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When my wife and I were married in 2009, I couldn't resist spoiling my bride.
We were in our early 20s, and I wanted to make sure she had the fairytale wedding she had dreamed of ... and once we were married, the fairytale life.
Onto my cards went our engagement party, our wedding and our subsequent international trips to places like Canada and Japan. Being so young, it was a point of pride that we wouldn't take handouts from our parents, and it never occurred to us to talk about money beyond handing over the credit cards (well, my credit card). Having a balance just started to feel normal. After all, paying off the minimum $50 per month was much more attractive than looking at our ever-growing mountain of debt.
About a year after our wedding, we realized that we were starting to reach the limits on my cards. We didn't have much left in savings, and we got the feeling that we may have been in over our heads. Our money had always been kept separate, but when we came face-to-face with the $40,000 of debt we had racked up together, things started getting tense.
Our tipping point came in 2011, when we decided we wanted to start a family. We realized that as parents, it would be irresponsible for us to bring our child into the world unless we could get ourselves together — so we decided to eradicate that debt once and for all.
A little over two years later, we're expectant parents without a cent of credit card debt and a positive net worth. Here are the five strategies that made all the difference.
1. Set Your Finish Line Before You Start
Your eyes may glaze over, but setting clear goals was truly one of the key reasons we made it through in tackling our debt. Our goals included:
- 50% reduction of our credit debt within one year, 100% reduction within two
- Increase our income (which was about $80,000 at the time — twice the amount of our debt) to support the above
- Have our child born with no credit debt
When we started tackling our debt, we felt like we weren't making any progress — we were making payments, but the interest kept pushing our bills higher. We had to get serious if we were going to battle the interest and pay the principle. So I listed out all of our liabilities, savings and spending on a simple spreadsheet. Having everything laid out in front of us made it clear where we needed to make major changes — like cutting back on extravagant date nights.
While we reduced our spending, we also focused on our careers. I started devoting my free time to reading articles, listening to audiobooks and watching videos that would teach me the skills I needed for the senior sales management role I set my eye on, and after a few years of diligence I was able to move from sales support into account management and then into a senior management position. My wife, too, was continually promoted within her company, from general administration into finance and accounting. Together, we eventually increased our income by 150% — and resisted the temptation to spend more.
In the beginning, it was slow going. But as we started having more money to put toward our debt and changing our daily habits, we saw the balance on our bills level out — and then slowly start to decline. We used that momentum to pay off entire cards, which was a huge encouragement to keep going.
2. Get Disciplined Across the Board
Around the time we decided to start tackling our debt, I realized that while my wife was very disciplined and diligent in all aspects of her life, I was not. So I decided to make a change.
I started getting up earlier in the morning and scheduling my weeknights on the Sunday before to make time for work or studying at night. This opened up an extra two to three hours a day that I used to work on my budgets and work toward furthering my career.
3. Look for Easy Wins
I made a habit of routinely calling my insurance, credit card and phone providers to look for cost-saving opportunities, even making appointments in my calendar — once a year for most services, or ad hoc when I received an abnormal bill.
I literally saved hundreds — if not thousands — by making sure I understood new pricing plans or giving more information to insurance providers to get lower premiums based on new details. One time I saved $150 on a phone bill by simply calling, making a case for my company loyalty and explaining aspects of the usage I hadn't understood. Another time, I saved about $300 on insurance just by getting a quote from another company and bringing it to my providers.
4. Work the System
I was ferocious at identifying ways to manage the debt, taking advantage of balance transfer opportunities to secure lower interest rates, automating over 10% of our household income toward debt repayment and savings and making extra payments whenever I could.
Balance transfers, which allow you to move your balance from one credit card to another for an introductory period of reduced or no interest while you hack away at the balance, required the most discipline. Before doing a transfer, I always called my existing bank first, and occasionally they extended a low rate to entice me to stay. If they didn't, I looked around for the best opportunity — ideally a card with no (or low) annual fees and the best interest rate. After choosing one, I set a calendar reminder to renegotiate after the introductory period or transfer again elsewhere. Then, after making the transfer, I had to be diligent in my payments. I knew if I transferred and waited a month or two to start making payments, fees would pile up as I procrastinated.
On the savings front, I made a list of all of our bills and then contacted each of the companies to arrange automatic payments from my checking account. Even though I was hesitant to automate them all at once, I started with the ones I sometimes forgot to pay to eliminate any late fees. I also asked some of my providers to change my payment dates to soon after payday, which meant after getting paid, my bills would be deducted immediately, and then I would know what I had left.
I also designated about 10% of my pay to go into a separate savings account automatically, then used those funds to disperse further payments where they were needed most. I used those funds to target the debt with the highest interest first, although when one of my cards was nearly paid off, I liked to focus on that for a quick win.
5. Be Impulsive When It Counts
Although counterintuitive to what got us into debt in the first place, we found that being impulsive has its place — and that place is deciding when you'll start paying off your debt. No time like the present! The sooner we took action, the sooner we moved from stress to a resolution. I only wish we had acted sooner.
Impulsiveness isn't only about the big stuff, though. For example, one week I did an analysis of my spending and found that my coffee habit was costing me $2,000 a year. I was in the supermarket a few days later and instead of thinking "Someday I should get a machine," I decided to spend the capital upfront and buy a $120 coffee maker. Ironically, I put it on credit, but then I automatically directed the $40 per week that I would have spent on coffee anyway to my card, and within three weeks I paid it off. Since then, I'd estimate I've saved nearly $4,000 on coffee, just because I took the plunge and bought the coffee maker I knew I needed.
In the end, I'm no financial expert. I was a young man who wanted to spoil and provide for his wife. But today, I'm a soon-to-be father who realizes that there are more important ways to provide for his family — and that doesn't include credit card debt.