From-debt-to-positive-networthI have written about this part of our financial journey in several articles before, including My Unemployment “Vacation” of 2008, Our Debt Checkup, and How We Paid Off Our Debt. However, it is such a crucial part of our story where we made a lot of things happen that I feel compelled to write about it again. On top of that, Paul has never given his version of events, and so I asked him to collaborate with me and he gladly agreed.

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 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 first 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.

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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.

Sharing Everything, Including Our Debts

The day that I came home, 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. It turned out that between the two of us, we were $25,000 in debt. Each month $950 was leaving our bank accounts to service these past debts, of which $75 was interest. Here was 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

“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.”

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 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.

Coming Up With the Extra Money

How we came up with all of this extra money from our paychecks will be the topic of the rest of this series as I talk about ways to gain breathing space in your budget and increase the gap between your earnings and your expenditures. 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.”

In 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 the excess and Paul’s hatred of debts fueled us along the way.

Looking to work your way out of debt with you + your partner? Try out my free 5-day Debt Busting Challenge.

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From a Pile of Debt to Net Worth Part I
From a Pile of Debt to Net Worth Part II

9 replies
  1. Lauren
    Lauren says:

    Very nice, Amanda. I’m working on debt while in grad school (not going so well, but practice makes perfect, right?), and definitely attacking my high-interest loans first. Thank goodness I only have mostly-low interest student debt!

  2. Jeff @ Sustainable Life Blog
    Jeff @ Sustainable Life Blog says:

    Very nice post amanda. It is awesome to see people grabbing the reins with their finances, even through hardship. Also, great idea on the trip to disney world after the layoffs – it does a lot to help you forget temporarily what’s going on and have fun. I feel like once that’s done, you know when you get home that it’s back to business.

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