Amanda Colby relishes the simple things in life.
With winter in full swing, that means plenty of cold-weather daytime activities and cozy nights at her home in Boston.
Really, for 27-year-old Colby, it's all about embracing the basics—a concept she and her boyfriend are using to dig out from under almost $200,000 of collective debt.
So how exactly does a young couple rack up—and then start hacking away at—such a high debt figure?
For this duo, it involves perseverance ... and some ingenuity.
We sat down with Colby, a marketing manager, and Josh Wimble, a 27-year-old chemical engineer, to hear more about their path to financial freedom—like how they wiped out nearly $6,000 of credit card debt in just six weeks.
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Then we tapped Certified Financial Planner™ (CFP®) Amy Lauber of Lauber Financial Planning to weigh in on their strategies—and even offer up some added financial moves the couple may want to consider.
Where’d That Crazy Debt Come From?
Amanda: Like so many young people today, our debt journey began with student loans.
When I started school in 2007, my tuition was mostly covered through a combination of merit scholarships, need-based aid and federal loans. A few years in, I enrolled in the university’s dual degree program to get my bachelor’s and master’s at the same time, thinking it would be an awesome deal.
What they didn’t tell me is that you lose your financial aid eligibility once you hit your fifth year. When I got the bill for an extra fall semester, I was floored—so much so that I crammed a year’s worth of courses into a few months just to avoid another $25,000 semester.
By the time I graduated with two degrees, I had $88,000 of student debt to pay.
Josh: My student loan story is similar. I declared a double major, and because of the heavy course load, I ended up staying for an extra semester, which also wasn’t covered under my university’s four-year financial aid plan.
That semester cost $28,000—on top of the other loans I already had.
Amanda: And it didn't get better after we graduated. In 2013 we made the leap to move in together, and got a joint credit card with the intent to use it to cover household expenses.
However, having that plastic opened the floodgates to more spending—getting dinner with friends, going out for drinks, you name it.
Josh: The credit card became a good way to not have to say no to anything. We even splurged on a trip to France two years ago that we couldn’t afford.
Amanda: At its highest point, our balance got up to about $5,500. That’s when we knew things had to change.
A Look at Amanda & Josh's Financial Picture
How We Started Hacking Away at Our Debt
Josh: I took a page from a side gig I had in college working for a moving company to make extra cash—and began working for them on the weekends. Plus, whenever I'd hear about coworkers who needed a mover, I'd offer to help them out. Any money I made from my moving work went directly toward our credit card debt.
From there, it snowballed. People started recommending us to other friends—and the referrals kept coming.
Amanda: To really max out the gig, we had to get organized.
Most Boston-area leases are on a September 1 schedule, so [last] year we preemptively reserved a few trucks for the September 1 weekend, hired friends who’ve worked for moving companies, and advertised online.
That weekend we made about as much as we had in credit card debt—and wiped out our full $5,500 balance in six weeks, thanks to our moving gigs.
As an added benefit, we've furnished almost our entire apartment with freebies from jobs, including a dresser and bed frame.
Josh and I have also found a lot of other little ways to save money, so we can further pay down our debt.
I moved banks from one that had a .01% savings interest rate to one with a 1.5% rate. And I switched gyms, cutting $80 a month on my membership.
We also chose a new electricity provider that offers clean energy alternatives at a cheaper rate, cutting our bill nearly in half to $29 last month. We even changed our cell phone plan from 6GB of shared data to 3GB, which brought our bill from $140 a month down to $113.
Josh: That’s an example of how it’s easy to use something that costs extra just because it’s available. When we had a phone plan with more data, we relied on it when we could have easily connected to a Wi-Fi network.
It’s not a hard adjustment—it’s all about being conscious of making the change.
Amanda: That’s actually the concept behind our household “ban on lazy”—we return items we don't like, bring leftovers instead of buying lunch, and always look for a deal before we do anything.
"My ultimate goal is to pay off my $77,000 chunk of student debt before I turn 30—so in just about [two] and a half years!"
One Debt Down … Plenty More to Go
Josh: The main goal is for us to have the financial security to fund our future dreams. In order to get there, we still have a mountain of debt between us.
Amanda: Combined, we owe about $180,000 in student loans. That sounds like a lot, but we're both ahead of schedule on our repayment plans.
I have four private loans and one consolidated federal loan. They range from 3.75% to 7.75%.
The one with the 5% interest rate only has $1,900 left on it, so I’m targeting to have that paid off first. Then I’m going to work on paying off the 7.75% one, which is my largest private loan.
My ultimate goal is to pay off my $77,000 chunk of student debt before I turn 30—so in just about [two] and a half years!
We're also getting our money act together for another big goal: buying a home.
In Massachusetts, first-timers can buy a house with only 5% down and not face PMI or mortgage insurance, so we’re saving up $15,000 for a down payment on a $300,000 house.
I’m putting $100 a month straight from my paycheck into savings for this goal, but I’m hoping to get that up to $300 a month now that the credit card is paid off.
Josh: I’m also taking advantage of the first-time home buyer’s 401(k) withdrawal my employer offers to put toward the down payment.
What the CFP® Says About the Debt-Crushing Duo
Amy Lauber: I really admire this couple for being honest, creative and committed—they’re well on their way to achieving their goals.
I suggest Amanda and Josh tackle savings at least as vehemently as paying off debt, because lack of savings could create more debt.
I’d like them to have at least $11,000 in an emergency fund to cover about three months of living expenses. This way, they can make purchases without having to turn to credit if there’s a change in employment, an illness or an unexpected expense.
Once their emergency fund is at a better place, they can then consider putting savings toward the down payment—but it should be at least 20% of the home price, or $60,000.
At $600 per month, it will take them years to accumulate this deposit—but it's the prudent way to go. Buying too much house is one of the main reasons I see people living beyond their means and being unable to save for retirement.
Also, I'd really prefer Josh not take a 401(k) loan. It’s hard enough to save—why thwart that effort and add to debt?
If the 401(k) loan isn't repaid on time, it’s considered a withdrawal and is subject to income tax. Also, because they’re under age 59 ½, there's a 10% penalty.
Regarding the student loans, if Amanda pays about $2,000 per month, she should have them paid off in her desired timeframe. A good strategy, in general, is to tackle the highest interest rate loans first. But if she has loans with similar rates, she can pay off the smaller balance first to help add momentum.
They should also consider consulting with their tax adviser to ensure they are receiving any income tax deductions available to them for the student loan debt.
One additional goal Amanda and Josh should consider is ensuring they have adequate health, life, and disability insurance coverage. While most employers offer all three, people can and do change jobs, which could leave them uninsured.
LearnVest Planning Services is a registered investment adviser and subsidiary of LearnVest, Inc., that provides financial plans for its clients. Information shown is for illustrative purposes only and is not intended as investment, legal or tax planning advice. Unless specifically identified as such, the individuals interviewed or otherwise listed in this piece are neither clients, employees nor affiliates of LearnVest Planning Services and the views expressed are their own. Please consult a financial adviser, attorney or tax specialist for advice specific to your financial situation. LearnVest Planning Services and any third parties listed, linked to or otherwise appearing in this message are separate and unaffiliated and are not responsible for each other’s products, services or policies. LearnVest, Inc., is wholly owned by NM Planning, LLC, a subsidiary of The Northwestern Mutual Life Insurance Company.