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Getting Out of Debt

You can do it!


by Margaret Feinberg

While visiting Alaska one summer, I met the man of my dreams. We began dating, and within a few months it became obvious to both of us that this relationship was for keeps. There were only two problems. The first was that he lived in Alaska, a place I never wanted to consider living full-time. The second was that my new love had about $17,000 of debt—student loan debt, which is actually considered "good" debt by financial experts because it is debt acquired to help you get ahead—but still debt. After a lot of prayer and some encouragement from my mom, I decided I would give Alaska a try and discovered I could actually survive the winters.

The debt was another story, a bigger hurdle than the darkness and rain that plagues southeast Alaska. We agreed we wouldn't get married until he was debt free. He decided to leave his job at an airline for a far better paying job with the federal government. He moved in with his parents. He bought a 10-year-old car. This guy was serious, and it showed how much he really loved me.

He cut back on lots of extras and began renting movies instead of going to the theater, cooking in rather than eating out, and buying simpler gifts during the holidays. Meanwhile, every free dollar went to pay off the student loan debts (and a simple but beautiful wedding ring). One year later—and approximately two weeks before our wedding date—he received the final notice from Sallie Mae. The loans were paid in full, and "he" became "we." Within a month after our marriage, we received a letter from the same financial institute inviting us to apply for another low-interest loan. We promptly shredded it.

You can do it

My husband and I are convinced that going into marriage debt free was one of the best things we have ever done. It has prevented countless conflicts and lots of stress. When we look back, it seems incredible that he was able to pay off that much debt in one year. But when you are disciplined and determined, anything is possible.

So make it your goal to get out of your credit debt and pay back as many loans as you can. It takes determination and sacrifice, but if you can learn to live on less you can become debt free.

To get out of debt, you need to consider two schools of thought on debt reduction. Some advisors recommend that you focus on the highest-interest debt and pay that off first. It makes the most fiscal sense, but it doesn't work for some people because the size of the loan is so discouragingly large. That's why a second group of financial advisors recommends that you pay off the smallest loan first even if it's not set at the highest interest rate. They believe that, like dieting, even a small success delivers a significant amount of satisfaction. So paying off one loan will provide the incentive and motivation to pay off more and serve as a reminder that becoming debt free is possible. Only you know your personal motivation style, so choose the plan that works best for you.

For financial coaching from an organization with integrity, visit Crown Financial Ministries, for free articles, budgeting guides, and live advice online from a trained budget coach. Crown also has trained volunteers around the country to coach you out of your financial messes. The best part: It's absolutely free. 

Room for reward

If you think getting out of debt means all work and no play, think again. Look for ways to provide yourself with little incentives and bonuses along the way so that you will stick to your budget. Paying off a particular credit card obviously shouldn't be rewarded with a no-holds-barred shopping extravaganza at Neiman Marcus, but that doesn't mean you can't enjoy a reasonable purchase or treat! Rewarding yourself will help you stay strong for the journey of becoming debt free.

You may also want to get in the habit of giving yourself and your spouse an allowance—an amount of money you can use to buy anything you want each week. If you're in a heavy reduction mode, you may want to limit this to $10 or $20, but if you have more disposable income, you may want to increase this amount to reflect your standard of living. For some, that may be as simple as having the house stocked with a name-brand soda or fresh flowers. Others may choose to use their allowance to eat out or go to a movie. You may save up your allowance for a trip or a larger purchase. Having money you can freely spend—even if you have other financial limits—will help you stay on the road to a five-star, debt-free lifestyle.

Once you are used to seeing where your money goes and you have a budget you can live within, you can relax a little. Start examining a different aspect of your finances from time to time. You may spend one month reflecting on your fixed expenses, such as house, car, and utilities, to see if there's anything you can reduce. You may spend another month tracking the amount of money you spend eating out. Another month you may examine your work-related expenses. By focusing on one area at a time, you can hone your budget to a figure that truly works for you and your lifestyle.

Taken from: Five-Star Living on a Two-Star Budget. Copyright © 2006 by Margaret Feinberg and Natalie Nichols Gillespie. Published by Harvest House Publishers, Eugene, OR. Used by permission.

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