How I Ditched Debt: Kicking Frugality Into High Gear
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In this series, NerdWallet interviews people who have triumphed over debt using a combination of commitment, budgeting and smart financial choices. Responses have been edited for length and clarity.
Ben and Melissa Panter of Mount Laurel, New Jersey, had always been what Ben calls “above-average savers” — they lived frugally and coordinated schedules to avoid day care expenses. They ate out “maybe once a week,” he says. So when they decided to cut expenses in order to repay debt, it was no easy task.
At the time, they had a large mortgage payment, and Ben’s student loan balance was growing, even as they made income-based payments. Ben, 33, is an adjunct professor, freelance photographer and graphic designer.
Melissa, 32, who teaches public school part time, says they weren’t focused on what they owed — doesn’t everyone carry debt? But when she asked their financial advisor when they should ramp up saving for retirement, his answer surprised her: “Once you’ve paid off your debt.” The Panters hadn’t even added up their debt at that point. [Editor's note: NerdWallet advises saving for retirement while repaying debt because an early start is key to growing a sufficient nest egg.]
They had been saving, however, and they had nearly $30,000. They quickly paid off their $8,000 auto loan balance, kept about $5,000 in savings for emergencies, and put the rest toward Ben’s student loans.
Then they kicked their frugality into high gear. They went to the movies only if someone gave them a gift card, and stuck to homemade Christmas presents. The lone exception: “We gave each other $50 Starbucks cards for Christmas,” Melissa says. “And we made those puppies last. We would order one tall iced drink to share and then get free refills.”
Melissa says that the family’s intense focus on buying exactly what they needed — and not more — is on trend. Think minimalism and Marie Kondo for your finances.
A tight budget was “freeing,” Melissa says. She didn’t have to use brain space deciding which $10 makeup foundation to buy at CVS, nor was she tempted by impulse purchases. She and Ben wanted to get out of debt, period, and their already-lean budget didn’t leave many obvious opportunities to cut.
They connected with NerdWallet to share their story, which may inspire your own journey to paying off debt.
What was your debt when you started your repayment journey?
Ben: The round number was about $127,000, mostly student loans and a car.
How did you end up in debt?
Melissa: Ben had some debt remaining from his undergrad degree, which we were paying the minimum payments on. We wanted him to be able to teach at the university level, so he applied to several graduate programs. He loved the program at a private art school, and we honestly hadn’t even tried to figure out how much it would cost us. We just figured this was the logical next step for his career, and that this is what we were supposed to do. We also bought a car with a loan because we had heard that using “other people’s money” was a smart thing to do. We were so naive. We also bought a home we couldn’t afford at the same time he started his graduate program, with almost nothing down. Prices went down right after we bought, and we couldn’t sell. The mortgage payment was so high for us that it was hard to make a dent in the debt.
What triggered your decision to start getting out of debt?
Melissa: Our financial advisor had been through Financial Peace [the Dave Ramsey program], and he suggested it.
What steps did you take to reduce your debt?
Ben: We got on a budget with no wiggle room [using You Need a Budget software].
Melissa: We reduced our internet to slightly above basic. We’ve had no problems with our speeds for under $60. We got rid of our insane cell phone bills by switching to Ting. We don’t use data — we just use Wi-Fi in our home, and free Wi-Fi is everywhere in our area. We cut our food bill to $200 monthly. [They have since increased the food budget to $250 a month with a 7-year-old and a toddler.] The only vacations we took were connected to artist-in-residency programs that Ben was awarded as a photographer. We were able to stay in Rocky Mountain National Park as well as Acadia National Park and some others, while he had a “work-cation.”
Ben: We stopped making anything except mandatory contributions to retirement plans [including not contributing to get a match].
Melissa: We still haven’t started it back up. We’re trying to save 20% for a down payment on a house. Once we do that, we will resume contributing. [Editor's note: NerdWallet recommends contributing at least enough to get an employer match, even while repaying debt, because it’s free money.]
Any big or unexpected sources of cash you used to pay off debt?
Melissa: Ben’s parents paid $100 a month of his student loan, as they had for his older brother. That was a big help. Ben was able to increase his income, too, with more freelancing and another adjunct position.
What would you do differently knowing what you do now?
Ben: We might have sold our house early on. We had an offer, but we’d have had to bring $25,000 to the table because we were underwater. We ultimately decided to use the money to pay off other debt, but we ended up continuing to spend a big portion of our income on mortgage payments.
How is being debt-free different?
Melissa: Being out of debt is actually more challenging because you have more choices. It’s like, “OK, what’s a good way to spend?” Not having money or choices actually saves some brain energy.
Ben: Being debt-free gives you freedom. We’d rather have freedom — be able to change careers, travel or whatever. We still have a budget. It helps you prioritize and know the money is going to do the things you think are important.
How do you hope your children will benefit?
Melissa: I wrote and self-published a children’s book to help talk about this with our kids. Debt is so prevalent that it’s important to teach how to think counter-culturally about it early on. The book is called “Piggy’s Peach Pie,” and it’s about a little pig who runs into a problem when he promises his friends a peach pie before his peach tree has produced any fruit. We’re showing our own kids that debt is a trap, and we’re teaching them the skills they’ll need to avoid it.
How to tackle your own debt
If the Panters’ story has inspired you to take a look at your own debt and design a budget, here’s how to get started:
Figure out how much you owe, and come up with a strategy for paying it off. The Panters chose the “snowball method,” which involves tackling the smallest balances first. You should choose whatever strategy will motivate you to stick with it.
Set aside or save up an emergency fund. Unexpected expenses will happen, but they’re less likely to derail your debt-repayment plan if you have money earmarked for them.
Learn strategies for frugal living, so you can squeeze the most out of every dollar.
Check out ways to bring in more money so that you can get the debt out of your life more quickly.
Photo courtesy of Melissa Panter