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.
Financial goals and family goals go hand-in-hand in the Hill household.
When newlyweds Andy and Nicole Hill envisioned their future, they saw debt as a roadblock to achieving goals for themselves and the family they hoped to start. So they got serious about paying off what they owed.
The couple made budgeting into a routine and wiped out nearly $50,000 in debt in a single year. Big cuts to entertainment and vacation spending freed up money for debt payments.
After conquering debt, the Hill family — now including Zoey, 5, and Calvin, 3 — has more room in the budget to meet other goals, such as paying down the mortgage and taking family vacations.
Andy Hill chronicled his experience getting out of debt on his blog, Marriage, Kids and Money. He recently shared the story with NerdWallet.
How much debt did you have when you decided to pay it off?
In 2010, we had $48,032 in debt — $20,908 on my wife’s car and $27,124 on my student loans. In one year, my wife, Nicole, and I paid it all off.
What triggered your decision to start getting out of debt?
I wanted to change our financial family tree for the better. I wanted our kids to know how to avoid debt and start to build wealth early so they would be set on a path to financial freedom. If our family tree was going to change, we had to change first.
What steps did you take to reduce your debt?
Nicole and I agreed that spending less than we earned would be the key to us making some real change in our lives. That decision was the complete opposite of splurging on steak dinners, concerts and Caribbean vacations like we were used to, but we both knew if we were to continue down this path, we wouldn’t be able to realize our dreams together.
I learned the importance of monthly budgeting. It allowed us to start controlling our money instead of allowing our money to control us. We would get together at the beginning of each month for our “budget party.” We ate pizza, used Excel sheets and focused on crushing debt.
To pay off our debt, we essentially lived off of my $70,000 salary and used hers, which was around $60,000, to clobber our debt.
» DID YOU DITCH DEBT? Tell us how
How has getting debt-free helped you achieve your family goals?
We have a lot more income to allocate to the truly important things in our lives. We’re able to properly save up for retirement by maxing out our Roth IRAs and my 401(k) at work. With our debt eliminated, our savings grew as well.
In 2013, we were able to buy our dream home with 40% down. That mortgage will be completely paid off in December 2017. Then we’ll have complete debt freedom.
With our extra savings, we’ll be able to invest in real estate. Oh, and we’re going on an epic family vacation each year, too! Next year, Disneyland in the spring and Mexico in the winter, which is the perfect time to escape our Michigan winters.
How to take on your own debt
Before diving into a debt payoff plan, make sure you have an emergency fund. Finding the money to stash away can be hard when you have a tight budget, but pulling together some extra cash gives you a buffer so unexpected expenses don’t lead to more debt.
Once you have that, follow these steps:
- Know what you owe: List your debts to understand the work you have ahead.
- Get a grip on your cash flow: Understand how much money you have coming in and out each month, as well as how much you might be able to put toward paying off your debt.
- Find your route: There are a few ways to pay off debt. Decide if a DIY approach, such as a debt avalanche or a debt snowball, is possible. Or you might find debt relief tools more appropriate.
- Make progress: Stay on top of your payments.
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