How We Paid Off $20,000 Debt In 5 Years On $22,000/Year Income

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Paying off debt can be a daunting thought, but its’ easier than you think. We paid off $20,000 debt when our income was just $22,000 per year. Here’s how we did it.

How We Paid Off $20,000 Debt In 5 Years On $22,000 Per Year Income

Tawra’s Debt Reduction Story: How We Paid Off $20,000 Debt In 5 Years On $22,000 Per Year Income

In 5 years we paid off $20,000 of debt and medical bills on an average income of $22,000 per year. We didn’t have $20,000 debt when we were married. My husband had $3,000 in credit card debts at the time. Over the 5 years we made 2 major moves, killed 3 cars, and our daughter was born and placed in Neonatal Intensive Care (the insurance paid all but $7,000 of her bills). Click here to see the list of debts and payments.

During the first five years we were married, our income averaged $22,000 a year. The first year we earned $13,000 and steadily went up to $28,000 in 1999. We paid off $10,000 in debt and medical bills in 1999, so half of the debt was paid off when we were earning the most money. You may wish to see our budget from 1999 (before my husband was laid off).

Our basic living expenses were $18,000 in 1999 and we paid the rest toward debt payoff. We also used any extra money we received like income tax returns (usually a few hundred dollars) gifts of money, etcetera to pay off debt rather than splurging on things we wanted. What it boils down to is we nickel and dimed our way out of debt. First we made up our minds that it had to be done. There never had been another option for us — we HAD to figure out a way to do it. (I am disabled with Chronic Fatigue Syndrome so I can’t work a regular job even if I wanted to.)

One of the ways that helped us the most to pay off the cards was to transfer to other credit cards with low interest rates. I transferred every six months (or whenever the good rate expired.) I only paid 9.9% for 3 months once in 5 years. Otherwise I have never paid more than 6.9% and the last 2 years (1998-99) were 2.9% and 3.9%. We went from paying $100 a month in interest to $15 a month in interest. Then we paid the other $85 that we saved each month to pay down the principle.

We kept paying the same payment, which was then more than the minimum but we had a lot more money going to principle. We don’t eat out a lot. I spend $250 a month on groceries and I don’t buy my kids a treat every time I go to the store. We don’t go to a lot of movies and we don’t buy a lot of things. We drive 10-12 year old cars. All the kids clothes and toys are from garage sales (and we still get many Baby Gap and Baby Osh Kosh). Many garage sale kids’ clothes have only been worn once or twice. It is a lot of work finding the best ones, but worth it for the savings. We also purchase most of the kids’ Christmas and birthday presents at garage sales. Right now they don’t care, but when they are older we plan to get them one new present and then fill in with garage sale finds. Paying off debt or saving money is all a matter of priorities.

You decide what is more important to you. Some people use disposable diapers. I use cloth diapers. It is more important to me to pay off my debts and house than to have the convenience of disposable diapers. (Personally, we don’t mind using cloth. In fact we like them.) We all choose how to spend our money. We choose to go out to eat, we choose to have cable, we choose how many and what kind of gifts to buy our kids, we choose how we buy groceries and we choose if both spouses will work (and the added expense that goes along with both working.) It’s not the big things so much as all the little things that add up.

If we want to go to a movie we do occasionally and we do go out to eat for birthdays but these are TREATS, not the norm. I almost always figure how many hours my husband will have to work in order to pay for something. I would rather save money and have him home then to have him gone to pay for things we don’t need. An example would be if it costs $100 for an item, is it worth him working 12 hours to pay for that item? If the answer is yes, then great but if it’s no then we don’t purchase it. The trick is you have to figure out how to live on less than you earn.

There is no magic bullet that will make your debt go away overnight or your savings rise like a wild day on the stock market. It is a long process of nickel and diming your way to savings. How quickly you get out of debt depends on how many extras you are willing to give up. The thing is that some people don’t want to give up those things. When the stress of having debt or no savings is more than the stress of giving up the things that you want, then it will motivate you to pay off debt or save money in these ways.

If it is more important for you to save money than to spend it you will find a way. Amazingly enough, when you really get into it, you find that many of the things you “needed” yesterday aren’t quite as important today. Even my self proclaimed “formerly spendthrift” husband says I have ruined him because now he can’t bring himself to spend his Christmas money from the family on this or that because he might find something else of greater value to him later. -Tawra


After posting this article in the newsletter recently, several readers wrote asking about our debt reduction story and our current budget.

Yes, our first big debt reduction was in 1999, but the principles still apply today. Some readers noted that the prices cited in the article were lower than the prices today. The point of the story was not to cause people to dwell on the details, but to understand the thought process that goes into getting yourself out of debt. (By the way in 2010 prices aren’t really higher.)

One point I really want to make clear is that no matter where you live you can always find ways to save. We have noticed that as a general rule, the more expensive an area is to live, the higher the average wages. Some readers scoff at the fact that we “only” pay $890 a month on our mortgage, when their mortgages are higher, not considering that the same job here in Kansas that paid my husband $35,000 a year would pay him $100,000 in New York or LA.

We like to encourage skeptical readers to stop finding excuses for not getting out of debt and just do it. If it means you need to move, do it. If it means you can’t pay for your kids college, then let them pay for it. If it means cutting the cell phone, cable, eating out and extra activities then cut them.

We got out of debt because we worked really hard and did without a lot of extras. We chose to do it so we wouldn’t have the burden of debt on our backs, I could stay home like I wanted to do and we could have peace in our family instead of the strife that goes with poor financial management. If you really want to get out of debt and you can barely pay your minimum payments, then you can either find things in your spending that you can cut and cut them or get another job.

If you often wonder where all of your money goes or if you need a more frugal mindset, check out Dig out Of Debt and learn more about how to keep more of your money.

Read debt reduction part two here.



  1. says

    Terrie, I was married in 94 but I think $6,000 would still be on the high side. It does depend on how many people and how fancy you do your “cheap” wedding. It also depends on how much willing you are to do the stuff yourself and look at yard sales and thrift stores for wedding stuff.

  2. C.M. says

    In response to your cover story where “Sally” feels that your mom lives in too nice of a house to be “frugal”.

    I am sorry she has to defend what she has. Though there’s 10 of us in our family, when someone comes over and sees our home, they wonder the same thing and how we can afford it. But I always say, “My husband has worked hard for this, and we have “chosen” to spend our $ wisely; buy second hand ‘everything’, no cell phones with contracts, no fancy internet plan or tv plan…..etc. Just like you we have ‘chosen’ to purchase wisely, so we could afford a nice country home for the family to really live in and enjoy. It’s all about making the proper choices. We are almost debt free (just finishing off the car loan) and loving the freedom of it. In this economy family and friends are more open to second hand stores and the frugal life style. If they would have done that 20 years ago, they’d be free too!

  3. says

    In response to Sally’s Article 3/29/11, We believe that was an insult calling you Cheap with Poverty mindset when in fact, Priorities have to be set to work toward. Poor people can Save by cutting back on things they don’t actually need and not buying things they can’t Afford. Some folks want everything, House, Car, expensive Clothes & Haircuts, Manicures, etc. at the very start and go into Debt to achieve this. It takes persistance, many long hours and Years of HARD work to become Debt-Free and be able to Afford a comfortable Life Style. As Mike & Tawra say, they worked together to become Debt-Free, as we did in our 60 years of Married life. Life has challenges we
    must all face, but we do make it through with Hard Work,
    Persistance and Faith.

  4. Christine says

    Our mortgage is the same as yours; a few cents under $890. When we bought our house we spent 87% of the amount the bank was willing to lend us .. .. .. it was a really good decision; kind of a safeguard for when things were tight.

    A year ago we went from a monthly payment to an every 2 weeks payment. In addition, we add in an extra $100 with each half payment to go towards the principal. This approach to our mortgage is making a difference we can actually see

  5. jan says

    Good ideas here! Thought I’d add that … when you use only cloth diapers it is easier to potty train early! Cloth diapers are not so comfortable when soiled. The child is well aware of exactly when the discomfort happens and much more eager to stop doing things that way. So you also save with a shorter time of diapering too.


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