Before 2000, most people had some savings in the bank and only borrowed money if it was for something important, like a car or a house. But with wages falling flat for the past decade and a half, that’s all changed. In recent years, interest rates have fallen, and more and more people have access to credit than ever before. It’s led to a vicious cycle of falling wages and increased debt to make up the difference.
Last year, total household indebtedness in the US reached more than $160,000. That’s the highest it’s been in history and higher than it was before the financial crisis of 2009. Many economists and professionals chalk this up to the fact that households are getting richer so they can afford to take on more debt. But the data simply don’t back up such statements. The real reason people are going into debt is because they can’t make ends meet.
Now, though, some people have said that they’ve had enough. They’re taking action to reduce the amount of debt that they owe and regain control of their finances once more. Here are their inspirational stories.
Bridget Casey Eliminated $20,500
Bridget Casey is a 27-year-old woman from Canada. Her debt problems began even before she started work while she was at college. In just a couple of years, despite having a part time job, she managed to rack up more than $20,500 in college debt. Not only did she have to pay for tuition fees, but the accommodation in the city in which she was studying was also very expensive.
Casey made a decision early on that she wanted to get rid of her debt as soon as possible. She decided that once she left college, she would pay off as much as she could every month. She was worried that if she didn’t pay off the debt in her twenties that she wouldn’t have enough money saved up when she retired. Casey says that saving all that money and paying off huge balances every month involved a lot of sacrifices. But the pain was short lived. Within two years, the debt was gone, and Casey was back on her feet again financially.
Life after debt, she says, is amazing. Now she’s got enough money leftover to spend on what she wants. She got so used to being frugal while she was paying off her debts that now she feels like she’s living like royalty.
Wendy From Vancouver Paid Off $50,000
Wendy is another victim of the price of college. She had to pay tens of thousands of dollars in college fees for a course that wasn’t worth much to her career prospects. Her story is similar to one recently featured on TFI where a couple racked up enormous amounts of debt. Wendy’s problems began after her decision to do not one but two bachelor’s degrees. After six years in college, she had racked up more than $45,000 in student debt. However, that money had just gone towards her tuition. Wendy also had to pay for other things, outside tuition fees, like clothing and bills. As a result, she also accumulated an additional $13,000 of credit card debt.
Wendy, who is now 29, decided that she had to take on her debt head on. She made some dramatic lifestyle changes that helped her beat a significant portion of her debt. For starters, she took the highest-paying job she could. By increasing her income, she was able to pay off more of the total balance every month when she got paid. In addition to that, she also took on an extra roommate to help share the cost of rent. This reduced the rent she was paying from 31 percent of her total income every month to just 19 – a far more manageable amount. As a result, she was able to pay off a staggering $7,000 in just six months.
Johnny Moneyseed Paid Off $60,000
Johnny Moneyseed started off in life at the bottom of the pile. He began his working life in low pay jobs in the fast food industry. Always wanting to be in the middle class, Johnny began taking on debt to buy things he couldn’t afford. He wanted a better car and a brand new television, even though he couldn’t really afford those things on his income. He took out all sorts of personal loans and credit card loans, but ultimately he found himself drowning in debt.
He decided that to improve his finances and pay off his debt, his best bet was to join the military. He soon met his new wife and settled down in life and realized that there are some things in life that you just “need” like food, water, and shelter.
Paying off his massive $60,000 debt was a tall order for Johnny and his family. A lot of the debt was in the form of high-interest loans, meaning that the total payable debt was racking up quickly every month. Johnny decided to use online debt calculator tools to figure out exactly how much he would need to pay off the debt over a period of seven years. He and his wife came up with a plan for how much they would have to set aside every month to pay it off. They also hatched a plan to try and get most of the money back by selling some of the stuff that Johnny had bought that they didn’t need. In fact, their whole lifestyle changed. They learned to cook cheaply, instead of eating take out every night. And they swapped out their expensive pay-as-you-go cell phones for a family plan that saved them money every month.
Mario Faced Down His Massive $162,000 Debt
Imagine being more than $162,000 in debt. That’s the situation Mario from Brooklyn found himself in after losing money in the New York property market. Back in 2013, he found himself in all sorts of debt problems. He had over $300,000 in mortgages outstanding, over $100,000 in student debt and more than $35,000 in credit card debt. On New Year’s Eve that year, he decided that things had to change and that he had to find some way of extirpating himself from his debt troubles.
His first New Year’s resolution was a promise to himself that he’d pay off his mammoth credit card debt first. He achieved this, and two years later, he began working on whittling down his student loan. Since the beginning of the year, Mario has been paying down more than $3,000 a month, using the money he’s made from the property market.
Mario has also been honest with himself about how he got into so much debt in the first place. He was a victim of so-called impulse buying, just grabbing stuff that he wanted and worrying about the financial consequences later. Now he’s turned that damaging spending impulse into something much healthier. Instead of getting impulses to just buy out an entire store, he now gets impulses to pay off more of his student loan.
Mario has found it helpful to track his efforts through his blog. This, he says, helps to make him more accountable and also acts as a form of inspiration for others going through similar circumstances. He says that he has now got his total debt down to just $139,000, meaning that he’s paid off more than $100,000 since he started. Mario shows that even if you have a big debt, you can still pay it off.