How To Get Out Of Debt: $40K Debt to $70K Savings in 2 Years

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Not long time ago, I was indebted to the tune of over $40,000 with no savings in the bank and funds for my retirement accounts. Then,  I learned the tricks on how to get out of debt fast.

Paying off debt is no joke.

When I was buried in debt, I got married and, eventually, had our first baby. There was too much pressure to straighten my life financially for my budding family and me.

Fast forward by 2.5 years; my life has completely changed as I eliminated all of my debt. Yes, free from debt.

Also, I have saved at least $70,000.

Oh, did I say that during those years, I was the only one working?

Just a fact:  According to the Federal Reserve's latest release, the average American household carries around $137,000 in debt.

The story of failure

I was about to graduate from the MBA program when the subprime mortgage catastrophe occurred. I had a couple of interviews lined up from some of the big banking companies in the US.

But they got all canceled.

After graduation, I attempted to apply but ended up not getting a job. It was during that time when my sisters and I built our own business.

The money was good in the beginning. But our business started to tank a year later.

As a result, the business was bleeding money…. a lot of money.

I attempted to revive the company, but all my efforts failed.

In 2013 or 2014, we decided to close the business to prevent from incurring more debt. Though we shut down our business, we were swimming in a sea of debt.

I can’t remember how much was the debt, but my share was around $40,000.

Related posts:

How To Get Out of Debt Fast

Paying off debt is not for the faint of heart. But we found our way out. Here's how to pay off debt fast based on our experience.

Note: When I say “I”, I mean me and my wife. 

1. Figured out how much I owed.

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I knew I owed a lot, but didn't exactly know how much or to what extent.

Here's what I did:

I took a look at my credit report for FREE from Credit SesameFor someone who wanted to know how to get out of debt, this was a must.

It gave me a free credit score.

It laid out my credit history to exactly show how much money I owed and to whom. It even showed me what's causing my credit score to tank.

Here's the result:

The information I got was the one piece I needed to do before making any financial moves.

If you don't know where to start or how much you owe, Credit Sesame is a great option to use.

Click here to use Credit Sesame for FREE to see what's in your credit.

 

2. Consolidated our debts.

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Dealing with multiple credit cards can be exhausting especially when you don't have a lot of money to pay for those cards.

That's our situation before until we took on a personal loan through Upstart.

Some say taking another debt on to pay another is like robbing Peter to help Paul.

This time it's different.

We got a 4.99% APR from Upstart while our credit cards' rates' were between 20.99% and 29.99%.

Upstart paid off our debt. In turn, we paid Upstart a monthly set amount that we're comfortable of.

We saved over $6,350 in interest and penalty over the life of the loan.

Click here to use what a personal loan can do for you. This is how to get out of debt fast.

 

3. Made money from side hustles based on what I was already doing. 

“How To Get Out Of Debt” savings meter: $11,000.00

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As a stay-home wife, my wife took surveys (and I did too when I had time). Between Survey Junkie and Survey Club, she made over $4,000. Not bad for spending a couple of minutes here and there to share her opinions.

If you want to make extra money without leaving home or doing something extraordinary, taking surveys is a good choice.

As with me:

Since we lived in an apartment complex, I helped out tenants to move out or move in and got paid to do that. I also refinished pieces of furniture and sold them for profit.

Between taking surveys, helping out tenants, and refinishing products, we made close to $11,000.

Register here for Survey Club l Register here for Survey Junkie

 

4. Used money saving and making apps.

“How To Get Out Of Debt” savings meter: $3,100.00

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We're open to anything back then to pay off our debt. That's exactly what we did.

True, paying it off with apps isn't your typical debt strategy. In our case, these apps worked.

How?

Since we were using our cell phones, we found a way to make the most out of it by using money-making apps.

While we only made small amounts of money monthly from these apps, this money added up and became big enough to make a big difference in paying off our debt.

Here are some of the apps we used that made us money:

  • Trim – cut our everyday expenses like groceries and utilities
  • Swagbucks – helped us make money by browsing the internet, playing games, reading news, and everything else under the sun
  • eBates – gave out some of the highest cashback offers for just about any companies or online retailers.

 

5. Got into a meal plan.

“How To Get Out Of Debt” savings meter: $6,000.00

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Getting into a tight meal plan was tough but doable and necessary.

Because I wasn't making much, we cooked meals and didn't go out to eat. We bought ingredients on sale and froze a lot of the perishable ones.

We also followed a meal plan called PlateJoy. Overall, we brought our grocery bill from $350/mo to $150/mo – savings of $200/mo.

We cut down our meals costs to around $2.

Believe it or not:

Food expense is the third biggest expense of Americans.

If you're looking to cut your debt quickly, focus on cutting your food expense is a good start.

Start your 100% risk-free trial membership here with the PlateJoy Plan.

 

6. Made payment arrangement with creditors.

“How To Get Out Of Debt” savings meter: $1,200.00

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Penalty, interest, and other fees made me want to puke (seriously).

They're those things that made my family's life worse. We were paying a lot on our debt but that money didn't go to the principal.

I got tired of the situation and wanted to start and finish paying off our debt.

I requested payment arrangements with my creditors.

Fortunately, they agreed. The arrangements included penalty waivers and a monthly set amount I needed to pay them.

Because the penalties were waived, I was only responsible for paying the principal and interest payments.

That's when I decided to get a personal loan to consolidate my debt.

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7. Make big changes in expenses.

“How To Get Out Of Debt” savings meter: $2,820.00

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To pay off debt means to cut down on expenses and put the savings towards… paying off debt.

That's exactly what my wife and I did.

Here's the kicker:

We went to the bare minimum and put almost every penny towards our debt.

We also went on using Trima personal finance app that analyzes spending, finds subscriptions to cancel, negotiates bills, etc. 

Trim saved us over $2,500.

Up to this date, Trim has saved us close to $6,000 – all came from subscriptions cancellations and bill negotiations.

Here's the reality:

We thought we couldn't cut our expenses further, but Trim came in and slashed them even more.

Click here to start using Trim for FREE.

 

8. Got a higher paying job.

“How To Get Out Of Debt” savings meter: $8,500.00

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After applying for over 435 jobs and 23 job interviews, I took a job promotion near the D.C. area.

Yes, I remember those numbers.

Every month for the first six months, we saved about 45% of our net income, and the rest went to debt and monthly living expenses.

Here's what I did next:

After the 6th month, we increased our savings to 46%, decreased our expenses by 1%, and left the debt payment amount the same.

Every month, we would increase our savings rate and reduce our expenses until we couldn’t cut our expenses anymore.

Look:

Back then, when I had a salary raise, I kept the net increase (i.e., income after taxes), which was the difference between my old and new paycheck, between investments and savings.

Up to now, keeping the net increase every time I get a bonus or a raise has been our saving strategy.

Overall, we paid roughly $8,000 using my salary. We saved around $20,000 through frugal living for 2.5 years.

 

9. Changed banks.

“How To Get Out Of Debt” savings meter: $1,200.00

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We changed banks to avoid paying those pesky monthly fees that really didn't do us any good.

I used to earn 0.06% APY on my savings account. But really, I was on the negative many times because of all the fees I had to pay.

We ditched our old banks and switched to CIT Bank. Since 2013ish, we have earned 1.55% APY per year, which is over 25 times the national average of 0.06%.

The reality is:

It's free money for us. The interest money we got easily paid half of our grocery bill monthly. Since there's no monthly fee with CIT Bank, we felt like having it was a double win for us.

The truth is banks should help you make money, and that's why CIT Bank is a great option.

Click here to open an account with CIT Bank.

 

10. Invested in the stock market. 

“How To Get Out Of Debt” savings meter: $60,000.00

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I am passionate about investing, that is, stock market investing.

While paying off debt, I started investing in mutual funds. I started with a $100 monthly investment and put in additional when I had extra money.

In 2013, my investment return was around 23.65%. In 2014, my return was 16.12%.

The returns I got from the stock market increased of my family’s retirement funds and a college fund for my daughter. Thus, allowing us to save a lot in a few years.

Two and a half years later, our investment's value increased to over $60,000.

People told me to focus on paying our debt first. I didn't agree. In short, I made the right decision.

Related tip: If you want to invest in the stock market but don't know where to start and/or how to begin, Acorns is a great option. You can invest as little as $0.01 and your money will automatically be invested in over 7,000 bonds and stocks. Click here to start using Acorns.

 

Final thoughts:

I think what my wife and I did in the first two years was extreme frugality.

We stayed away from even the littlest things that my wife and I call luxury like eating out, buying dresses, buying toys for my daughter, watching movies, just to name a few.

We decided to provide ourselves with needs and ultimately stayed away from the wants.

It was hard especially when we wanted to buy something for our daughter but didn’t want to shell out some few dollars.

This was the sacrifice we wanted to go through in exchange for a better future. That future has come. We have been debt-free since January of this year. All the challenges and struggles are all in the past.

The lessons they’ve given us will always be with us and will be our guide to whatever decisions we will make in the future.

My family has never been in a better situation than we are now. If there’s one thing that came out from this phase of our lives, it is that we’ve become even closer as a family.

That makes everything that we’ve gone through all worth it.

Is paying off debt important to you? Do you think these the tricks I discussed will help you learn how to get out of debt fast? 

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