In order to fully appreciate this story I need to take you back to the year 2009. This was the year I bought my first house. Yes, I bought my first house at 22 and that was an experience of it’s own I’ll save the details for another time. For now, just know that I got the house for about $5,000. Remember, the recession of 2008/2009 made it easy for a foolish, yet ambitious young man like me to take chances like this.

Yes, I bought my first house at 22…

How was I able to afford a $5,000 home at 22? Student loans. For the record I do not condone taking student loans. I don’t know what I was thinking, but I saw an opportunity, did a little research and took a chance. I felt that if I borrowed the money via student loans I wouldn’t have to worry about high interest rates or being a denied for a bank loan. Still, I was like millions of other students across the nation. Taking student loans without regard to how I would pay it back.

So, there I was a 22 year old home owner and I had no clue how I was going to maintain the home, because it was a real fixer upper. I ask myself even now if I would have made the same decision or bought the same house if I knew all the maintenance and up keep that came with that purchase. I’d like to think so, because of how cheap I got it for. I would just have avoided taking a student loan to do so.

The day after I closed on the house and signed the check, I graduated from college with over $40,000 in student loans. Apparently, I was one of the ones helping to increase the average student loan debt for college seniors graduating. According to The New York Times, “College seniors who graduated in 2009 had an average of $24,000.”

The years would go by and I would chip away at my student loans little by little, never really thinking about interest building up and I still had this house. Sadly, I never really thought much about it. I truly was one of those foolish, blind millennials who wasn’t aware of the bigger world outside of myself and the responsibilities I had as a home owner.

Now fast forward to September 2016. I get married to the most beautiful and intelligent woman I had ever met. Life was set and we were destined for an amazing, lavish life supported by two-incomes. But, NOT SO FAST!

Prior to getting married, we talked about finances throughout our 3 years of dating, but never really anything specific. More so just the kind of house we wanted or how much to tip the waiter on date nights. Yeah, nothing specific at all. We were aware we both had student loans, but the exact amount was not known. Word of advice for those planning to get married: make sure you have everything laid out when it comes to finances. Your debts, income, net worth, future plans, saving and investing goals, and so on.

We were aware we both had student loans, but the exact amount was not known.

Almost two months after getting married we find out we’re pregnant in October 2016.

There we were, a 30-year old newly married couple with over $250,000 in consumer debt and a child on the way! What in the world were we going to do?  We were living in an apartment where the rent was about $1,000/mo. Initially, we were just going to pay the minimums on everything. The student loans, credit card debts, and the car note would all get the minimums paid each month and we could save the rest of the money. Good idea, right? Then one afternoon in February 2017 I heard the voice of who I call the personal finance godfather, Dave Ramsey, on the radio driving home from work. He was talking about how debt was dumb, the need to pay it down fast and some other things in regards to money I don’t remember.

…30-year old newly married couple with over $250,000 in consumer debt!

Then, the light bulb in my head came on!

We needed to pay off this mountain of debt as quickly as possible. You may ask, why so quickly? Couldn’t you just make the minimum payments and pay off the debt that way? Yes, we could have done that. If we did I wouldn’t have this article to write as we’d still be in debt probably with other payments like a mortgage and new cars. Habesha Finance probably wouldn’t exist either. However, one of the main reasons we chose to pay off the debt this way was due to the accumulating interest.

In case you’re wondering, we did have credit card debt, but that was already taken care of in the previous months before we began to aggressively attack the $250,000+ debt. So, using the the debt snowball calculator (that you have access to when you subscribe to my newsletter) I reviewed how much money we owed with interest. Total interest payment alone would have been about $275,000. When you add the interest to the principal that was over $525,000 we were going to pay! If we just paid the minimums over the next 30 years without any debt payment strategies we’d still be in debt today running ourselves into a financial catastrophe. I’m 100% convinced of this. This is why we used the a debt paying strategy like the debt snowball method.

(If you want to calculate a student loan repayment Credible has a good calculator for that.)

When you add the interest to the principal that was over $525,000 we were going to pay!

This is what so many people in America don’t get to see and understand when they sign up for loans and credit cards: the potential long term disaster that could happen. I’ve heard some people say that a student loan is “good debt” to have. I’m still trying to see how in the world this was good debt to have.

The next math we did was compare the debt snowball method against the debt avalanche. The basic difference is that the debt snowball method pays off the smallest debt first while the debt avalanche tackles the debt with the highest interest rate. Then you would take whatever you were paying on the debts that were cleared and add that to the next lowest amount or interest rate, depending on which method you choose. Dave Ramsey recommends the debt snowball, because of the small wins that give people the psychological boost to keep attacking the debt. So, what was the result?

With the debt snowball method we would pay $177,357.85 in interest and completely pay off all the debt by January 2033. Remember, the beginning of this would have been March 2017.

With the debt avalanche method we would pay $176,446.55 in interest and have the same payoff timeline of January 2033.

For our situation it made sense to do the debt snowball and get those small wins to help us emotionally and psychologically. Now, I can say that we chose wisely.

So looking at all the numbers and what our total income was at the time of about $160,000/year we had a goal to completely pay off all the debt in a timeline of 2-1/2 to 3 years. We somewhat believed in the process of using the debt snowball method and living a very minimalist lifestyle to help us achieve this great goal. With the debt snowball method we were looking at an average monthly payment of 60-80% of our paycheck and be completely debt free by March 2020. That’s three years of a lot of sacrifice, dedication and eating in!

Also, we ended up moving into my mom’s house paying $500/mo for rent. Imagine that! A mother’s first born son who left the nest comes back one year later with a wife and a child on the way. We were fortunate. My mother was very welcoming and really didn’t want us to pay anything, but we couldn’t let that happen. I believe in situations like ours a temporary living arrangement with either spouses parents is a great option if possible. Remember to make it temporary and pay your dues. After all you all will be adding to the increase of bills around the house.

So, that’s how we started our debt snowball plan. We made our first payment of $8,000 in March 2017 and was moved in and settled at my mom’s.

So, before we got married my wife already had been a good saver, just not a good investor. She’ll even tell you that. With a good amount of money in her savings, which was now our savings (marriage talk), we discussed and discussed some more about how much we would pull from that. At this point my wife was about 6 months pregnant. I know, unbelievable that all this is happening at the same time. We had to make sure there was enough for us to bring our daughter into this world without outstanding medical bills.

Finally, we agreed to take $40,000 from savings and pay off a good chunk of the debt in April 2017. That was truly a scary and unreal moment for us. We fully put our faith in the advice of this guy Dave Ramsey and almost depleted our savings to get out of debt. The nerves were high and we could feel the tension as we worked the rest of that month.

Then something amazing happened. As we started to budget and live purposefully with our money the payments became like second nature. Our debt payoff goal became like a game for us. Every month we would try to pay off a little more than the previous month. Some months we were successful. Other months were disappointing.

Now, remember that house I had from 2009. Well, it was worth a little more now. As you can guess I started looking at what the house was worth. After getting with a real estate agent in September 2017, I found out that we (marriage talk, don’t forget) could sell the house for about $30,000. I know what you’re thinking. What about fixing it up and renting it out? Or sitting on it for a long time? Believe me, I thought about all of that. At the end of the day I knew the kind of person I was and having a rental property was not for me. So just like that after about 30 days I sold the house and made another big chunk of a payment to the debt!

By the end of 2017 we realized that if we could keep this going then we would have a chance at paying off all our debt in 2 years!

Nothing changed as we went into 2018. We continued to make payments that was about 60-80% of our income. Any bonuses we earned would go straight to the debt.

Early in 2018, we decided that we needed to add some more income. Yes, we added a third source of income. We learned that in order to pay off the debt as quickly as possible we had to increase our income however we could. So, with three incomes, one baby, one budget and living at my moms we attacked the debt with a vengeance. I mean literally. We saw our debt and the interest that was being added each day and made payments like there was no tomorrow. We gave each other high fives. We hugged and dreamed what life would be like after we would become debt free.

Then April 2018 happened and living at my mom’s was not possible anymore. Everything was fine. There were just some adjustments that we as a couple with a toddler needed to make. Plus, my wife was driving almost an hour and a half to and from work. Missing the time with our daughter caught up with us. We made the decision to move out in April and find an apartment closer to her workplace. That turned out to be a positive move for us, because now my wife had a 10 minute commute to work. She was able to spend more time with our daughter and I also was closer to work.

With a higher budget for rent we still managed to keep the aggressive monthly payment towards our debt. By December 2018 we paid off everything! We paid off over $250,000 in 22 months! This included the student loans that were current and in collections as well as a car note. What’s even more amazing is that we avoided the $275,000 in interest and 28 years of payments! This would not have been possible if we simply stuck to paying the minimums without following any of the debt payment strategies mentioned earlier. Now, we can ease off the gas and live a little more which is what we are thankful for. Honestly though, we never felt like we were ever missing anything.

…we avoided the $275,000 in interest and 28 years of payments!

Believe me, in the beginning we had our doubts, discussions, concerns and arguments about all of this. It really wasn’t until we were half way into the process that we truly started to put our 100% faith into the debt snowball plan. I look back and can absolutely say that we would not have done anything differently.

Along the way we did our best to help our families and communities where we could. Today, we are in a better position to support those who need the support and help those who need the help. I know this a point of contention with some. “Should I pay off this debt as aggressively as I can or continue to make minimum payments while I give my money to charities and non-profits?” This is a difficult question to answer and a question that ONLY you (and your spouse) can answer. However, do not let anyone shame you into thinking what you’re doing is selfish. There is absolutely nothing wrong with focusing on your financial well-being so that you can later be in a position to help others. This is something I am very passionate about and want people to understand. Yes, give if you want to, but understand your situation is unique and the choices you make with money are yours to make.

Do not let anyone shame you into thinking what you’re doing is selfish.

To finish off this testimony of sacrifice and success I want to offer my advice if you find yourself in a similar position that we found ourselves in early 2017.

1. Face your debt. Write all your debts on paper and post that piece of paper on the fridge. Don’t be afraid of your debt. This journey is only temporary and the sooner you accept the responsibility of having to pay it back the sooner you can come up with an action plan. For some of us, paying off our debt in 2-3 years is very doable. If you need encouragement and some cheerleaders join me and others at the Habesha Finance Facebook group.
2. Make sure to include live and dead debt on the list. Just because something went to collections doesn’t mean you shouldn’t pay it off. Many times you can call the organization your dead debt is with and make a settlement. Some of my student loans in the past were in collections and I got on the phone and worked out an agreement with the debtors.
3. Create a budget that includes your debt payment. Budgeting is sooooo important when working a plan to get out of debt. If you don’t know how to budget then please check out my free Google Sheets budgeting course. You get access to the same budget template we used to get out of debt and still use today. You also get my free financial checklist to help you figure out all the other important personal finance stuff no one really teaches us about.
4. Be prepared to commit at least 50% of your take home pay to knocking down your debt. I love the Dave Ramsey education of securing an emergency fund first. I encourage you to do that first before making large payments to your debt. And once you have a solid emergency fund in place then it’s time to take your income and power through the debt. Some months we were paying as high as 80% of our income to the debt. If 50% is too much then do what you can. Even an extra payment towards your debt will help tremendously. The point is to not settle with just paying the minimums.
5. Make the temporary sacrifice for the permanent freedom. I’m pretty sure if people in debt could understand how interest works against us when we’re making payments, that many people would attack their debt the same way we did. You need to have the mindset to make these temporary adjustments. Everything we did was for the short term. We’re not going to keep working multiple jobs that continue to keep us away from each other. That was all for the temporary. Now, we can relax and truly spend that time with each other, raising our children, and participating in community service efforts.
6. Celebrate each debt that’s paid off. Every small win was a huge motivational boost for us. We would have small celebrations for each debt that was paid off. When we finally got our outstanding debts to one, we had every reason to focus and be intentional about how we spent every single penny that came in.
7. Don’t let anyone make you think what you’re doing is wrong. Yes, we had friends and family who didn’t like what we were doing or thought we should be handling our finances differently. However, my wife and I understood our mission and the vision we had for our family. We wanted to raise children in a consumer debt free home. There is a huge financial burden on families in America, because of debt. I know this, because I grew up in a household that was living paycheck to paycheck. In my mind I told myself, “NOT ME! NOT MY FAMILY!”
8. Increase your income. Throughout our engagement and marriage we worked 3 and 4 jobs total at times. One of the best ways to pay off debt, aside from reducing living expenses is to increase your income. Whether you need to drive Lyft, Uber, deliver food or even sell stuff you own, you have to increase your income somehow if you want to be debt free very fast.