Debt-Free: Now What?


It seemed insurmountable.

When we tallied it up in February of 2010 we had no idea how or when we would pay off $82,174 in debt.

The thing is, we could have put off writing our debts down forever. We weren’t living pay check to pay check and we paid all of our bills on time. We had available lines of credit and investments we could cash out if we ever got in a real bind. While our debt number was big our day to day checking account was always healthy and we never really felt a crunch.

But the numbers didn’t lie. There was a lot to pay off and we weren’t even sure where to start. At the time I was on maternity leave and Chris was self-employed. I received some maternity benefits, a little less than half of what I made at my job, and Chris had a very good, if erratic, income. We had some challenges in front of us.

Here is a breakdown of our former debt totals and monthly payments:

credit card 2000 *0% interest
credit card 1800 95
student loan 3315 59.76
student loan 5239 58.88
student loan 7000 114
investment loan 7700 218.51
line of credit 10000 35
credit card 14624 200
line of credit 15767 250
credit card 16729 200
82174 1231.15

How did we get there? A big move, my lingering student loans and continuing to live just a bit above our means. I could go into more detail but the long list of ways got there don’t matter. How we got out of it, and how we are continuing to improve our financial habits, is what really matters.

I will also say this: don’t judge your friends that are in debt. They don’t need it. They go to bed worrying at night and feel bad about every purchase. What they need is encouragement and a non-judgmental ear. They need support. They need to know there is a way out.

How did we get out of $82174 in debt? Day by day. Luck. Trying a lot of budgeting/financial tracking tools until we found one that works for both of us. Encouraging each other and talking to each other a lot. In the beginning Chris and I held financial meetings every Tuesday night. We tried to project cash flow and expenses and we prioritized debts. We reviewed our weekly spending and thought up strategies to do more with less money. We gave each other high fives and congratulatory text messages when a credit card was paid off.

We started a conversation about spending and our finances.

And the conversation hasn’t stopped.

Big purchases are discussed and debated. As I’ve mostly gotten over my emotional spending habits we can have pleasant conversations about who needs new wellies or if we have money in our household budget that month for an extra date night. There aren’t arguments about someone unexpectedly making a large purchase without telling the other.

We’re a team in this.

One of the greatest things to come from tackling this debt is a new level of connection with my husband. We’ve faced some daunting odds and supported each other on what seemed like a never ending road. On the other side of this debt we now have the fun task of discussing savings plans and strategies. What we once thought of as dreams are now goals.

I’ve had a lot of interest in our debt story and I want to point out that you can read all of our financial posts here in the financial section of the archives. I’m considering collecting the posts and writing a more in-depth guide to our debt, how we paid it off and strategies we used. That’s on my someday list for now as I am putting the final touches on The Minimalist Mom’s Guide to Baby’s First Year (which is going very well!).

What next?

I’m not sure how much of our finances I feel comfortable writing about here now that we are out of debt. Mostly because we’re in a really good spot and I don’t want to brag about that. We’ve worked hard but we’ve also been lucky. I know there are a lot of people that are working very hard to stay ahead of debt but aren’t so lucky.

But loosely we are planning to:

  • Build an Emergency Fund. This isn’t really an Emergency Fund but an International Move Fund. We know we’ll be heading back to Canada at some point and we want to have enough money for six months of living expenses and our plane tickets. Right now we’ve saved about half of what we think we will need.
  • Pay down our mortgage in Canada. We’ve just upped our monthly mortgage payments by 15%. This increases that gap between rental income and what our mortgage payments and condo fees are. So we’ll likely have to start sending a bit of money home in the New Year.
  • Save. For now we’re saving as much as we comfortably can. Retirement plans and projections will happen much later.
  • Give. We want to give more. This blog and my upcoming guide will be part of that. I’ll share more later when the book is ready.

We’ve thought about getting some financial advice from an expert. Does it make more sense to save than put money on our mortgage? Should we be putting our savings in accounts in Canada or here? We’ve thought about it but, really, we’ll probably do just fine by continuing to save and live below our means. Nothing fancy about that but it works.

I know that much like losing weight, paying off debt does not mean you will stay debt-free forever. My hope is that our live with less strategy, coupled with good financial habits, will keep us on the path.

Anyone else out there battling debt? What strategies are you using?

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  • I actually just have a question, although usually I’m a lurker 😉 We live overseas and will be moving home next summer. For the most part our move will be paid for but there are a few things that I’d like to have money saved for, such as his job won’t pay for the actual transition of finding a new home, or moving our pets, and we’ll have to find some sort of transportation once we get back stateside until our car gets there.
    We don’t have as much debt, but it has been growing and I’ve been wanting to pay it off before we leave. But I feel as if we also need to have a savings ready for the move, or our debt will get worse. So the choice has become to either pay down our debt fast or save for next summer. We’re torn! Just wondering what your opinion on that is, since you have made such a big move in the midst of paying things off :)

    • Could you split funds? Psychologically it might be motivating to have some cash on hand and a bit less debt when you make the move. You might still have to dip into credit for your transition stateside but it wouldn’t all be credit. I know how demoralizing it can feel to rack up more debt after just having paid it off. We had a bit of that with our move over here.

      Before we tackled getting our of debt, and changing our financial habits, I thought having good finances was all about numbers. For us, success has been heavily tied to how we feel about money, debt and spending. It’s been more emotional and psychological than I could have imagined.

      Of course, I’m not a financial planner. Not sure what the experts would say but that’s my 2 cents. Good luck! Exciting that you have a big move on the horizon. 😉

      • Thank you for weighing in on it, I think doing both is feasible :) The numbers part is very intimidating to me, but I feel everyday what we spend or save, and realize the impact that can all have psychologically.

        I meant to add a congratulations too! That’s an amazing amount of money paid off in less than two years :)

  • congrats! This is awesome. I’ve just been reading for a while, but I love your blog, it’s inspired me to really stick to my budget and buckle down to pay down debt. thank you!

  • We are slowly, very slowly at the present, paying off debt. Our car will be paid off next month though! Our van, the loan is for 3 more years, but we plan to have it paid off in about a year. Our student loans though are an entirely different story. We have about $150,000 combined in student loan debt. Our student loans are through the US Goverment and have fairly low interest rates. My portion (2/3) is at 4.75% and his is at 6.8%, they tell us it will take 30 years to pay it off. We estimate it will take us 10 and that’s if our income doesn’t increase. If it does we could get it paid off sooner.

    • Nice work on the car loan and cutting your student loan amortization so drastically. Student loans are tough. I really want our son to go to college or do post-grad work if he chooses too but eek, the expense. We’re saving for him now and hopefully if he decides to go we’ll be able to help him a lot.
      Good luck!

  • Congratulations! I remember how thrilling it felt to pay off a credit card. I spent a year or so working really hard on my budget to pay off credit cards. I hadn’t got too far into debt, in total numbers, but as a portion of my income it was more than I wanted. It was such a relief to know I didn’t have that hanging over my head. Now it’s just some low-interest student loans…

  • Congratulations!! I’m sure you feel so much lighter. We recently paid off all of our debt with the exception of our house and are on a 10 (or less) year plan to pay that off, too.

    I’m going to challenge you on one issue, though. And it’s that you attribute your accomplishment to luck. I believe to be lucky, you have to do the groundwork and put yourself in the path of luck. Which you did with a lot of hard work and dedication.

    Congrats again!!

    • Thanks, Stephanie. :) The reason I say luck is that we did have an unexpected windfall of cash from a relative that really helped us get traction on our debt. Of course, in the past we would have used the money as an excuse for a vacation or a bathroom remodel 😉 This time we put all of it straight onto debt.

      That is amazing that you will pay off your house in 10 years or less. We are nowhere close to that. HUGE Vancouver crazy real estate mortgage. We are hoping to get ahead of it a bit by upping monthly payments each year by 15% and doing a lump sum payment annually.

  • We’ve paid off over 40k in debt in the past couple of years. We still have my student loans, and honestly, they’re too high for us to get gazelle about–even then, it would take 5 years on our pathetic income. But we’re on a plan, we watch our spending carefully, and we have achieved so much more financial freedom. So nice not to feel overburdened by debt!

  • Congrats, Rachel! That’s so great!

    Getting on the same page with your spouse is such an important thing. For a long time, I think my husband and I were just of different mindsets and it was easier to ignore the accumulating pile of debt. (Hmm, kind of like how the rest of our clutter happened too).

    Anyway, since finding minimalism and realizing the mess we’re in, we’re not united on all fronts. It’s just rough trying to undo the mess we’ve made.

    Your story is very inspirational and I so appreciate you sharing it!

  • What an inspiration!! We’ve been extremely fortunate to avoid debt thus far except for our mortgage. If we could find a way to pay that off, we’d do it in a heartbeat! However, we’re pretty pay check to pay check, so saving anything is near impossible :/

    • Ahh yes, mortgages. My parent’s generation used to have mortgage burning parties when they made the last payment. The only people I know who have paid off mortgages I have met via this blog. It’s almost unheard of in my circle of friends and family. I hope we can drastically reduce our amortization in the next few years. Drastically meaning get it to 15 years. That would be huge for us.

  • I think a difficulty for me is waiting. Thinking about how small the piece I am paying on such a big chunk of debt it feels like we will never get there. For me the mortgage just seems insurmountable. I would love to pay it down in ten years but the gap between how much we owe and how much we make is just vast. I am trying to live with the fact that we have to have some debt and that it will take some time to get it all paid off. But I want to be debt free today, now. So well done on getting there so quickly. I must feel great.

    • I should have added debt-free but with a mortgage. Our mortgage isn’t going anywhere fast. I think when it comes up for renewal in 3 years we may seriously look at selling. Depends on what our status is over here in the UK.

      Dude, you’re set. You know when you can retire and when your mortgage will be paid off. Golden.

  • After months of struggling and worrying I’m completely revamping our budget. It worked for us for a little while, but now we’ve gone back to not really caring what we spend and when and while we aren’t in as much debt as you, we do have quite a bit of debt rolled up in two different car loans and a significant personal loan. My goal is to have the majority of our personal loan paid off in the next 2 years when we leave Hawaii. We’re also saving for our move with the military, since they will only pay to ship one car — and we need two cars — and we need to ship our dog back to the mainland.

    Seems like a daunting task…but I think we can do it. We’re trying the cash envelope way of doing things…it’s how my parents managed to stay out of debt as newly weds and while they aren’t debt free now, their debt is minimal (house and cars) and they are in an amazing financial situation.

    Even though looking at our budget was scary (okay, didn’t end up being AS scary as I initially though), I made a plan that we will try…and if it works, I think we will be in a good spot financially.

    Living within our means while providing everything that we want to for our children in Hawaii is a difficult task…the cost of living here is so high and the prices for every day items are significantly higher than back on the mainland…it’s been difficult, but we’ve been okay so far. I hope the future holds something amazing for us!

    • It wasn’t really until we moved to the UK five months ago that our budget and forecasting hit the sweet spot. So that was at least 15 months from when we started tracking debt and spending. So don’t give up!

      I’ve heard Hawaii is horribly expensive. Things here are expensive too. Activities for children are surprisingly expensive. About 3-4 times what they would be in Vancouver. I believe it is because there is very low taxes here so programs aren’t subsidized by the gov. I try and remind myself of that. We pay lower taxes so have to pay more out of pocket for those activities. And groceries!! Ouch. I’m paying about 20% than Vancouver and Vancouver has expensive groceries.

      Good luck, Kimberly!

  • We’re very inspired by your blog – we’ve recently reduced our cable bill, and refinanced our mortgage to free up more monthly cash. I’d like to put that money towards out mastercard bill, and pay that sucker down, otherwise, just-above-minimum-payments aren’t really doing much.


  • Rachel,
    I applaud you and your husband for accomplishing your goals. You share it with such honesty and humility, which inspires me. I am so happy for you! Congrats,

  • Congratulations on becoming debt free!

    How did you keep yourself motivated to pay off the debt? I can imagine that 80 000 dollars looked insurmountable at the start?

    Personally I find it hard to be patient for our savings goals. My boyfriend and I would like to move to a different home in a different city but right now our house is worth 20 000 less than the mortgage. Also there are a lot of houses for sale, so if we are going to sell it will be really hard to do. We really don’t want to take the loss and take on additional debt, so that means we need to pay off more on our mortgage. Also, my boyfriends car is likely going to break down in the next year so we need to save up cash for that expense as well. I calculated that it will take us at least three to five more years to save up enough to sell our home without a loss and save for a down payment on another home. I really struggle with being patient!

    • We stayed motivated with weekly meetings and, honestly, talking about getting out of debt a lot. It was exciting to think about the end and being on the other side of it. Even when we had a bad month and paid nothing off.

      Our savings goals are kind of limitless. So while it’s exciting to sock money away each month, I will admit it’s not as thrilling as seeing those debt numbers go down. Laura posted below this that they found the same thing and have focused on paying off their mortgage instead of ramping up savings.

      Do you have options to rent your home and then rent in the other city? Could you make that work financially until it’s viable to sell your home?

  • Way to go!!! Isn’t it such a great feeling? But you missed something really important in your ‘what’s next?’ list: spend.

    I know it sounds totally wrong, but I think it’s really important to make sure that you feel the benefit of your accomplishment, or you’ll get sick of finances and end up letting them slide. Even if you just add enough to your grocery budget to make a special meal every weekend. For us it was a cleaner twice a month. It was something we could never have justified before, but since we were debt free, we were free to spend our money on something that made us happy.

    • Thanks, Krista. Our current budget is quite comfortable and has room for a sitter twice a month and a meal or movie out. We’re also saving for a spring vacation and might splurge on staying at a resort for a week. You’re right: it’s important to not deprive yourself for too long. You’ll end up ‘bingeing’ on shopping, etc.

      When/if we have another baby I will be hiring a weekly cleaner for at least the first 3 months.

      Congrats to you for being out of debt 😉

  • Sorry to nitpick, but you aren’t truly debt free until you’ve paid off your mortgage.

    My wife and I paid off our mortgage in 2010 and became debt free at that time. There is a lot of debate about whether to pay off your mortgage or save money, but for us there was never any doubt. Our mortgage was at 6%, so paying it off as quickly as we could gave us an instant return on investment of the same amount.

    Some financial advisers will tell you this is a bad idea, but they’re counting on the fact that you will be getting a better rate of return on your investments over the long term, and that’s definitely no guarantee (especially true in the last few years). Paying off our mortgage was a guaranteed 6% ROI.

    Another thing that financial advisers don’t consider is how bloody great it feels to pay off your mortgage and not owe anybody anything, and how good it feels to say “screw you” to the bank because you’re no longer owing money to them. There is no longer a financial black cloud following us around, and the feeling of freedom that gives us is tremendous. In fact, I’ll be taking a year off starting January 1 because we’ve managed to bank so much money in the time since we’ve become debt free.

    • Not nitpicking, Ian, it’s the truth. We aren’t truly out of debt because we have a whopping Vancouver mortgage. Being out of consumer and student loan debt is a big milestone for us so I was excite to share it here. Next up: mortgage!

      I agree with you on putting more money on our mortgage instead of into investments. Ours is at 5% and that’s a better rate than the bank can give us on investments. We’ve decided to hedge our bets on this front. We will roughly put half of our savings towards mortgage and half towards general/retirement savings. We do have some money invested but not a lot. Also, neither of us has contributed heavily to a pension scheme or the Canada Pension Plan. We’ll need to save a lot on our own. I’m 33 and my husband is 41 so we feel the clock ticking a bit on this.

      Thanks for sharing your story here and advice. Congratulations on paying off your mortgage and your impending year off! Enjoy it!

    • Ian, your comment hits close to home. My husband and I paid off our mortgage in 7 years (two of those years we rented while we saved up for our down payment and our condo was being built). Our number one financial goal since we became home owners was to have no mortgage. Ironically, my husband is a financial planner. :) He sees the value in paying off a mortgage first, but I know not everyone that works in the FP industry is of the same mindset.

      Rachel – Many congratulations to you! Very exciting times! It might be tricky to find the balance of what will work for you and your family, but addressing the issue of where to put your money (mortgage vs savings) is half of the battle and either way, the payoff of having no other debt enormous!

  • Congratulations! Just brilliant!

    We faced the mortgage vs. savings debate and the mortgage won. Being mortgage free (for us) is the key to our financial freedom.

    And we find attacking debt far more motivating than saving – something I still don’t quite understand?! 😉

    Good luck which ever way you decide to go.

    • I do see the high motivation factor of paying off debt. That’s how we blew away so much debt in such a short time. We’re still a bit undecided on it but are upping our mortgage payments and will hopefully make a balloon payment before next summer. Our mortgage is daunting. Very large so a month’s savings doesn’t put much a dent in it. Some days I think about going back to work full-time just to make extra payments on our mortgage. But for now I really want to stay at home with our son while I can and before he is in school.

      Thanks for the kudos and right back at you 😉 You are doing so well with crushing that mortgage!

  • Congratulations! I’m really happy for you. Thanks for blogging about your path to becoming debt-free…it’s been a help to me.

  • Congratulations Rachel! Such an inspiring achievement!

    My old mortgage v investment question is still standing, however, with the career change we tend to live day to day and also use our savings…

    Hopefully in a couple of years’ time we can go back to the good old reverse budgeting to start reducing the mortgage. Are you still using reverse budgeting?

    • Thanks, Apple (Laura). It feels really good.
      We’re also debating mortgage vs. investment. If you come to a firm conclusion for your situation let me know. My husband is leaning towards mortgage. I’m leaning towards a bit of both.
      Reverse budgeting is going really well. I was never good at planning out how much for each spending category so with this I don’t have to. This month we had an unexpected renter’s insurance bill (150GBP). My husband had to work all weekend so we just had a few low-key days. No date night or any casual spending. I’ll probably watch the grocery budget a bit closer the next two weeks and we’ll skip date night this coming weekend. Nothing too extreme but it will make up for the unexpected bill.

  • I’m not to familiar with refinancing in other countries, but now is a good time in the U.S. We are looking into it right now. The interest rates are currently: 30 year = 4.125% and 20 year=3.75%.

  • I just found your blog and am going through some of your older posts! So happy that you were able to get rid of your debt. I just recently graduated with 65K in student loans and am working hard to pay them off as soon as possible. Not easy when your income isn’t as high as you were hoping, but I am definitely blessed to have a job right out of college! I am cutting back my expenses, as I recently turned to the minimalist lifestyle, and hoping to have them paid off in 5 years! Debt is a serious strain on me, but I’ve come to realize that it is something you have to take day by day and just do as much as you can, without getting discouraged. Looking forward to reading more! Thanks!

  • It is so good to read everyone’s success stories. I am working on my finances more seriously and even better is my husband has joined on the band wagon. We hope to get our debt mountain down and are more focused more than ever before. I’ve got my spreadsheet tracking all our expenses “All of them”!! I even developed the best budget yet. I even setup some repeating payments so I don’t have to think about it. I’m fascinated on how quick some of my debt is disappearing. Keep up the good work everyone.

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