Paying off $38,000 in 24 months is no joke. It’s a huge sum of money in a very short amount of time. So how did I do that? Well, I didn’t do it by getting a job that paid $60k a year or marrying a rich husband, I also didn’t acquire magical cash printing powers that none of you know about. I did it on an average recent grad’s salary, with a little help from some tax returns and windfall money.
Here’s a time line of exactly how I manage to pay off my debts in 24 months.
On November 30th of 2011 I made my first scheduled monthly payment of $301.46 on my student loans, which were sitting at a balance of $26,720. I’d already been reading personal finance blogs at that point and knew that I need to make extra payments on my debt in order to get it paid off faster. I started out making an extra $50 payment per pay period, or $200 per month.
By the end of 2011 I’d made a small dent in my debt payoff, managing to eliminate about $1,255 from my loans.
Debt Remaining: $36,732
I started out 2012 with the same enthusiasm I had in 2011. I started this blog in February, to chronicle my debt repayment plans. I had a sort of maniacal enthusiasm about paying off my debt, I was crazy positive even though I owed so freaking much. My enthusiasm was bolstered when I received a gigantic tax return. I took $4,000 of that return and applied it to my student loans, which brought my total debt owing down to $31,001. This tax return was a huge shot in the arm, seeing those numbers decrease so fast made me believe that I really could make progress on my debt.
Things continued on pretty uneventfully for a few months after that. I was able to increase my weekly extra payment from $50 to $60 then to $81.50, and dutifully made my payments, watching the thousands of dollars slowly ticking away. I put everything I had into my debt, including all of my extra paycheques in the months where I had five pay days. I paid off $10,000 in debt in July 2011, seven months after I started this crazy journey.
In October, I got a car insurance settlement from when I got sideswiped on the highway in July 2011. I took $1,200 of the $2,000 settlement and applied it directly to my student loans, bringing my total debt owing down to $23,186. I also started generating some freelance income in October for the very first time, 100% of which (after taxes) was thrown at my debt.
At this point, between my regular monthly payments, my weekly extra payments, and my freelance income, I was able to throw at least $1,000 per month towards my debt, usually more.
In November, I got a raise, which allowed me to add an extra $30 per week to my weekly extra payments (now totalling $111.50 per week) and I secured a huge freelance contract which allowed me to kick an additional $783 towards my debt that month. In the 12 months from November 2011 to November 2012 I paid off $16,648 in debt. I still had a ways to go.
Debt Remaining: $20,368
I started out 2013 owing $20,368 on my two debts.
In March, I got another monster tax return. I put the whole $4,662 onto my debt, and kept nothing for myself. This brought my total debt down to $12,509 at the end of March. After this payment, the end seemed to finally be in sight for my student loans, and my car loan wasn’t far behind. I could almost taste my debt freedom, so I plunged forward, continuing to throw every dime at my debt.
In May, I applied for and received the New Brunswick Tuition Rebate, which gave me back all of the NB income tax that I’d paid this year. The total was $1,929, and I put 100% of it onto my student loans. This meant that my total debt owing took another big hit, and dropped down to just $8,101 by the end of May.
In June, I got married. Since I came in under budget for the wedding, I was able to spend the $1,000 I had tucked away in a “just in case” wedding account. Of course, I didn’t really spend it, I directed it towards my debts. I was able to pay off my student loans in June, so I put that $1,000 towards my car loan, bringing my total debt owing down to just $5,748 at the end of June. At this point I was pretty much just surfing on the waves of debt repayment. I’d been able to make large lump sum payments three times since March, and seeing that debt tick lower and lower was so satisfying.
I accepted a new job in October, and had to suspend my debt repayment. This really sucked since I was so close to being debt free.
I finally paid off all of my remaining debt. I became debt free on November 1st. I used money from my paycheque, but I also borrowed $500 in cash from my savings to make it happen. Cue fireworks.
Debt Remaining: $0
So that’s how I did it. I had some help, I got some tax returns, some rebates, some car insurance settlement money, and some freelance income. I didn’t do it by eating KD every night or reusing paper bags. I did it through hard work, some savvy internet sleuthing, and determination.
What were some of the big contributing factors to your debt payoff journey? I want to know!