Ditch the Debt: Our 2021 Debt Payoff Plan

Like most households in America, we have a considerable amount of debt. Whether due to good or poor decisions, over the years, the dollar amounts have crept up and we, quite frankly, are over it. This year, we are hyper-focused on addressing our debt and saying “so long!” to paying a stupid amount of money every month to previous behaviors.

Why 2021?

Why did we pick this year after all the uncertainty that happened in 2020? Well, first, all the uncertainty that happened last year had a significant impact on our income. We oscillated between doing really well to getting creative with financial solutions. Creating an environment where we can be more consistent and stable with our money is key.

Additionally, as you’ll see with the breakdown below, you’ll notice our debt accumulated quickly during the numerous life changes we crammed into the last 4 years of our life. A wedding, a major move and home purchase, two babies via c-section, and starting a business are a lot. Throw in a pandemic and phew! I’m honestly surprised the debt isn’t worse. The good news is, for the foreseeable future, our major life changes are on hold. We don’t plan on moving and our family is complete. Now is the perfect time to tackle those debts before the inevitable household issue sneak attacks us!

Why am I sharing this? It’s so priiivate!

First, I have to say, this is taking a lot for me to share. I’m notoriously private about my finances and in talking about debt, there’s always a little bit of shame wrapped up in it because people judge every decision you’ve made. Let’s just say that we did the best we could with what we had and sprinkled in a few irresponsible decisions here and there. The money is spent and gone – now it’s time to pay it off.

Second, I do want to contribute to normalizing the discussion of finances. Literally everyone on the planet is impacted by financial health. If I could help even one person take a critical look at their behaviors and make a change – then that’s rad.

Finally, to hold us accountable! Publicly discussing our financial journey keeps it top of mind. You all are like one big accountability buddy for paying off our debt. So thanks!

So… what are we working with here?

Okay – here we go. Below is a break down of the debt we currently have. Then I’ll explain why it’s in that order and we’re doing to address it.

  1. Student Loan 1 | $944.22
  2. Student Loan 2 | $1,668.49
  3. Credit Card 1 | $2,757.97
  4. Student Loan 3 | $5,570.79
  5. Personal Loan | $9, 762.52
  6. Renovation Loan | $11,478.99
  7. Credit Card 2 | $19, 692.04
  8. Credit Card 3 | $20,000.00

That makes our total debt $71,117.96. Ouch! Bigger ouch? Our minimum monthly payments plus interest and fees is about $1,900.00. Oof! Such a huge chunk of our budget and it’s honestly quite painful to see those numbers.

What’s the plan?

After crunching the numbers and doing some self-reflection, we decided to do the Snowball Method to tackle our debt. If you’re unfamiliar with the Snowball Method: You focus on minimum payments for all your debts except for your top priority. Once it’s paid off, instead of saying, “Yay! I have extra money!”, you take the payment from that now-gone debt and apply it as an additional payment to your new top priority debt. And so on until all your debt is gone.

So here’s the reality – $1,900.00 a month is a lot, especially since we don’t know what Hank’s job situation is for the rest of the year. So right now the plan is to carry forward 75% of the previous debt’s payment in the snowball so we get a little bit of relief when a debt is paid off. For example, our minimum payment for Student Loan 1 is $65 a month. Once it’s paid off, we’ll only roll $48.75 into the snowball.

We also decided to do the Snowball Method based on lowest amount – instead of lowest interest rate. Why? One, I’m more motivated by substantial progress, so watching debts close out will be more satisfying for me than simply watching the balance fall. Two, I did a debt calculator and we actually will pay off our debt faster and pay less interest attacking the lowest balance first paired with the Snowball Method.

Let’s talk behaviors

  1. Cash Only Purchases: Aside from major life events, we have some habits we need to address. My husband and I are both enablers of spontaneous spending decisions, which isn’t necessarily a bad thing if you’re playing with house money. Unfortunately, quite a few of those decisions have been thrown onto a credit card and not paid off immediately. Moving forward, we’re doing “cash only” purchases. But don’t mistake that for only paying in cash! We’ll be using credit cards to continue to reap the benefits of points, but every week we’ll be paying off our purchases with cash from our account to ensure we aren’t accumulating any new debt.
  2. Meal Plan: We knooow this, but we’ve been so bad at controlling food spending, especially when the littles are having rough weeks. Moving forward, we’re cooking all meals at home except for Friday nights. On Fridays, we’ll order in from a local small restaurant.
  3. Allowing Supplies to Run Out and Buying in Bulk: I’m notorious for buying when we’re “getting low” but the more you buy, the more skewed “low” becomes. We live about a mile from a Costco and have plenty of storage in our house. So we’re going to thoughtfully buy in bulk when items run out.
  4. Do More With What We Have: Want to hear something ridiculous? I have a Cricut Maker and still buy greeting cards at the store. Monthly that alone can range from $20 to $100 in cards alone (my family has a LOT of August birthdays.) We’re going to get more creative about what we already have. Repair more items. Repurpose. Hand make gifts and decor. All the good stuff.

Ultimately, the goal is to wean us off credit cards and move to cash. This doesn’t mean we’re going to stop spending. We’re simply reducing our spending and ensuring it comes from our funds. We’re both pretty impatient people so this is quite the exercise for us.

How am I tracking all of this?

Over the past few years, we’ve absolutely fallen in love with You Need a Budget. I truly believe that without You Need a Budget (or YNAB) we would be muuuch further in debt than we are. So we’re continuing to use the platform to stay on top of our bills, plan for annual charges, memberships, and events, and even get ahead on our monthly obligations.

A little plug for You Need a Budget: YNAB works like a digital cash envelope system. However, instead of having a bunch of cash lying around or 10 different debit accounts to divide up your funds, YNAB allows you to create categories to allocate your funds. Your money stays put in your bank accounts, but it changes the way you see it. Instead of one bulk amount of money (“oooh, look at all my cash!“), you will see line-by-line how much money you have for specific bills and activities. To keep you consistent, YNAB allows you to set goals for each line items, so whether you have a consistent bill (like rent or mortgage) or something you want to save for over the year (like Christmas gifts), YNAB allows you to set a goal and tells you when you’ve met it. In a nutshell, YNAB enables you to be proactive about your budgeting and spending. You can get a 34-day free trial here. If you use this link and end up buying a subscription, you’ll get another month free – and I’ll get a free month too!

But that’s not all we’re doing! I’m highly motivated by progress visuals. So we made this:

It hangs in my office so I’ll see it every day. As we pay debt, the thermometers will fill until they are paid off and the letter at the top gets filled in. I’ll be sharing my tutorial for this soon!

A few other notes…

In the spirit of full transparency, here are a few other things that will impact our debt pay off journey.

  1. Hank’s future job situation: We may be able increase our debt contributions based on Hank’s income and not paying out of pocket for health insurance.
  2. Etsy Sales: My cross stitch pattern business is doing quite well and producing little nuggets of funds. We’ve decided that 25% of all sales will go toward debt payment. What about the other 75%? Good question. 25% goes to business overhead (website, softwares, supplies), 25% goes to fun money, and 25% goes to a travel fund for a future Disneyland trip.
  3. Extra Business Income: In my primary business, I have a number of ways to make extra money, including doing coaching, VIP days, and shop sales. 50% of all these activities is going toward debt payment. So, if I want to be a crazy person, I can really go after it!

Here we go!

So that’s it! Every week, I’ll be reconciling our budget, paying any new credit card charges, and sending any extra Snowball funds to our top priority debt. Then on the first Saturday of the month, I’ll be doing a recap of the previous month, including how we did, any major updates, and updates on our totals.

Have you tackled your debts? What tips do you have for me?

Until next time!


13 thoughts

  1. I have made debt payment a high priority in 2021. I will be paying off the house this year and then focusing on my credit card debt, which is mainly an accumulation of large purchases like big car repairs, a storage shed, stuff like that. I currently put $2000 toward debt each month. I have the following:
    CC- 628
    CC- 604-all medical
    CC- 13093

    At $2000 a month, even adding ongoing medical costs I plan on having it all clear by the end of 2021. I am so excited to get there. Mind you, I have less time in my life to pay things off and a limited income so I have to get serious!! I am also using the snowball method because it works for me as well.

    My other BIG goal is to create a book with all info in it on what has to be done if something happens to either one of us, or both of us. I need a roadmap for that with all account info and log ins etc. We have a trust but this book would tell how to deal with it. Then I could sleep better knowing I left someone prepared.

    Thanks for sharing!

    1. Thank you for sharing! I love the idea of having an “In the Event of…” book. I prepared similar documents leading up to both c-sections with the boys and it gave me so much less to worry about it. It also allows you to stop worrying about all the things you need to remember on a regular basis too. Then you can just update it once a year or so. Love it! Good luck with the debt payoff!

  2. Good luck with yours as well! Mind you, if something did happen to us we have enough in retirement investments to pay the debt off so no one will be saddled with that. The book will be handy for you as well when our time is up… I’m sure you’ll be knee deep in the the resolution of our affairs. I feel like I have lots of time left to live but I will worry less about leaving a mess for someone else.I don’t want anyone hating me for that. 😊 and…I can enjoy my hobbies much more. 🧵 🧑‍🎨 🎨

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