A couple of years ago my wife and I were sick and tired of paying our monthly car payment. We sat down in May to look at how we could pay off that loan.
This loan had just over $7,00 left on it and was not supposed to be paid off for another 18 months.
Our goal was to get this loan paid off by the end of the summer, August. This gave us three months to knock out the $7,000 loan.
My wife and I had a goal now we needed to figure out how to accomplish this goal. We started by building a roadmap. This map was intended to help us with several questions.
- What are we going to accomplish? – This question was simply the goal. We are going to pay off the remainder of our car loan in three months.
- Why are we doing this? – An extremely easy question to answer but it was important to help us stay focused. We wanted to free up $400 a month in our budget to help tackle student loans.
- How are we going to do this? – The most complex question to answer for the roadmap. This is the part that will have the most meat to it. We are going to spend the remainder of the article answering this question.
We initially decided to take a look at every line item of our budget to see where we could save. There were some tough decisions and sacrifices to make.
I love to explore new restaurants, so we tended to eat out too much each month. This was the first sacrifice. We decided to only eat out once a month instead of once a week. I hated this choice, but I knew it was temporary.
To continue with the food theme, we also decided to cut our grocery bill by 25 percent. We noticed that we were purchasing a lot of luxury items that we really did not need. This was surprisingly easy to cut back on.
Other budget items trimmed included our entertainment, utility, and a creative childcare move. Overall, this saved us thousands of dollars over the three months. We were off to a good start but had a lot of room
I recommend using a personal finance app such as Mint to help you review your expenses. We used Mint to help us review our budget which saved a lot of time.
This item is similar to adjusting our budget but happens at a more detailed level. Instead of looking at each budget category (Eating Out, Gas, Utilities, etc.), you need to look at each individual purchase.
We did this with our grocery budget item that allowed us to save 25 percent each month. After putting together our grocery list, we review the list to look for unnecessary luxury items that might have snuck onto the list.
It is easy to avoid unnecessary expenses. All we did was take a team approach. The person wanting to make the purchase would ask the other about the item. The other would question the purchase. If the purchaser could not make a good case for the item, he could not buy it.
Growing up in an affluent family, couponing is something I did not grow up doing. My wife, who grew up in the opposite situation, had to teach me how to properly coupon.
We started with the basics such as finding manufacturers coupons for common items we purchase (ie. toilet paper, toothpaste, body wash, etc.). Then we started using applications such as Ibotta and Honey to save even more money.
Really this did not save us the biggest amount of money over the three months, but it did get us, especially me, in better habits for the long run. Some of the stuff I learned from this experience, I still use several years later. That money really adds up over time.
Selling Unused Items
We had a bunch of items just sitting around the house collecting dust. There was no point in hanging on to these items anymore, so we decided to gather up these items and list them on Craig’s List.
How did we figure out what to sell? This for some people is easier said than done. I tend to question what I should get rid of. I always talk myself out of getting rid of something by asking, “What if I need this again?”
To overcome these speed bumps, we decided to put a rule in that if we have not used the item in the last twelve months then it needed to go. This simple rule helped a lot to get rid of things. We also asked ourselves if the item distracted us from our goals in life or not. If it was a distraction, it got put in the sell pile.
We were able to sell enough to put another $1,000 towards the car loan.
For me, it is quite easy to lose focus on a goal. I am like a dog when he sees a squirrel.
This is when I keep that goal written down and displayed in a visible location to keep me reminded of what we are sacrificing for. Every week I try to create subgoals that I am going to accomplish the next seven days that inch me towards the main goal. I love the direction these subgoals give me and I get addicted to the feeling of checking them off.
It feels so good to know that I am moving towards completing that final goal.
Now it is your turn to start crushing some debt into oblivion! It is always recommended to start with the smaller, high interest loans. Once you get those paid off it in a way starts a snowball effect to paying off larger loans.
After paying off our car loan, my wife and I were able to start tackling our student loans with an extra $400 a month. That is huge! Once paid off, we will only have our mortgage to tackle.
What debt do you plan on tackling first?
Andrew and Adam are the founders of Wallet Squirrel, a fun personal finance blog focused on finding creative ways to make extra money on the side while saving and investing! We look to help our readers better their own financial journies through real-life experiences.