How I Got Out of Debt

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roadoutofdebt
Three years ago this past month, I sat down for coffee with my friend Jeremy at a Starbucks near our house. Almost 25k in credit card debt, behind on all our payments and ready to walk away from the debts, he talked me out of it. He encouraged me to use the last of my money to make the most pressing debt payment. Trust God to provide, and work and hustle like there was no tomorrow to make the next one he said. Three weeks later, the Craigslist business started and it’s been a whirlwind ever since. Having made one last payment a few weeks back, we are now out of debt. (except our house, the next target) You never know what a difference you can make in someone’s life over a cup of coffee and a few words.

What I’m going to share in this post are some of the unconventional methods I used in paying off our debt over the past three years.

1. I never used a budget. This might not work for everyone, but I’m a very competitive and driven person. When I made the decision that I was done living under the black cloud of credit card debt, it was game on. Generally, we strive to spend as little as possible and only on what we need.

2. I passed on investing in Bitcoin… and most other investments. A little over a year ago, we had some friends over and we talked about bitcoins for almost two hours. I was sold. I wanted to invest a good chunk of money in them as they were around $13/bitcoin at the time. But I didn’t. Why? Because I had already decided where all my extra money was going before I earned it. No exceptions. A small portion would go into the slow expansion of the appliance business and the rest would go to paying off high interest credit card debt. My credit card rate was 10.9%, so it was a no brainer to put my money into paying it off.

Looking back, in the past year Bitcoin has gone from $13 to over $1,000 each. That has been slightly painful to watch, but I have no regrets. You can’t have regrets when you are making wise decisions in the moment. Get out of high interest debt and then invest like crazy!

3. I focused on function over form. We have multiple remodel projects that aren’t finished. They haven’t been finished for almost 3 years now. But the thing about each one of them is that what is left on them is mostly cosmetic. I remodeled our bathroom, but I haven’t finished mudding, texturing and painting the walls, for example (or the tile….). I’ve replaced single pane windows all over the house, but I haven’t trimmed them out yet.

The thing about house projects is that you can dump money into them until the end of time. When you are getting out of debt, just focus on the essential projects and save the non-essential ones until you you are debt free.

4. We always use cash. Using cash provides much needed friction during the buying process. It causes you to think just a little bit more before letting the money escape out of your wallet or purse. Many times it will give you the extra nudge you need to walk away from an unneeded purchase.

5. We still took nice vacations. We spent a good chunk of money taking the entire family out to Hawaii two years ago, and then I went out again this last January.  We are also planning to go again this February. We could have paid off our debt much sooner had we not taken these vacations, but it wasn’t worth it to us. Paying off our debt was our destination, but I think it’s good to take a few rest stops along the way. Hawaii was one of those rest stops (literally). We have really close friends out in Hawaii that we enjoy visiting. It also provided an opportunity for us (me) to escape the winter seasonal depression that often comes with living in the Pacific Northwest.

6. We would still eat out once a week. Our family has been going to Chipotle every week for the past few years. We spend about $20 each time for the entire family to eat.  Rather than buying kid meals, we figured the best way to save money was to have our three young boys split one burrito, and our 3 year old shares food with mama. We all drink water. If Hawaii is our big rest stop, eating out once a week is one of our mini ones. It provides the family a night when a meal doesn’t need to be prepared and it has become a treat to look forward to at the end of each week.

7. We only had one vehicle. My wife stays at home with our four kids (works harder than I do) and I work from home, making it so that we don’t need a second car. This saved a lot of money on insurance, gas and maintenance.

8. I worked hard. I think it’s worth mentioning that it takes a lot of hard work to get out of debt. There were definitely days and weeks where instead of leisurely coasting after reaching my weekly average, I continued to push hard to earn extra money.

9. I had my wife on board. To be able to get out of debt you and your significant other need to be on the same page, heading in the same direction. Getting out debt requires sacrifice and much delayed gratification which can be hard at times. Fortunately for me, it took no convincing my wife towards the mission. Truth be told, she was the one waiting on me all these years to become more responsible with our finances. I have an exceptional wife and I’m incredibly grateful to have her on my team.

10. I sold our one vehicle. With the end of our debt in sight, and the appliance business using the truck all day every day, I decided to just sell it to the business. That was the final death blow to our debt. How do we get by without a car? We are in a unique situation where we still have access to the truck for personal use when needed, but the reality is that we really don’t drive that much.  We plan on getting another car sometime in the near future, and when we do we’ll pay for the next one in cash.

I’d love to hear your tips and stories of how you’ve been able to get out of debt, stay out of debt or live a more frugal lifestyle. Also, let me know if you have any questions. I hope this post finds you all well. Let me know if there is anything I can do for you.

-Ryan

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23 COMMENTS

    • I just had a friend unload a lot of them. I’ll have to ask him how he did it and I will report back after I talk to him. That’s crazy about the MtGox waiting list.

  1. Great job. I would advise others to use a budget but other than that I’d say to follow your steps. Personally, I’ve never had debt. I’ve never even applied for a credit card and have always used cash. But, I’ve also always had a written budget. With a written budget, the husband and wife or girlfriend and boyfriend or what ever the heads of the households are called in your house, the 2 of you can sit down and talk about your future and where you want to be in the next month and year and 5 years and 10 years. I listen to Dave Ramsey all the time but I was doing Dave Ramsey before Dave Ramsey was doing Dave Ramsey. lol

    Since no one else can see my email I’ll tell a story about it. Dave has people call in a scream I AM DEBT FREE when they pay off their debt.! So I made my email when I first started a cleaning business… iamdirtfree

    • I agree, most would greatly benefit from a budget. Congrats and never getting into debt in the first place, not many can say that! Well done!

  2. Excellent Ryan, This is one great eye opener article about debt management. Although your situation is unique, the point about spending cash for purchases hit it spot on. Good luck with your new car purchase and I am just going to borrow your cash tip and see if it works.

  3. Congratulations. My wife and I, on Thanksgiving, just paid off our 4 and 1/2 year old house we built (we actually built it, not had someone build it, took 20 months). We do use a written budget, one income, and the budget freed us. We never went out to eat before. Now, we put $100 a month into an envelope on the 1st of each month. When it’s gone, we’re done going out. We also set aside for vacations and we both get a little “blow money.” We didn’t do any of that before the wditten budget. I am amzed that people think a budget is constricting….debt is constricting, a written budget is freeing.

    You said you are not on a budget but you are…not a written one. Discipline is key. Both my wife and I have a list of things we would like to purchase now that we are completely debt free…delayed gratification! Keep it up for your family’s sake. It’s nice living with no strings attached, and not paying interest (tax paid to a corporation)

  4. Dang phone! Fat fingered while editing. Interest is like paying a voluntary tax to a corporation so I can have something today when I don’t have the money. No thanks.

    Read the book “MILLIONAIRE NEXT DOOR” and you’ll find most millionaires live frugally.

    My wife and I enjoy investing in eternal things and living debt free allows us to build that portfolio.

    • Thanks Walter. That’s great advice and I will read that book the Millionaire Next Door, I’ve heard about it before. Congratulations on finishing your home and paying it off! That has to be an incredible feeling. Love the advice, and keep investing!

  5. Great post, Ryan. While some of your methods won’t work for everyone (I think I would fail without a budget!) I think you’ve got some brilliant insights there. The two that stood out to me are using actual cash (literal green pieces of paper), and refusing to let your home improvements divert your focus and consume all your forward energy. Way to go.

    So, will you invest in Bitcoin now? As I write this, Bitcoin prices are back “down” to under $900… 😉

    • Thanks Justin. I will probably stay on the sideline with Bitcoin now. They are too expensive, too much risk for not much potential reward, in my opinion. I think the Bitcoin elevator is towards the top, and I don’t want to get on now.

    • There are slower days/weeks at times. Holiday’s tend to be slower. Weather can also affect things. I encourage people to just roll with the slow times. Don’t give up, keep posting and sell things when people want them, but spend time with your family, reading, and even preparing machines for when you sell 6-8 in a day. You will be happy to have more inventory that is ready to go. Keep it up!

  6. My brother, you’re a serious trailblazer. I am so impressed by your work ethic and sound decisions for your age. This goes to show anyone that even with a family of six, you can still get out of debt if you use wisdom and say no to unnecessary things. This must be teaching your children so much. You’re a huge example to those associated to you. I’m so thankful to have you in my path. May God overflow you with goodness and wisdom. I know that what you give to others in wisdom and experience will return to bless you many times over. Continued success to you and your family. You surely deserve it!!! Alena/DallasTX

    • Thanks Alena, I really appreciate it. It’s one thing I really enjoy about blogging and the internet. Amplification. If you are trying to help people, you can end up really helping a lot of people, and I love that. I’ve learned far too many of these lessons the hard way and if I can help encourage/prevent others from making the same mistakes, that would make me happy.

      Also, it’s soon to be family of 7! My wife is pregnant with our 5th child. I’m already almost done with an additional room/office in our garage. Blessings

      -Ryan

  7. Once again, superb article. I thoroughly enjoyed it and I thought it was a great idea to sell your truck to your business for the last debt-smash. I’ve never used a budget before, but I stay on top of all my expenses for the most part. I was taught early on via Dave Ramsey to be debt-free (and that credit cards are bad) and to this day I remain debt-free and credit-card-less. Being in college, my parents were really avid supporters of avoiding student loans, and I am also free in that area as well. I’m really thankful for that, especially hearing all my friends complain about their student loan debt being such a burden.

    I had never even heard of Bitcoin until mid-2013 but I also believe there is a high risk with e-currencies. Seems like a great investment, sure, if you had jumped on board a few years back, but we never know beforehand what will happen with that kind of stuff. Better to continue focusing 100% on your business: something that you know for a fact will keep you financially secure!

    I will agree with Walter, “Millionaire Next Door” is great. Really opens your eyes to how successful people actually live and build wealth. That envelope system really works (I don’t do it at the moment but have in the past) and it’s really surprising how much you can accumulate that way. People say how important building credit is when in fact it’s not necessary at all… your bullet point about using cold hard cash is very true. We tend to overspend or spend on unnecessary things more easily with a swipe of plastic, because with plastic there’s less of a mental association of money leaving your possession.

    • Thanks! Well done on staying out of debt! I’ve read/listened to a good bit of Dave Ramsey, good stuff. He was a big encouragement as well when I started paying off the debts, the smallest one first. That was a great tip to help build momentum.

    • We NEED to stop teaching our kids that it’s important to build credit. The only reason to build credit is so you can get more credit, and take on more debt. It’s completely backwards. We’re doing the next generation a huge disservice by teaching them that a responsible adult should use credit.

      • Completely agree. I’m teaching my boys to save up large portions of money so they aren’t even tempted to borrow, even for a first house. If they work hard enough, early enough they should be able to pay cash for a nice house by the time they are 18-20. That’s the goal at least.

  8. About the envelope system. It’s a great way when you are first starting to save money or get out of debt. I’ve used the envelope system for many years and it still helps. I don’t take the envelopes everywhere I go but in our safe I have envelopes with names on them with x amount in them. We have never ran out of money in an envelope but I have a plan for that too. I save all my change. I put quarters in a bag. I put dimes in a bag, nickles in a bag and pennies in a bag. If I run out of change I can go through the hassle of taking it to the credit union and cashing it in. But that’s a hassle and I hate hassles. lol

    Student loans and debts…. my girlfriend had $50k all together when we met and we were rid of it within the first year. While she says she don’t know what to do now that she doesn’t have payments every month, I didn’t know what to do when we DID have payments for that first year.

    For all of you that are pressured with debt…. GET RID OF IT! You might have to suffer for a year or 3 but never having to worry about anything is the way to live life.

    Keep up the good work Ryan. Thanks for having this web site to help people.

  9. Congratulations Ryan, you’ve done a great thing for you and future generations of your family. Getting out of debt is not easy, but neither is living under it.

    When my wife and I were first married, I owed over 40k between credit cards, a new truck and student loans. We now owe nothing, she drives a 10 year old car that’s paid for, and we budget with cash. Getting out of debt for us was about being on the same page. Like you, I too think my wife was just waiting for me to sort myself out and she supported me fully when I decided to start budgeting. Funny thing is, we seem to have much more money when we budget. We can still buy things, but we have to save our discretionary money for them.

    Don’t be afraid to do what everybody else won’t. We lived in a fifth wheel trailer for 4 years while our friends all bought houses. I just sold it for 90% of what we paid for it 4 years ago. I also drive a 22 year old electric car. The point is, if you’re willing to live with less now, you can create a far more secure future.

    Thanks for the post Ryan, love what you’re doing here and I’m excited to start my appliance business.

    • Thanks Mike! It’s great to hear more of your story. Congrats on paying off all that debt and I’m excited for you in the new appliance venture!

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