this year?'

I didn’t quite see the problem with my finances. I never spent more than I made, I had a credit card that I almost never used.  What was the big deal?  Well after I realized that I wanted to spend the rest of my life with someone, I thought that it was important to understand what Amanda was talking about.

We looked at all of my bank statements and saw that the general bulk of my income was not going to rent, or food, but just cash. Cash that I had no idea where it went. We went through all of the financials and came up with a budget, which would allow us to meet our savings goals. After that arduous night I thought we were pretty much done with that conversation. At the time I didn’t realize that so far in my life I have been able to out-earn my stupidity. It was time for a financial life change.  It wasn’t going to be easy, but we had a plan.”

How to Get Out of Debt Quickly – Our Debt Strategy

Even before we were together, both of us had individually paid extra down on our debts. But now that we were serious, we wanted to really plot out a strategy and set a target month for being debt-free.

We used a hybrid approach of both Dave Ramsey’s Debt Snowball and Suze Orman’s debt repayment plans (pay the highest interest rate debts first).

We were the recipients of the $8,000 first-time homebuyer’s tax credit, and so we put $7,000 of this money onto the car loan (Suze Orman’s Plan). The other $1,000 we used to help replenish our savings account after purchasing the home.

This turned out to be very important, as my car died one month after we purchased our first house. We also put $300 per month onto the engagement ring debt in order to wipe that out before the wedding, and before the 12 months of free interest were up.

Once we paid that off, we used that $300 to put towards other debts, thus utilizing Dave Ramsey’s Debt Snowball.

Our Get Out of Debt Plan – How We Came Up With Extra Money

I’d like to share a few snippets here though to give you a glimpse into our finances.

Since we were living together throughout this entire debt repayment, our living costs were cut in half. We had two incomes to work with, which really helped as well. Also, Houston has a relatively cheap cost of living (especially compared with Southern Florida). We set a budget, I taught Paul some of my frugal principles, and we worked towards our goal together.

Paul’s Perspective: “Two years later, I am a lunch packer and a guy who no longer buys the most expensive beer. I also gladly use coupons at the store. The best part about frugal living and being out of debt is knowing that you can leave your job and you are not in any immediate danger. It has been a tough adjustment, but I could never go back to out-earning my stupidity.”

Our Debt Payoff Story Conclusion

Paying off our debt and saving a lot of money did not come easy to us, though it may seem as if it did. We suffered our share of setbacks and obstacles: three lay-offs, two moves, unexpected car failure, unexpected dental surgery, etc.

However, my strong background and passion for living a frugal lifestyle and saving excess, and Paul’s hatred of debts fueled us along the way.

And you know what? While we didn't meet our debt payoff goal of going down the aisle debt-free…we managed to pay off all of that debt (plus get married, and go on a honeymoon) just five months later in September 2010. Pretty awesome!

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Amanda L Grossman

Personal Finance Writer and CEO at Frugal Confessions, LLC
Amanda L. Grossman is a writer and Certified Financial Education Instructor, Plutus Foundation Grant Recipient, and founder of Frugal Confessions. Over the last 13 years, her money work has helped people with how to save money and how to manage money. She's been featured in the Wall Street Journal, Kiplinger, Washington Post, U.S. News & World Report, Business Insider, LifeHacker, Real Simple Magazine, Woman's World, Woman's Day, ABC 13 Houston, Keybank, and more. Read more here or on LinkedIn.

Michael Mota @ negativetopositivenetworth

Sunday 28th of December 2014

Great site! I have begun to read your articles and enjoyed this one. I too was at one time in debt to my eyeballs because of the decisions I made in my past. In four years time I have become debt free and began to build wealth for me and to leave a legacy. I too wrote about my own journey on my blog with the hope that it could help others We all have the ability to improve our futures but first we must believe we can and then we shall. Debt and the lenders want to keep us down so we can keep sending them our future income.


Monday 29th of December 2014

Good for you, Michael! I love hearing success stories.

Financial Success for Young Adults

Monday 11th of July 2011

Great story so far! I wish I could pay just 350 for rent but I don't think I could handle having a roommate lol

Barb Friedberg

Monday 21st of February 2011

Excellent habits. If you keep them up, your financial life will continue to go well. And you can end up getting the most from your paycheck. This is also a very nice primer for the new college grad. I'm definitely going to promote this article!


Friday 18th of February 2011

I can't wait to read the rest of your story! I also have college debt and am looking forward to paying it off quickly!

Cary B. Randall

Thursday 17th of February 2011

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One of the first things you should do during your transfer planning is to meet with your academic counselor as soon as possible.Tell your counselor what your plans and goals are and together you can craft a curriculum that not only helps you gain entry into a four-year institution but will also allow you to transfer the maximum number of credits.You should ideally meet with your academic counselor before your first semester at community college ensuring that your curriculum planning is optimal to your long-term goals.Schedule quarterly or semester meetings with your counselor and the transfer rewards will pay off significantly...Step 2 Evaluate what four-year institution and major you want to attend ..Not all institutions are created equal and neither are their transfer requirements.You should develop a list of institutions are you are interested in transferring into and then evaluate their transfer requirements.Each institution has a different set of governing rules when it comes to applications from community college students.For example if you are interested in attending the University of Virginia as a transfer student you will be expected to hold a minimum 3.4 GPA and not all programs are open for transfer students.On the other hand the University of California system requires a minimum 2.4 GPA and they do not have any limitations on the majors programs or departments for transfer students...Understanding what your ideal four-year institution expects of its transfer students can help you craft your time at community college accordingly.You can conduct research ahead of time to properly assess their requirements minimums and expectations which will help you make the best curriculum choices in community college...Step 3 Understand what the transfer program entails ..Most transfer programs anticipate that you will complete your first two years at community college then transferring to a four-year institution as a junior.Therefore your two years at community college are typically spent building your lower-division course credits such as .. Classes that are related to your major You should also take classes that will prepare you for your major once you transfer to a four-year institution.This not only cements your interest in your major but also demonstrates to the university that you are serious about your interests as well as have an ability to succeed in the subject matter...Remember as a transfer you essentially have two main goals demonstrate that you are academically competitive in your major and ensure that you can transfer over a maximum number of credits.Both of these are important in not only helping you gain acceptance into the university of your choice but also in graduating on time from that four-year institution...Step 4 Review articulation agreements between four-year institutions and your community college ..Articulation agreements are important in your transfer plan because they define the detailed policies that govern your transfer from a community college to the four-year institution.Your community college most likely has specific articulation agreements with both the public and private universities in your state...What does an articulation agreement entail?It essentially discusses what classes are required of the proposed transfer students and which courses from the community college will transfer with full credit to the four-year institution.Whereas some articulation agreements are broad governing the entire community college and four-year institution relationship others are more specific.For example for a community college student interested in pharmacy there may be an articulation agreement between the pharmacy departments of the four-year institution and the community college.On the other hand other articulation agreements offer broad guaranteed admission.The University of California for example has articulation agreements that guarantee admission of community college transfers as long as they meet minimum academic requirements...It is important to stay updated on the changes to the articulation agreements as they can vary between quarters and semesters.It is highly advised that you speak to your counselor to obtain these updated articulation agreements and you may be able to find the information online.For example if you are attending a community college in California and considering transferring to a UC institution then specifically helps you determine which of your classes will transfer to UC credits...The key to successfully transferring from a community college to a four-year institution is planning!The earlier you plan and the more you empower yourself with knowledge regarding the transfer and credits process the more likely you will gain admissions to the university of your choice and have all of your classes obtain maximum credits too.....