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It’s been an interesting few years since my husband and I started dating. One of the biggest change has been our finances. We’ve managed to pay down our debt, save for emergencies and mutual goals, and bought a house.

I’m really proud of what we’ve achieved with reducing our debt. To give you an idea of the progress that has been made, I want to share the starting point for the debt reduction plan.

  • Credit Cards ($2,500 approx): I threw out some of my old credit bills, but looks about right. I had 3 credit card accounts and for two of them I went over the limit, which incurred even more fees. I should point out during this time I was a college student working part-time which meant my credit card debt was much higher than my small income could handle.
  • Car Loan ($10,000 approx): I bought a car for about $10k at an interest rate of 13.75%. I think the interest rate and the fact they wanted a co-signer should’ve clued me in that the car wasn’t in my budget.
  • Student Loans ($24,000 approx): I was amazed at how much money was used for college. I made some stupid financial choices and this loan could’ve been much smaller (about a 1/3 less easy). We all have to accept responsibility, so now it’s something to be tackled.

Since this is on Couple Money, I starting around the time we got engaged until today.

First Down Credit Cards

One thing that helped me as I was paying down debt was getting work that paid better hourly wages than the norm for college students. I had worked at a doctor’s office handling insurance payment problems that offered flexible hours and offered performance bonuses.

I also applied for an internship that would not only provide hands on training and mentoring, but had better wages than anything offered on and around campus. It meant working hard and learning new skills quickly, but the increase in my income was appreciate and redirected to paying down debt.

How Paying Off Credit Card Helped My Credit Score

Besides having less monthly payments to make, paying off my credit cards has helped my credit score rise up. How?

  • Debt Payment History: The biggest factor in determining (and improving) your credit score is your debt payment history (35%). Do you pay all your credit card bill and car loan payments on time? Having a  late or missed payment on your credit report  can have a big negative impact on your score. Use online bill pay to automate your debts and eliminate late payments.
  • Debt to income: Your credit score also consider how much debt you have with your income. This is why eliminating even one small debt this month can be helpful.
  • Amount of available credit: Believe it or not, approximately 30%  is based on your available credit. If maxed out or closed to maxed out on your credit cards, you need to quickly get into financial shape.

While I’m not obsessed with my credit score, it has played a part in our financial lives. If we didn’t pay off the credit cards and the car loan before applying for a mortgage a higher score would’ve increased our interest rate. That not only  would have hurt us on a monthly basis, but it would’ve meant tens of thousands more dollars over the life of the loan with the interest payments.

Car Loan Eliminated

Once we were married and figured out our combined budget, we set a goal of paying the car loan off early. With limited budget, here is a brief review of how we paid the car loan off quicker.

  • Examined our budget line by line. We looked at what was necessary and what was important to us and we;ve kept that in. everything else was reduced or eliminated.
  • Shopped around for the best deals. We looked at what companies could take care of our needs at the best price. We compared cell phone companies, cable options, and even car insurance to trim our expenses.
  • We had cheap fun. We looked for happy hour deals around town and met with friends then. We had potlucks which meant stepping up our cooking skills a bit.
  • Snowflaked payments. Our tax refunds and stimulus check went to lower the principal.

Future Car Plans

What are we doing now to prepare for our next car? We’ve started a car replacement fund and we’re hoping to save and additional $5,000 this year. We’ve set up an automatic deposit of $400 each month for the car fund.

Working on Student Loans

As of today, we have one consolidated student loan between us and its our only non-mortgage debt left. We’d like to pay down our student loan principal by $3,000 this year.

To keep track with our higher priority goals, we’re not going to change our monthly payments. Instead we’re focusing on setting aside at least 50% of big and small windfalls through out the year towards paying down this debt.

Thoughts on Debt Reduction

Looking for strategies to reduce your debt? Please check out my debt reduction tips I’ve used as well as some strategies that have worked for other people. How much debt have you’ve paid off so far? What are your debt reduction goals for this year?

Photo Credit: Drewski Mac

About Elle Martinez

Elle Martinez helps families at Couple Money achieve financial freedom by sharing tips for reducing debt, increase income, and building net worth. Learn how to live on one income and have fun with the second..

11 comments add your comment

  1. This is huge progress Elle! Congrats! It’s nice that you took the time to analyze your credit score as well. We sometimes don’t realize how much influence it can have.

    • We didn’t realize how much it helped until we were going through the mortgage loan process. So happy we got a lower interest rate 🙂

  2. Wow Elle! It’s amazing how fast the debt can melt away once we put our minds to it eh? Great job!

    • Thanks Matt! The baby on way is lighting the fire even more to get out of debt 🙂

  3. Congrats Elle, you have made some fantastic strides since starting here. I found that blogging is a way to keep me on track since I have to report back lol same for you?

    • Yes Evan, blogging has been a big help! Just reviewing our account regularly for the site, keeps me aware of what’s going on. I’m hoping blogging will help us reach our goals for this year.

  4. Congrats on your successful debt reduction! I know all too well how difficult this can be. I posted some tips on credit cards on my fledgling blog; thinking about trying out yakezie myself. I’ll keep reading your blog!