In this series, NerdWallet interviews people who have triumphed over debt by combining commitment, budgeting, and smart financial choices. Answers have been edited for length and clarity.
Ben and Melissa Panter of Mount Laurel, New Jersey, have always been what Ben calls “above average savers” – they lived sparingly and coordinated their schedules to avoid child care costs. They ate at restaurants “maybe once a week,” he says. So when they decided to cut spending in order to pay off their debts, it was no easy task.
At the time, they had a large mortgage payment, and Ben’s student loan balance was increasing, even though they were making income-based payments. Ben, 33, is an adjunct teacher, freelance photographer and graphic designer.
Melissa, 32, who teaches part-time at a public school, says they weren’t focused on what they owed – aren’t everyone in debt? But when she asked their financial advisor when they should increase their retirement savings, her response surprised her: “Once you’ve paid off your debt. The Panters hadn’t even added up their debt by then. [Editor’s note: NerdWallet advises saving for retirement while repaying debt because an early start is key to growing a sufficient nest egg.]
However, they had saved up and had almost $ 30,000. They quickly paid off their $ 8,000 auto loan balance, kept about $ 5,000 in emergency savings, and invested the rest in Ben’s student loans.
Then they took their frugality to the next level. They only went to the movies if someone offered them a gift card and stuck to homemade Christmas presents. The only exception: “We gave each other $ 50 Starbucks cards for Christmas,” says Melissa. “And we made these puppies last. We would order a large frozen drink to share and then get free refills.
Melissa says the intense family focus on buying exactly what she needed – and no more – is all the rage. Think minimalism and Marie Kondo for your finances.
A tight budget “frees up,” says Melissa. She didn’t have to use her brain space to decide which $ 10 foundation to buy from CVS, nor was she tempted by impulse buys. She and Ben wanted to get out of debt, period, and their already meager budget didn’t leave many obvious opportunities to cut.
They logged into NerdWallet to share their story, which may inspire your own journey to pay off the debt.
It’s time to crush the debts
Sign up to link and track everything from cards to mortgages in one place.
What was your debt when you started your repayment journey?
Ben: The round figure was around $ 127,000, mostly student loans and a car.
How did you end up in debt?
Lemon balm: Ben still had debts from his undergraduate degree, on which we were paying minimum payments. We wanted him to be able to teach at the university level, so he applied to several graduate programs. He loved the program at a private art school, and honestly we hadn’t even tried to figure out how much it would cost us. We just thought it was the next logical step for his career, and that’s what we were supposed to do. We also bought a car with a loan because we had heard that using “other people’s money” was a smart thing to do. We were so naive. We also bought a house that we couldn’t afford at the same time he started his graduate program, with next to nothing down there. The prices went down right after the purchase and we couldn’t sell. The mortgage payment was so high for us that it was difficult to reduce the debt.
What triggered your decision to start deleveraging?
Lemon balm: Our financial advisor went through Financial Peace [the Dave Ramsey program], and he suggested it.
What steps have you taken to reduce your debt?
Ben: We have a budget with no leeway [using You Need a Budget software].
Lemon balm: We have reduced our internet connection slightly above the base. We had no issues with our speeds for less than $ 60. We got rid of our crazy cell phone bills by switching to Ting. We don’t use data – we just use Wi-Fi in our house, and free Wi-Fi is everywhere in our area. We have reduced our food bill to $ 200 per month. [They have since increased the food budget to $250 a month with a 7-year-old and a toddler.] The only vacations we took were related to the Artist-in-Residence programs Ben received as a photographer. We were able to stay in Rocky Mountain National Park as well as Acadia National Park and a few others, while he had a “job-cation”.
Ben: We stopped doing anything other than mandatory pension contributions [including not contributing to get a match].
Lemon balm: We still haven’t restarted it. We’re trying to save 20% for a down payment on a house. Once we have done that, we will resume our contribution. [Editor’s note: NerdWallet recommends contributing at least enough to get an employer match, even while repaying debt, because it’s free money.]
Have you used large or unexpected sources of money to pay off your debts?
Lemon balm: Ben’s parents paid $ 100 a month on his student loan, just like they had done for his older brother. It was a big help. Ben was also able to increase his income, with more freelance work and another auxiliary position.
What would you do differently knowing what you are doing now?
Ben: We may have sold our house earlier. We had an offer, but we should have brought $ 25,000 to the table because we were underwater. We eventually decided to use the money to pay off other debt, but ended up continuing to spend a large chunk of our income on mortgage payments.
How is it different to be debt free?
Lemon balm: Getting out of debt is actually more difficult because you have more choices. It’s like, “Okay, what’s a good way to spend? »Not having money or choice saves brain energy.
Ben: Being debt free gives you freedom. We prefer to have the freedom – to be able to change careers, travel or whatever. We still have a budget. It helps you prioritize and know the money is going to do the things you think are important.
How do you expect your children to benefit from it?
Lemon balm: I wrote and self-published a children’s book to help talk about it with our children. Debt is so prevalent that it’s important to learn to think about it counter-culturally from the start. The book is titled “Piggy’s Peach Pie” and is about a little pig who has a problem when he promises his friends a peach pie before his peach tree has produced fruit. We show our own children that debt is a trap and we teach them the skills they will need to avoid it.
How to deal with your own debt
If the Panters story inspired you to examine your own debt and design a budget, here’s how to get started:
Photo courtesy of Melissa Panter