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How we paid off $237,000 in debt in 5 years

The first step is to avoid taking on more debt. It's the most important and hardest step of all.

By MSN Money Partner Apr 8, 2011 11:48AM

This post comes from partner blog The Dough Roller.


I'm not a huge Dave Ramsey fan. I've listened to his show from time to time and read his books. He can be entertaining, and he has helped a lot of people. But his dogmatic, "I'm right and you're wrong" approach to personal finance rubs me the wrong way.


But he can be inspiring about getting out of debt. And one day several years ago, after listening to his show, I pulled out a piece of paper and wrote the following: "I will be debt-free by the age of 50."


I was 40 when I made that promise to myself. I'll turn 45 later this year. And last month marked a significant milestone in my journey to get out of debt. I paid off my last school loan, leaving just our mortgage as our only remaining debt. Post continues after video.

Five years ago our non-mortgage debt consisted of school loans and a home equity line of credit. The home equity line was the result of several purchases, including a kitchen renovation and consolidating some credit card debt. We made the last payment on the home equity just a month before paying off the school loan.


In total, my wife and I paid off $237,428.13 in debt in less than five years.


So how did we do it? And more importantly, how can you begin and finish a journey toward a debt-free life?

Based on our experience of climbing out of debt, there are four important steps that you need to take if being debt-free is your goal.


Stop going into more debt. This has become a bit of a cliché, but it is without a doubt the most important (and hardest) step if you want to tackle your debt. Unless you are teetering on bankruptcy, paying your debts is the easy part. But staying away from new debt is a challenge.


We started paying cash for cars, paying off credit card debt in full each month, and just saying no to big purchases we couldn't afford. Once you develop the habit of living without debt, you'll likely find that your quality of life has not changed a bit.


Here's what we found to be important to avoid piling on more debt:

  • An emergency fund. You've no doubt heard it a thousand times, but an emergency fund is a must. Even before you begin to pay extra on your debt, having some money set aside will help you handle unexpected expenses and give you a wonderful feeling of control over your finances. I'd recommend building up a one-month cushion before paying extra on debt. Once you have a month's worth of expenses saved -- in a high-interest savings account, of course -- then you can begin paying down debt while continuing to build your emergency fund at a slower pace.
  • Save for big purchases. It's absolutely critical that you include in your monthly budget the cost of large purchases (car, education) and periodic expenses (car insurance and vacations).
  • Plan to have fun. You shouldn't deprive yourself of any and all fun. I firmly believe that being debt-free is not actually the goal, but rather a means to a life full of choices and endless possibilities. But what's the point if you're miserable for years while you work your way out of debt? More importantly, most people cannot maintain total financial deprivation for long. And just like a yo-yo diet, the result can be even more debt than you started with.

Reduce your interest rates. This one is simple. Take a look at all of your debt, and take steps to reduce the interest rate on each loan. If it makes sense, refinance your mortgage or home equity line of credit. We refinanced our first home once, and we are refinancing our current home now. Refinancing a home is the single best way for most folks to lower their monthly expenses. But you should also look at refinancing your car loan or even personal loans.

And if you have credit card debt, use 0% balance-transfer credit cards to lower your rates. We did this for several years and the result was significantly lower interest payments and less time to get out of credit card debt.

Be aggressive, but not insane, about paying down debt. I alluded to this above, but it's critical that you be realistic about how quickly you can pay off your debt. Dave Ramsey speaks of "gazelle intensity" when it comes to getting out of debt. That's a great image, but we need to be careful.


To me, balance is important in all aspects of life, including finances. As a result, my wife and I invested in retirement accounts and our emergency fund while we paid down our debt. While this meant it took us a bit longer to get out of debt, it helped us develop the habits of saving and investing, and it provided a solid financial foundation for our family.

Find a way to earn extra money to help fuel your debt pay-down. This last one was our secret weapon. When I started The Dough Roller in 2007, I had no idea that it would turn into a business. But over the past four years I've launched several websites that, combined, generate a full-time income. And I've kept my job at the same time, which has allowed us to put the income from the business toward our debt (and now savings).


I'm not suggesting you start a website necessarily. But I am saying that if you can find a way to generate extra income, it will super-charge your efforts to pay down your debt.


I'll be covering each of the above topics in more detail over the coming weeks. But until then, here are some more resources to help you tackle your debt:

More from The Dough Roller and MSN Money:

Apr 11, 2011 10:55AM
Congratulations.  It's called living within your means, and it works on the personal as well as on the macro level (attention US government).
Apr 11, 2011 11:39AM
This article was just about useless. 
Apr 11, 2011 12:29PM
Apr 11, 2011 10:58AM
I get a good laugh out of articles like this since it seems to me they are relatively useless to the average person.  If these people could afford to pay off that much debt that quickly then clearly they are not making in the $30 K a year range.  And a kitchen renovation was clearly debt that anyone can choose not to get into.
Apr 11, 2011 1:32PM

Good for the writer but useless article (for the most part) for everyone else. No details whatsoever and basic information. Kind of like trying to teach Business 101 to the Wharton MBA students.

And I like how he mentions "Oh yeah, I started another internet business which flows the dough while I still work my 9-5." That is how I really paid the debt off. Why would MSN even post this bologna?

Apr 11, 2011 11:28AM

What a ridiculous article!!!    To accomplish this bit of nonsense, an annual income of  at least  $100,000  would be needed.  

It should be assumed that the level of living must have been high to begin with so mortgage payment plus cars payments  would make a pretty good dent in the monthly pay check.    After paying off  $47,400, that leaves  $52,600 GROSS to live on.

Taxes, taxes, taxes, utilities, utilities, utilities.    What utter g#dd##n nonsense.

Apr 11, 2011 12:02PM

Hey, guys, remember to have fun and build up that savings AND pay off debt at the same time!  I get the feeling they were never really struggling with student loans, they just got tired of sending the checks, so they paid it off and think everyone can do that.

What a tool this guy is.

Apr 11, 2011 3:27PM
also there are a lot of victims on this board who seem to think that their debt problem is due to their income. numbers don't lie, people do. when you pull out the old plastic card out to make your purchase to impress people you don't like, buying things you don't need, with money you don't have, the debt racks up. this happens at all levels of income. for example, you make $30k a year, and purchase a new $15k car, a person making $60k a year buys a new $30k car. $90k per year a new $45k car and the cycle continues. it all goes back to YOU. its a you problem.
Apr 11, 2011 2:22PM

I love these articles.  Where someone making good money was living way beyond their means but realised it and paid off their debt quickly.  This isn ot the reality for most people in debt.  And if you are a high income earner lving beyond your means than by all means fix it.


What this article tells me is that if you have money you can pay off your debt.  But you shouldn't have had the debt in the first place.  I make way less then these guys do and I don't have debt.  It's not rocket science.


Second this article tells me the writer is wasting their time working.  They have build an internet business in their spare time that pays as much as their full time job.  Hey genius quite your job.  Put that time into growing your business since clearly the business has great earning potential.


Finally to the commenter who paid off 600K in debt in 9 years are 85k per year in income, do the math that isn't possible.  Even at zero interest and zero tax liability it would only leave you less then 20k per year to live on for the rest of your expenses.  And if you have 600K in debt I am assuming your expensives are a lot more than 20k.   And in the real world you have to pay taxes and interest which would leave you with nothing to pay other bills.

Apr 11, 2011 3:53PM
Speaking for myself, I am all for personal accountability.  I love the idea of paying off debts faster than the bare minimum and not taking on more debt.  But sometimes, life just gut-punches the daylights out of you.  In the span of two months time, the transmission on my out-of-warranty car needed to be rebuilt ($2,800), my oldest daughter got in a car accident ($800 to fix her car), and the main sewer line in the house backed up.  Tree roots have grown in and that's going to need replacing before long.  Every bit of pad we had is gone.  At this point, I just need six months of no surprises to have a little cushion in the bank again before I can even think about paying extra.  It's easy to offer flip advice about woulda shouldas, but it's not like life just stops while you're trying to catch up.
Apr 11, 2011 2:07PM

I agree with most of the people who have commented.  This is a useless article.  I'll just start a new career ON TOP OF MY CURRENT CAREER creating websites.  Well, OF COURSE that would generate more income. 


Don't advertise this as advice to get out of debt.  The only advice given is to get another job, which does not work for most people.



Apr 11, 2011 2:51PM
Maybe I missed it ... but these people do not appear to be raising any children.  That makes a big difference.
During these years, many of us are supporting and raising our children, which according to the last estimates is around 200,000 each -  NOT including college.  We are also supposed to be saving for retirement and emergencies during this time ...  as well as meeting all our daily living expenses.  Additionally, most of us are trying to save money for our children's college since the cost is now so enormous it makes it almost impossible to get through with just student loans. 

It's almost impossible to keep up all of these significant expenses by themselves  ... let alone coming up with an EXTRA $237,000 to pay off other debt.  This story just doesn't vaguely  resemble the reality for the vast majority of Americans in this age group.
Apr 11, 2011 12:47PM
  While I would prefer more specifics than this article gives, don't say it isn't possible.  My wife and I have paid off approx. 600,000 in debt over the last 9 years on an average income of 85,000 per year combined. So we are doing pretty well, but certainly not making 100+.  We have150 to go.  This does include netting 150 on a house sale a year ago that we'd lived in for 20 years. 
  It hasn't been easy.  I'd be happy to go into some specifics, but mostly it comes down to don't spend anything!  :)

Apr 11, 2011 3:21PM
i think the reason you don't like dave ramsey is because he is right and you were wrong. people really don't like to hear the truth about themselves, so when dave ramsey revels that your money problem is actually not a money problem at all, but rather a YOU problem it makes people mad. if you were smart you really wouldn't have borrowed money in the first place, so it's a wake up call which makes people think he's mean. fact is if you were really that smart, you would have never borrowed money to begin with. i commend you you for getting over it, and being debt free.
Apr 11, 2011 2:10PM
Well, well...another useless piece of information...
If I were making that kind of money ..I wouldn't be in the mess that I am in!
Work hard and dream big...
The harder I work, the Luckier I get!
Apr 11, 2011 4:00PM
The author left out a very important Dave Ramsey step. Step # 1 Make a budget and stick to it for every month.  It is very difficult to bake a cake from scratch without a recipe for the first time. Why should getting out and staying out of debt be any different? You'll be surprised how much money that you are blowing each month by not planning and tracking it.   
Apr 11, 2011 4:23PM

What a bunch of whiney comments.  Obviously you don't have to earn as much money or have as much debt to pay off as these people did to take something of value from this article.  Those who are focusing on those two aspects of the article are just using how it's not EXACTLY their situation as an excuse to do nothing to improve their debt situation, probably just like they always have done. 


For example, " The only advice given is to get another job, which does not work for most people" commented by So Yeah.  He never said to get another job, he said to find a way to earn more money.  There are TONS of ways to do that from simply asking for a raise at your current job to selling stuff on ebay or craigslist that's just laying around your house or even cleaning houses on the side. 

Apr 11, 2011 3:54PM
I paid off my student loan when I got tired of the payments - of course, it is lots easier if there are no children, you save money, you pay off your credit card every month, and live within your means. That's why I do, so it worked. But if your house if upside down in value, no one will refinance it, especially if the equity is low (as it usually is in the first few years). I have a second job so I saved money to do a cheap remodel of my bathroom. Now I will be helping my husband out with his car lease. So, it is harder to get out of debt when you have more obligations -even if you do all the other things right.
Apr 11, 2011 3:43PM
  Lord,  had you read my post closer, I specified that we did have 150K from a house sale, bringing the debt paydown from income to 450K. 
  And Lynn, no question that becoming empty nesters 9 years ago helped.  :)  But it was by no means the only thing or even the major component.  We did save 15K each for 2 kids during this 9 year stretch and told them that was the best we could contribute and to make their school choices accordingly. 

Apr 11, 2011 3:36PM

Meh.  The author starts with, "Well, I don't like DR, but he has some valid points," (paraphrasing) but he doesn't really offer anything new except pace yourself and approach savings with balance. (and get another job)  Actually, I do kinda see something to both approaches (except the additional job part).  The most miserable people I know go out of their way to save three cents (usually on holiday gifts), and make a huge production of it in the process. 

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