How I Paid Off $14,383.15 of Credit Card Debt in 366 Days

And managed to buy a house at the same time

While most people awoke the morning of January 1st, 2020 — blissfully unaware of the dumpster fire ahead — I awoke in a panic.

No, I was not some psychic capable of predicting the horrible events of 2020, I awoke in a panic because of another number.

$14,383.15

After a major repair on our aging car, moving to a new city, going a month without a paycheck, and two years of poor spending habits, our credit card debt had ballooned out of control.

On January 1, 2021, exactly 366 days later (2020 was a leap year) that number was $0.

Credit card debt (red) vs Cash on hand (blue)

How we paid off over $14,000 in a year’s time is the focus of this article, an article I’ve been dreaming of writing for a year now.

While other “pay off debt” articles place emphasis on making big sacrifices such as moving back in with your parents, brewing your own coffee, and living the life of a monastic minimalist, my wife and I took a different approach.

We’re realists and understand the key to paying off debt is making small behavioral changes that compound over time. That’s exactly what we did and that’s exactly what I’m going to break down for you today.

Here’s how we paid off $14,383.15 of credit card debt in 366 days.

Step 1: Stop using credit cards

The first step of getting out of credit card debt is obvious — stop using credit cards.

It doesn’t matter how much cashback or points or miles they offer, it’s not worth the interest, stress, nor the pain in the ass that is credit card debt.

In January 2020, I printed out our credit card statement and scoured it over, line by line. Any expense that was considered recurring (subscriptions, services, bills, etc.) I either outright canceled or transferred over to my debit card.

I then physically removed my credit card from my wallet and tucked it away in my desk. From that moment onward, we were only going to spend the money we had in the bank (which wasn’t much but we’ll cover that in step two).

Getting out of debt requires that you change your behaviors and mindsets. Removing your credit card from your wallet is a simple first step anyone can take. Understanding how much cash you have available to spend, however, is much harder.

This brings me to the all-important second step.

Step 2: Create a forward-looking budget

I cannot stress how important this step is. Without it, there is no chance of you crushing your debt within a year.

Let me demonstrate with a real scenario.

Before January 2020, a typical trip to Target consisted of my wife and I walking inside with a small list of items we needed (cat food, moisturizer, diapers). We’d grab a cart and walk through the aisles, checking things off our list.

But then we’d see that shiny new kitchen thing we really needed. And the boys need new shirts and these are on clearance. Oh, let’s get a box of that really good granola bar they only sell here!

We’d leave with much more than what was on our list. And yeah, we’d charge the credit card of course.

Nowadays, a Target run looks a lot different. We walk into the store and know we have exactly $84 set aside for household items, $17 for pet supplies, and $32 of wiggle room (aka “allowance”).

Knowing how much money you have available to spend changes your shopping habits.

Now instead of saying “Yes, we’ll figure it out” to everything, we are forced to make a decision. Should we get the shiiney new kitchen thing or buy the boys new shirts? Or neither?

Now imagine this scenario but for every part of your life: bills, trips to the grocery store, Christmas gifts. Imagine knowing exactly what every dollar in your bank account is set aside to do.

That’s where a forward-looking budget comes into place.

A forward-looking budget should be self-explanatory, it looks forward to your upcoming expenses. If you get paid every two weeks then all you are concerned about is covering the next two weeks of expenses.

In other words, do you have enough?

Mint is a great tool, but it’s great for looking back and examining your spending. It’s not a great tool for instilling new habits or understanding exactly how much money you have available to spend at the moment. For that, I use a tool aptly named You Need A Budget or YNAB for short.

YNAB is software built around four core principles:

  1. Give Every Dollar a Job
  2. Embrace Your True Expenses
  3. Roll With The Punches
  4. Age Your Money

To give you a taste (minus any sensitive information), here is a look at my YNAB dashboard:

As you can see, I’ve already set aside $250 for groceries for the next two weeks. We’ve already spent $20.05. Including the $0.13 that wasn’t spent in December we now have $230.08 available for our next two Aldi runs.

We’re also expecting a major house improvement project within the next few weeks. That’s why we’ve been slowly saving up in our “Roof + Chimney” category. And we’ve already begun saving up for Christmas next year.

How did all of this help pay off credit card debt? Every two weeks when that paycheck hit, I’d set aside around $600 automatically for a credit card payment and what was leftover I’d have to make work for the next two weeks.

Some weeks we had setbacks and couldn’t afford the $600 payment and that’s okay, we’d “roll with the punches” as YNAB says, and readjusted our budget moving forward.

After a year of making bi-weekly payments, of knowing exactly how much money was available to spend, and diligently tracking every purchase. Our debt was gone.

However, it didn’t start out that way. This brings me to step three.

Step 3: Start your debt snowball

I was never a fan of Dave Ramsey.

Then I read The Total Money Makeover and, well, I warmed up to the guy.

I originally thought he was just another rich, old, white dude telling you how to be rich too. But then he started dropping bombs:

  • “We buy things we don’t need with money we don’t have in order to impress people we don’t like.”
  • “Energy, thrift, and diligence are how wealth is built, not dumb luck.”
  • “Remember, there is one thing the debit card won’t do: get you into debt.”

I read TMM nine months into this year-long debt-destroying journey. I wish I had read it sooner.

Simplify your financial goals

What I haven’t told you so far is that paying off our credit card debt wasn’t our only financial goal in 2020. We also wanted to save for a trip to Italy (which was canceled, obviously), save for a new car, pay off other smaller debts, and build up our emergency fund.

Step one of Ramsey’s TMM is to save $1,000 in an emergency fund. At the time we had more than that, which I thought was prudent. But as Ramsey explained, what’s the point of holding onto cash making 1% in a savings account when you have more debt racking up 10–24% interest?

So, we trimmed down our emergency fund and used it to help step two of Ramsey’s TMM, which is: Kickstart the debt snowball and pay off all your debt from smallest to biggest.

I opened up a fresh Google Sheet and made a list of anything that needed paying off, even things on 0% interest repayment plans.

  • Phones
  • Small medical bills
  • Personal loans
  • Student loans

The first to go was an old interest-free medical bill that was currently on a 24-month repayment plan. That freed up an additional $38 a month. Next to go was our cell phone financing, another $59 a month.

After freeing up these smaller monthly expenses and settling on a modest emergency fund we were able to up our bi-weekly debt contributions to $800. Let’s just say things accelerated after that.

Our credit card debt was number four out of six debts we’re gunning to pay off. Next is a small personal loan that will be paid off in the next 4 months followed by the bane of my adulthood: $48,000 worth of student loans.

Paying off the credit card was just one step of our debt-free journey. Staying focused and diligent isn’t easy over the long term, which brings me to step four.

Step 4: Keep sacrificing but reward yourself along the way

This is where Ramsey and I part ways in terms of financial philosophies.

Ramsey says sacrifice in the short term so you can live like kings in the long term. I agree but to a realistic extent. Paying off debt is mental anguish. Every payment is a small victory but it’s also another bit of money you don’t get to use.

I do believe when you are in the midst of paying down debt that sacrifice is necessary. However, you do not need to live a monastic life. It’s perfectly reasonable to reward yourself along the way.

For example, early in the year, we cut out a lot of frivolous expenses. I remember our YouTubeTV subscription being one of them. However, we cut too deep, too fast. We tried to drastically alter our standard of living and it became unsustainable.

So we readjusted. We kept a few “rewards” in our budget, takeout being our favorite. Every two weeks, after making another debt payment, I’d set aside $40 for a nice takeout dinner. My wife and I would get the kids to bed early, then we’d order tacos from our favorite joint and enjoy our small victory.

Our rewards were typically food-based but sometimes we’d change things up like a trip to a used book store or IKEA. It was always just enough to satiate our cravings but not too much to delay our debt repayment plans.

The day we paid off our credit card debt, we booked a small AirBnb on the bay for a long weekend.

Just to see what it’s like to live like kings for a few days. Finally, let’s talk about step five.

Step 5: Communicate your goals and set expectations with friends and family

This final step isn’t so much as a step but rather a reminder: You are no less of a person because of your debt.

After seeing our bill for $14,383.15 I felt so much shame. I felt at fault since it was me who left my full-time career a few years back to stay home with the kids. It was me who “managed” the money. In all honesty, I was embarrassed.

But then my wife reminded me that we were in this together and that yes, we made financial sacrifices so that she could go through a low-paying residency to land her dream job and that there was no shame in our choices.

That gave me the confidence to open up. We started to communicate more with our friends and family about our predicament. We weren’t asking for financial help, only the understanding that we were dead set on achieving our goal of being debt-free and to expect smaller birthday gifts this year.

At times we may feel the pressure to seem put together. But putting on airs to appear well-off is one reason people find themselves in credit card debt in the first place.

Like Ramsey said, “We buy things we don’t need with money we don’t have in order to impress people we don’t like.”

Be honest with the people you do like. They’ll understand.

Optional steps

We’ve arrived at the section of the article that is completely optional. Along the way, I’ve picked up a few ideas that helped us during our year-long debt destroying campaign. However, these ideas aren’t for everyone which is why I’ve added a separate section here.

Again, I’m not a financial expert so please take this as general observations from the battlefield.

Own vs Rent

The first optional step — and frankly, miraculous step — we took this year is the purchase of our first home. While this probably warrants an entire article on its own, here’s what buying a house did for us.

  • We received our security deposit back (a hefty $2,700)
  • We lived rent-free at my in-laws for a month while waiting to close on a house
  • We lived mortgage-free for the month after close (first mortgage payments don’t take effect until the second “1st of the month” after closing)
  • We now pay $900 less a month for a mortgage versus rent

Earlier in the year I was convinced homeownership was an unrealistic and expensive endeavor. Instead, it’s allowed us to speed up our debt repayment and build equity while we do.

A Year Without…

What’s one thing you can live an entire year without?

Maybe a specific streaming service. Maybe grocery shopping at Whole Foods. Maybe dining out with friends.

As you slim down your spending, think about making temporary changes. Ones that you are free to re-establish once your credit card debt is paid off.

Meal plan

My friend doesn’t believe my family of four spends on average $107 a week on groceries.

So, I showed him the data:

$5,589.44 divided by 52 weekly shopping trips is $107.49.

“How much do you and your wife spend?” I asked him curiously.

“Three times as much,” he replied, hesitantly.

My friend isn’t alone. I looked at various “suggested” grocery spending budgets for families of four and here’s what I found:

How did we save over $5,000 this year on grocery shopping without starving? Meal planning and shopping at Aldi.

Like Target, we never enter a grocery store without a plan. Every meal is planned, every snack is accounted for. We make a list and we buy what’s on the list. That’s the secret.

Also, buying plant-based proteins is a lot cheaper than animal proteins. Just saying.

Conclusion

My sincere hope is that if you are struggling with credit card debt you will, at the very least, make a decision to do something about it. Because here’s the thing: it is possible to be debt-free.

It’s not easy. It’s not fun.

But with small changes to your habits coupled with an unrelenting desire to beat debt, you too can experience the joy of seeing $0.00 on your credit card statement.

You’ve got this.

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Stay-at-home dad. 9-to-5 escapee. Aldi aficionado. Me in a nutshell→ declanwilson.co/start-here

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