Category Archives: Personal Testimonies

1999: $60,000 in Debt, No Ph.D. in Physics, a Drop-out. 2004: Debt-Free

Bill Corley

In January of 1999, I had withdrawn from a graduate program in theoretical physics with no Ph.D., no savings, $70,000 in debt, no marketable skills and no idea what to do next.

I had gotten a job working for Dell Computer doing phone-based technical support (back when 100% of their employees were in the Austin, TX area). The job paid $13 an hour, which (at full time hours) was more than I made as a graduate research assistant, but utterly inadequate to pay back the debts ($55,000 in student loans and $15,000 in unsecured credit card debt) I had piled up.

I considered bankruptcy, but soon realized that student loan debt is basically non-dischargeable.

Today I make $140,000 a year as the Chief Information Officer (and junior partner) of a privately-held architectural and civil engineering design firm. I own a home with a reasonable fixed-rate mortgage payment, have no debt (besides the mortgage) and ~$100,000 in cash and retirement savings. In short, in ten years I was able to turn my net worth from -$70,000 to + $150,000 without gifts, lottery winnings or speculation of any sort.

What made it possible was a change in mindset. I remember the exact instant when it occurred. I was sitting on the stoop of the porch of the house in Austin I rented with 3 other people, having just concluded that bankruptcy wasn’t going to work, and realizing that there was no one who could help me, so I would have to figure out how to help myself.

I began by cutting up my credit cards, purchasing Quicken and tracking every penny I spent. I then used the threat of default to negotiate lower interest rates and (temporarily) lower payments on my credit card accounts and got a 1 year forbearance (interest continued to accrue) on my student loans. These moves allowed me to begin to accrue cash savings, which, together with a yard sale in which I sold most of my possessions (including my car), gave me enough money to leave Austin and move to Boston, MA, where I had friends (fraternity brothers) from my undergraduate days.

My cash lasted long enough to secure contract employment doing Y2K system upgrades, and, through that, ultimately land a full time job as a systems administrator for the engineering firm I currently work at. For the first time in my adult life, income — expenses > 0, even when I resumed paying down my debt. This is when the second stage of my personal economic recovery began, because I made another decision: not to increase my spending. For the next five years, I dedicated all of my excess cash to debt repayment. With each raise I received, 50% went to debt and 50% went to cash savings, until I had six months expenses saved. Then that portion went into a 401(k) plan. All that time, I took the subway to work, walked to the Laundromat to wash my clothes, and pushed a cart back and forth to the supermarket (a mile away) to avoid buying a car.

In November 2004, I was debt-free, had six months of expenses in the bank, and $25,000 in a 401(k). I was 33.


A Seven-Step Solution to $75,000 of Debt and $2,000 a Month Child-Supprt Payments


Several years ago, I found myself in the unenviable position of being newly divorced, paying off a mountain of credit card debt accrued during the marriage, paying child support, and being the owner of a losing business enterprise.

I was in the health care field, so I had an income, but my debts were so massive that bankruptcy was not only a viable option but was recommended by my attorney so that I could “start fresh.” All in all, I owed in excess of $75,000.00 in credit card debt, $2000.00 a month in child support, mortgage payments on a mobile home where I was living and the usual sundry living expenses. My minimum consumer debt payments were in excess of $4,500.00 a month.

I had never considered myself a spendthrift, but these circumstances forced me to take a hard look at myself, my standard of living and the options available. I really did not wish to enter bankruptcy mainly as a matter of pride, but I needed to be realistic. So, one might call this story the guide for the newly single.

Regarding expenses, the single most important concept in curtailing everything was embracing “do it yourself.” I don’t mean handyman type issues — I refer to all the aspects of daily life one takes for granted, especially men. So, in a list fashion:

1. ISSUE: Food, Meals and Dining. SOLUTION: Buy groceries, and learn how to cook. While this may seem obvious, aside from grilling, very few men know how to cook foods from staples, or even cans. Rice, beans, flour, corn meal, pasta — all of these can be bought extremely cheap, and if portions cooked are doubled, can be saved as left-overs. Cooking the basic staples is a no brainer — anyone can read the bag, boil water and time the simmering (buy a $2.00 ding timer). It just takes more time than heating an instant meal in a microwave, but costs 1/10 as much, but some need to be prepared overnight. Canned goods are cheaper than frozen. Used cookbooks can be had for a couple of dollars — sometimes free at garage sales and flea markets. Not Julia Child but ones like “one-dish meals” or “My first cookbook.” Embarrassment needs to take a back seat to learning. Daily take-out and restaurant meals need to be substituted for brown-bag sandwiches and fruit. Simply decline the offers at work to go out. Use refillable water bottles from the tap and bring a Thermos for coffee — it all adds up to substantial savings. Ignore the comments (if any) and remember that all of this adds to your debt repayment.

2. ISSUE: Dry Cleaning and Laundry. SOLUTION: Do your own laundry. Buy soap, read a few articles and wash everything except white underwear and towels in cold water. If you don’t own a washer/dryer, get quarters and go to a laundromat. Buy an iron and cheap ironing board at a discount store, both for under $10 each. Buy spray starch and experiment — you will amaze yourself how fast you will get good at getting nice crisp shirts. For suits that MUST be dry cleaned, do they really need to be cleaned, or just pressed? IF they are not dirty, just wrinkled and do not smell, the price of a pressing is much cheaper than a full dry clean — just ask for the service. Push your case and they will agree to it. For house work, a cheap vacuum cleaner, a bottle of all purpose cleaner and some rags will do you fine for 90%. Get a toilet brush and use it for maintenance. Scouring powder or Soft-Scrub for the hard areas.

3. ISSUE: Entertainment. SOLUTION: Stay at home and watch free TV, Cable, or cheap $1.00 movie rentals (check the grocery store offerings) or if you get a deal from Netflix. Go to the library, the park or free concerts. If you are truly hard-up, this is the one area where substantial savings can be realized, not only from not spending retail for movies and going out, but the gas etc that gets you there. Inevitably dating comes up — try to find a sympathetic person who will respect your plan or maybe needs some help themselves in cost management. My current partner embraced these concepts from the beginning after a frank talk and we are both completely out of debt because of it, albeit some years later. And neither one of us missed the dates at expensive restaurants or other venues, and simply enjoyed each other’s company.

4. ISSUE: Transportation. SOLUTION: Sell the expensive car if you can and buy a reliable, used, gas-frugal vehicle. Many men place great personal store by their cars but you just need to get over it (think what a bankruptcy on your record will do to your ego.) Four wheels and an engine is all you really need, if it is well maintained and costs less.

5. ISSUE: Buying retail. SOLUTION: Cut coupons from the newspaper. Look for sales and stock up when prices are cheap. Shop on double-coupon days. Use the internet to find deals. Check on eBay, flea markets and garage sales for staple appliances or other items but buy only what you need. Use LISTS and try not to impulse-buy. Sign up for email notices from grocery stores and discounters. Check out for online coupons for various online retailers — frequently you can get free shipping or discounts up to 20% or more just for looking. Use to price compare new items at various retailers. NEVER be afraid to haggle — you never know when they may say yes or get you more value for your money.

6. ISSUE: Existing monthly expenses. SOLUTION: Find all ongoing expenses and try to cut them out. Do you REALLY need all those magazine subscriptions? Do you have ALL the premium cable channels or can you do with one (or none & watch free cable?) Do you actually use that gym membership daily or is there a YMCA near you? Do you belong to music clubs, XXX of the month or other unnecessary recurring expenses? Cut them out, go to the library, sign up for free blogs or e-newsletters, look for free alternatives.

7. ISSUE: Debt Management. SOLUTION: Pay off your lowest balance items first. I certainly will not try to take credit for this concept as I have seen versions of it for the last 20 years, but I have to admit that it does work if you discipline yourself. The biggest hurdle to getting started is usually the overwhelming sense of the “bottomless pit” mentality — the sense that you will never dig yourself out. Getting rewarded by being able to eliminate one payment every so often is a powerful motivator and kept me going. The way to start is to get a copy of Quicken or Money (now they have free online versions at etc) and enter ALL your finances, no matter how mundane.

Categorize EVERYTHING, including what is spent as cash (be prepared to get shocked over what you REALLY spend for fast food or other unnecessary expenses.) Use the software to create a monthly budget and stick to it no matter what — if you run out of money for a specific category in a particular month, don’t borrow from another but do without if you can until the next month.

Don’t forget to budget for quarterly or yearly payments such as taxes or insurance. Also budget for contingencies such as repairs and emergencies.

NOW, after all the money is budgeted go to your debt-repayment budget category. Get all your accounts and pay the absolute minimums on all of them except for the one with the smallest balance. On THAT account pay ALL of the money you have left in the debt-repay budget. Continue to do this every month until the account is paid off. Then never use it again. Go celebrate that one of the accounts is paid off and treat yourself to an extra movie or so. The next month, take all of the money that was being paid to the paid-off account and pay it against the second lowest balance account along with the minimum payment you were already making. Continue this process until all the accounts are paid down. If you get raises, bonuses or a tax refund, put the money toward the debt to accelerate the process even further.

There are some that recommend paying off the highest interest items first. This is certainly an option, and may mathematically work out better in the long run, but I simply cannot overstate the absolute joy it gives you to be able to say “I did it! I’m DONE with sending them any more money!” The sooner you get to do this the sooner the much needed reinforcement happens and will keep you on your mission. This is easier to achieve with paying off a smaller balance account first.

Another issue (which some told me I was crazy to do) was even when I was so deep in debt, I subscribed to an automatic savings policy where I had money deducted from my paycheck BEFORE I could get to it and deposited in a money market fund that was hard to access easily. It was not much, but it really helped me psychologically to see that small account increasing every month and even earning interest on it. I felt that despite my crushing debt I was able to show something for all my hard work that was mine alone. And when I had paid off all my cards, all the money I had been paying towards debt went straight into savings, which now is a substantial amount.

Finally, unique to this era versus the past is that credit card companies will cancel a card if you let it go dormant (don’t use it for a while) — this will affect your credit score. So every quarter, use each card at least once (say for the groceries) and pay it all off at the end of the month. That way the accounts will remain current but with zero balances.

The above steps if followed will ultimately get you debt-free without having to declare bankruptcy. The deeper issue is do you have the mental fortitude NOT to get back into the habits that got you there in the first place? If you have a spendthrift partner, can you deal with taking the cards away and giving them an allowance? Can you handle the whining kids demanding the latest and greatest electronic gadget and you saying no? If you doubt yourself and honestly your partner is stronger, then you have to let your ego go and let the more responsible partner handle things.

Start With the Tithe

The Howards

In August of 2007 our family started our journey to being debt-free. The main motivation for doing so was freedom. My husband wanted to leave his job and start a home business, but we could not do that with the debt load we were carrying which was $33,673.28. This included credit cards, student loan, car, home equity loan and medical bills. It did not include our home on which we owed about $65,000.

I started by reading Dave Ramsey’s Total Money Makeover. We adopted his plan of saving $1000 first, then paying off loans in order of highest interest rate. My husband does occasional contracting work outside his normal job, so in August we were able to save $1000 and also put aside the money we would need for buying Christmas presents. We have five children and we buy for our parents, but we don’t go crazy with Christmas giving. We set aside $500 for gifts. It felt good to meet our first goal so quickly.

Our next goal was to pay off medical bills with a flex account my husband had at work. These totaled $1612.50. In September we paid $363, but then my husband decided we needed to change our goal. We had gotten behind in our tithe to church by $1354. My husband wanted us to pay this off before we continued paying off our other debt. He also wanted it paid off by the end of the year. I knew he was right, but I felt a little discouraged that our plan had been interrupted. I also doubted whether we could pay it off in that time frame. Unless my husband brought in extra income, we barely had enough to pay the bills each month.

In September we used $670 of the flex money to pay off back tithes. Using all extra money that came in through extra work he did, we paid $250 toward tithe in October and the final $434 on December 2. On Monday, December 3, my husband found out that he had been awarded a private grant to develop an educational website. The amount of the grant was $37,000. Just about exactly what we needed to get out of debt after we paid taxes and tithes on the grant money! It couldn’t have been any clearer to us that God was rewarding us for obeying His command to give our tithe to Him first.

The money is being paid to my husband over the course of about 18 months as he completes the work. Since paying off our tithe, we have continued to work diligently at paying off our debt. By March of 2008, we had paid off about $3000 in credit card debt. In April, we paid off the final $3180 of my husband’s student loan from his master and doctorate degrees! What a sense of relief! We had had that loan for ten years.

That same month we also paid off another $1338 in credit card debt. In May, we bought all of our homeschooling books for the year ($2579) using the stimulus checks the government sent. June we paid off another $1000 in credit card debt.

In July, because of a four-month stint of sickness in our family which required a lot of my time, I stopped keeping accurate records of our debt payoff. We have, however, continued to work diligently to pay down our debt. Our remaining debt is about $5500 at 2.9 % for our car and $6100 at 9% for our HELOC. We hope to have all this paid off in the next 6-9 months.

In December of 2008, I was in an accident which totaled our car (it wasn’t worth much). We determined that we would not spend more money than the $3100 the insurance company gave us for our settlement. We found a 2000 Chevy Venture that had 8 seats and about 40,000 fewer miles than the 7 passenger 1999 Chevy Venture I had just wrecked. We found it on Craig’s list. We were able to test drive it after pumping up the tire. However, the next day when we went to purchase it, we discovered it had a gas leak which meant we couldn’t drive it. The man cut the price from $1800 to $1500 and we took it. After having it towed, fixed up, detailed (it was filthy), towed, fixed, towed, and fixed all within a 2 week time, we now have a car that suits our family well. We have spent about $600 more than the insurance company gave us, but we are still pleased that we don’t have another car payment. The “check engine soon” light is on constantly. The repair shop says there is nothing wrong. We put a piece of paper over the light which says “pray”. It is a daily reminder that God is providing for us. The car made it all the way to Florida and back without a problem. We feel blessed.

I try to keep strict records of where our money is spent. As much as possible, we use an envelope system to keep our spending under control For our family of seven (five children ages 2-16), I try to keep our food budget at $500. This takes a lot of effort, especially since we have many food allergies in our family which require some special ingredients and don’t lend themselves to coupon use. We have basic cable, although I would be fine canceling this altogether. We have basic phone and use a company called ECG for long distance. Internet is a large expense, but we use it all the time for my husband’s private contracting jobs and for our homeschooling and many other things. We do splurge on music lessons for three of our children, but if we had to, we could eliminate those for a while.

We have been able to work our way towards being debt-free for two reasons: my husband’s willingness to work extra hours to bring in extra money and our family’s willingness to be thrifty. God has been good in providing for us. My mother gives us money each season to buy clothes for the children. We gladly accept hand-me-downs. My husband and I discuss all purchases before we make them. His weakness is computers and electronics, mine is books. When we get money for our birthdays or Christmas, we use it to buy things that will help the household economy. For instance, I saved my gift money until I had enough to buy a Bosch mixer which allows me to mix enough dough for six loaves of bread at one time. Our children use their money for things they want, but don’t need. They understand our goal and are completely onboard. Our older daughters help prepare meals which saves on eating out — which we rarely ever do. My oldest has learned to sew and earns her spending money by sewing modest clothing for others.

God has allowed us many blessings during this time. Recently we were able to go to Florida where we stayed on the beach for a week and then went to Magic Kingdom, Epcot, Gatorland, and Medieval Feast. The first part of the trip was almost completely paid for by my husband’s employer since he was down there on business. We also got to go to Kennedy Space Center for free. My husband was working there for the week and asked if they had free tickets we could use. They did — it never hurts to ask! The second part of the vacation was complements of my father-in-law who was also in Florida for business. He found some great deals — a house for rent for $85/night just minutes from Disney. The whole trip cost him about half of what he had budgeted. We are so thankful God provided this unnecessary, but very welcomed vacation to sunny Florida in February.

It takes a lot of work, time, and discipline to get out of debt when you are in this deep. I’m so glad we are nearly finished since the economy is tanking. As soon as we are out of debt, we will start building a much larger savings account.

The 10 Key Actions That Finally Got Me Out of Debt; or, Why Living Frugally Is Only Part of the Solution

Leo Babauta

This month, I paid off the loans for both my vehicles! I am debt free!

After focusing on getting out of debt for so long (a few years now), becoming debt free is a wonderful and amazing feeling.

It wasn’t easy — my wife and children and I all made sacrifices. It took perseverance. It took some creativity.

And unlike the common misconception about getting out of debt, it took more than frugality.


Let’s take a little trip back in time and see how I got into debt to start with. For a large part of my early adulthood, I was very careful to have a small credit limit and to pay off any purchases on my credit card immediately. I had an auto loan that I paid off religiously, and later a mortgage that I also paid very conscientiously.

After a divorce, I came out debt free. We had paid off our car loan and credit card, and the mortgage was no longer my responsibility.

Then I entered a period that I like to call “frugal irresponsibility”. I made some bad choices, getting a car loan, a credit card with a higher limit, putting things on the credit card that I couldn’t afford, spending without a budget … not the smartest decisions.

The next period was one where I was crippled with debt, as well as trying to survive on a single income with no medical insurance. This was only recently (within the last few years). I wasn’t making enough to support my family, so we fell deeper into debt.

The most recent period has been my turnaround. I canceled the credit card, and began to live more frugally. I increased my income and saved an emergency fund. This is the part where I learned how to get out of debt. And this is what I’d like to share with you today, in hopes that it will help others struggling.

You won’t be able to replicate what I’ve done exactly … everyone has to deal with their situation in their own way … but my hope is that you’ll be able to glean something from my experiences. At the very least, a little inspiration. And that’s not such a small thing.

How I Finally Got Out of Debt This hasn’t been the easiest of journeys for me, but I think because of the struggle that getting out of debt entails, the final destination is that much sweeter.

Here are the most important things that got me out of debt:

1. Canceled the credit card. This item always draws a lot of debate, but I’ll say it anyway, because it’s been crucial in getting myself debt free: credit cards are extremely tempting, and with the high interest, they can be downright dangerous. It is possible to use them wisely and even profit from using them … however, most people don’t use them that way, and for people like me, it’s better to just cancel the card. I still had a big debt to pay on the card, but at least I wasn’t using it anymore. Rule #1: If you’re trying to get out of a hole, stop digging.

2. Eliminated non-essential expenses. This might seem extreme to many people, but remember: I have six kids and for awhile I wasn’t making enough income to support my family. I needed to cut back. So I eliminated everything I didn’t need: cable TV, most of my eating out, going to the movies (except on rare occasions), alcohol, eventually cigarettes (once I quit smoking in November 2005), buying new clothes (except when really needed), etc. I slowly re-learned what it was like to live frugally. This was also key, as it’s part of the “stop digging the hole” rule. See also: How to Stop Living Paycheck to Paycheck.

3. The spending plan. I don’t like to use the word “budget” because it strikes fear in the hearts of many readers, and blank stares in the eyes of others. Instead, I like the term “spending plan”, because it conjures images of creating a plan to achieve a goal, taking action, and doing something about your problems. Nevertheless, both concepts are essential the same: figure out how much you make, and consciously decide how you want to spend it this month. My plan actually budgets out each paycheck, because a monthly budget wasn’t useful to me: if I only do a budget for a month, how do I know what to pay when my first paycheck comes out? I like to be more specific.

Anyway, the spending plan is essential. You have to decide where your money is going to go before you actually spend it. It was when I was spending without a plan that I got into trouble. And remember: a plan should be flexible, and have wiggle room, because life changes. See also: 10 Ways to Simplify Your Budget.

4. Cash and online bill payments. One of the reasons I had a hard time controlling my finances in the past is that I was spending left and right with no easy way to track my finances or stay within budget. I was using a credit card, debit card, checks, constant ATM withdrawals, etc. I’m not good at writing down every penny. So I devised an easier way: pay all my bills online (including debts and savings), and then withdraw all the money I need for spending categories like eating out, groceries and gas. I use the envelope system, so that I always know how much I have left in each category. Simple and fail-safe. More here.

5. The emergency fund. I think this was one of the most important things I did. I know, it’s very common advice, but it’s for a good reason: without an emergency fund, your finances are at the whim of any urgent situation that comes up. Unexpected medical bill? Home repair? Car repairs? Need to travel to see your sick relative? These things will have to be paid for somehow, and if you don’t have an emergency fund, you’ll either go into debt to pay for them, or you’ll sacrifice your debt repayment for this month to pay for it.

Without an emergency fund, it’s almost impossible to get out of debt. For myself, my debt reduction didn’t really start until I had saved at least a small emergency fund (shoot for $1,000 to start with, but at least a few hundred in the beginning). Read more.

6. The debt repayment plan. I like having plans. They’re how I get things done. I created a plan to get out of debt, using the debt snowball method. I tackled the small bills first, allowing myself to create a sense of accomplishment right away, and to free up some money to pay for the bigger bills. Although tackling the highest-interest debts first is smarter financially, the difference is small and the psychological boost of the debt snowball is huge.

7. Debt is my first bill. In the beginning, actually, saving for the emergency fund was my first bill. As soon as I got paid, I would go online, transfer money into my savings account, and only after that was done would I pay other bills and withdraw my spending cash. Once I had a $1,000 in savings, I began making debt repayment my most important bill, and I would pay those first. Savings second. All other bills third. By paying debts and savings first, you eliminate the common problem that people have when they make savings and debt the last thing they pay: if something else comes up, there’s not enough money left over for savings or debt.

8. Rewards. I am a strong believer in rewarding yourself and celebrating any accomplishment. When a debt was paid off, my wife and I would go out to dinner to celebrate. And we might do something nice for the kids. Sure, we were spending extra money, but that sense of accomplishment is important. It’s a long journey, and you need to be able to look back every now and then to see how far you’ve come. It’s very motivating, and it gets you to the finish line.

9. Increased income. Besides spending less and living more frugally, I also increased my income to make my financial situation more stable and to accelerate debt repayment. To do this, I got a full-time job (I was only doing freelancing before), and continued to do as much freelancing as possible. Then I started Zen Habits, and that became a steady and growing income stream. I also improved my freelancing gigs, and began to look for other ways to make money.

10. More increased income. With the increased income mentioned in the item above, I was in a much better situation financially. That gave me the courage to look for more. I sought donations, to help me achieve my dream of becoming a full-time blogger, and people were incredibly generous (and still are). I began to seek new opportunities, and have some projects coming up down the line. I sold my Zen To Done e-book, and that was a surprising success … it actually allowed me to get debt-free two months before I had anticipated. My wife went back to work, and that helped tremendously. And now my book agent is shopping around my print book proposal, and that could be another way for me to make more income. Always look for new ways to pursue your dreams and your passion … and to increase your income.

Why Living Frugally is Only Part of the Solution

I would not be debt-free today if I didn’t learn to live frugally. If you don’t stem the flow of blood, you’ll never heal the wound.

But frugal living is only one component. You have to learn to get your finances under control, and to plan your spending, and to create an emergency fund. You have to learn how to motivate yourself to finish the long journey.

And one of the most important steps, as mentioned above, was increasing my income in multiple ways, in a series of steps designed to get my finances in better shape and to pay off debt faster.

Living frugal should be the first thing you do, in my opinion. It is vitally important. But it’s only a part of the equation — spending less only gets you part of the way. Earning more gets you the rest of the way.

How can you increase your income? You won’t do it the same way I have. Sure, anyone can create a blog, write an ebook, freelance, write a print book. And I’ve talked about ways to do those things in various places before. But it doesn’t always work out for everyone.

The key is to find something you’re passionate about, and pursue that with all of your heart. That might mean educating yourself, and learning new skills. That might mean finding mentors, and starting at the bottom. But when you’re passionate about something, you’re more motivated to learn and to succeed. Really pour yourself into it, and you’ll find a way.

It’s also important to seek new opportunities, and don’t let good ones get away. If the opportunity doesn’t work out, well, drop it … but at least you gave it a shot. And who knows? One or more of those opportunities might turn into pure gold. They sure have for me, and I’m loving my life more than ever before.

What’s Next: My Credit-free Plan

So I’m debt-free … where do I go from here? My plan now is to continue to try to increase my income with new projects, to continue to follow my heart and my passion, and to see what comes up.

But I plan to still live frugally and to save and invest as much as possible. In truth, I haven’t done much investing yet (besides my 401k) … that’s my next financial project, once my emergency fund is where I want it to be.

There will be a little more spending, to be sure … I’ll be able to travel now (maybe a trip every year). I haven’t traveled in 6 or 7 years.

But one thing’s for sure: I’m not getting into debt again. I’m not taking out any credit cards, and I’m not going to take out any loans. This might be a little controversial, but I’m pretty adamant about this: I’m already saving for my next car, so I can buy it on cash. And I’m going to buy my home on cash too, someday. Until then, I can rent.

Debt is a dangerous game. Some people can succeed at it. The rest of us can’t. For me, getting out of debt has been like shedding a load of boulders from my back. Living without debt is wonderfully light, and I’m not giving that up. Sure, I’ll have to wait a little longer to get the things I want on cash … but that’s worth the wait. It really is.

I’m free!

We Began by Getting Rid of Stuff


My wife and I have started to not just track our spending but really control it. We set goals. Foremost is simply good stewardship. Second, we want to not spend the money so we can do other things with it–like pay off debt or improve our house (to sell it while the government is giving out 10%/$8k rebates). So we set a goal to exceed our goals.

The first place we started was getting rid of stuff. We are stufficated. It is very demoralizing to be owned by our stuff. I am an engineer. I love stuff–parts, pieces, stuff to tinker with. Our house has been a cluttered mess. So we would spend more money to forget about our overwhelming stuff problem. Our moods have lifted as the stuff has gone out the door. Now we want to get rid of more stuff instead of buying more stuff.

Next was controlling our money instead of being controlled by our money. We use the envelope system for common and easily exceeded budget items, like eating out (rarely done anymore), groceries, personal spending money, homeschool costs, clothing, gifts, etc. We fill the envelopes with cash (according to the budget) at the beginning of the month. If the cash is gone, we don’t spend the money. We are flexible with things like groceries and clothes. There are some absurdly good clearances on clothing that we’d be foolish to pass up.

As for groceries, we are working slowly to fill our pantry (which expands as I build additional shelves). But we are also tracking grocery costs. It is amazing what a little coupon clipping and sale tracking can yield. We’ve even begun paying attention to what individual items cost (what a concept). We carry a notebook with us while we shop. Sometimes one store’s sale price is still more expensive than another store’s regular price, even with a doubled coupon. So we’ll buy the item at the cheaper store that doesn’t double our coupon. But we have to balance time with the money saved. But… My wife loves going out to shop by herself, while I attempt to manage our three children (ages 6, 3, and 1). She also gets a few hours each week by herself at the local coffee shop to puruse the sale adds, clip coupons, and organize her grocery list. She loves the time by herself and saves us money in the process.

We also don’t fill the grocery envelope up at the beginning of the month. A fat envelope of cash is too easy to spend. So we ration the grocery cash. We divide our monthly grocery budget six ways–one sixth for each week, plus a sixth as margin for extras for the pantry or a few steaks for a cook-out on the grill with friends, plus a sixth as pure margin. The money is withdrawn weekly. The first month we did coupons plus weekly rationing (but no price tracking by store) saw a savings of about one fifth. We had money left over in many of our budget categories, not just grocery. I am excited about December as we tracked prices in Novemeber by store and have more experience with coupons and sale add shopping.

We use YNAB Pro budget software to track our spending. We can see where the major portions of our money goes via a report. We can track cumulative non-cash categories like auto maintenance, home maintenance and home heating savings. Everything is tracked. If we use a credit card, it is entered in the appropriate account register. The expenditure counts against the relevant budget line item(s). It is similar to writing credit card expenditures in your checkbook. There are no surprises at the end of the month–except to see how much we didn’t spend.

We have paid off the only credit card we had debt on. We still have our mortgage, a pair of student loans and a car payment–all but the mortgage will be finished in about two years with no extra effort.

We are looking at selling our house and buying a fixer-upper for about 1/3 less money, 1/2 the taxes on more land with 1/3 more space–perfect for our kids, a garden, and some chickens. The house will need some work, though less work than our in-town house, and the work is stuff I can do myself. And we’ll actually have more money to do the work with, since the house and taxes costs less.

These are exciting times.

From Envelope System to Debit Cards and Back


This was posted on one of the forums on

* * * * * * * * * * * *My wife and I used to operate heavily using cash and the envelope system, i.e., putting cash into specified envelopes for certain expenditures. We used cash for (among other things) groceries, restaurants, “Blow” money, clothing, oil changes, and books.

Those were blessed days. We had little income; but we were content, knew where our money was going, and were able to save around 25-30% of our income.

Then we stopped using the envelope system. Which led to increased debit card usage. Which made it harder to track the flow of money and feel the pain of how much things actually cost to purchase.

Well, I’m glad to be back on the cash/envelope system.

A few thoughts/tips to share what is helpful to us:

1) We keep a clothespin attached to the cabinet door that is above our “landing strip” (key bowls, spare change, etc.; the place where you set stuff down as you enter the house) in our kitchen. Any receipts from our outings instantly go right there when we enter the house. When I need to update the checkbook register every few days, it is easy to grab the receipts and enter them.

2) It is a question for some about whether it is better to use cash or a debit card for gas purchases. My wife will always use a debit card – safety, children in car. But what about me?

Using a card saves valuable time – no waiting in the nasty little buildings (typically nasty, that is). Also, using a card keeps you from the temptations of buying useless sodas, junk food, etc. I am not much tempted these days in this department, but I know it is a real issue for some.

On the other hand, cash always hurts. It could be helpful to look into the envelope and say, “Well, honey, we aren’t going to the regional mall today because we don’t have enough gas money to get there and back. But we can go next Wednesday when we replenish the envelope.” Sure, you can do that if know how much in your checking account is set aside for gas – but when it’s only numbers in a checkbook or online, it’s easier to cheat and say, “Yeah, but we’ll just use less gas next week to compensate.” Yeah, right!

3) When using a debit card for gas and the receipt dispenser fails – which it will – I just email myself a note with the amount of the purchase as the subject line of the email. Easy to transfer into checkbook as soon as I’m back home.

Or just keep a small notepad and pen handy in the car. Don’t trust your memory. You must capture your gas expenditures. This is for the sake of discipline as well as tracking it so you can adjust your budget from time to time to reflect reality. (It’s looking like we may be able to budget $50 less per month than our current budget calls for, for example.)

4) I don’t use one of these, but there are phone apps out there that allow you to track gas, mileage, etc. for your cars. I have looked at a few, and they sem like a good idea for those who are into techie stuff like that. I have only looked at iPhone apps, but I am sure there are apps for the other platforms as well.

5) This is obvious, but it is essential to budget for car repairs/maintenance. Duh – but many of us fall too easily into thinking that running a car is simply a matter of car payments + gas (and oil if you’re really sophisticated). Not so. Your car will need maintenance, and it will break. If your budget doesn’t haven an allowance for this, then it is not actually a budget.

We are struggling with this now because I know we are not budgeting enough in this category; but we are budgeting what we can.

If possible, jump start that section of your checking account (or envelope) with some hundreds of dollars, as you are able. Then add a reasonable amount every month. My guess (yes, guess) is that somewhere around $150 -$200 per month is reasonable as a minimum if you are running two cars. That gives you about $1800 – $2400 per year to put towards repairs. That’s not that much if you get hit with a couple of serious repairs on both cars in a given year, plus maintenance. Think about… tires!

I think of trips to the mechanic in terms of increments of $300. That way, anytime I spend less than $300, I am happy. Not grumbling about the cost. Or if the bill is $450, then hey, that’s under the $600 threshold, right? I am not saying you shouldn’t negotiate and look for deals on car repair. But it is expensive, and you need two things to keep from getting uptight about spending money on the vehicle: !) money set aside for the purpose; and 2) realistic expectations about the actual cost of repairs combined with a mental ability (I use the $300 increment rule) to keep yourself from getting too bummed out when they throw the bill at you.

Personal Testimonies

Gary North

It is possible to get out of the debt trap. It takes self-discipline. It takes future-orientation. It take a realization that debt really is a trap.

Occasionally, it takes a bankruptcy, but not often. There are ways of avoiding bankruptcy in most cases.

These personal testimonies offer hope. They also offer specific strategies that may help you in your program to live debt-free.

From Envelope System to Debit Cards and Back
Here is a success story. . . . keep reading
We Began by Getting Rid of Stuff
A site member at describes his family’s strategy. . . . keep reading
The 10 Key Actions That Finally Got Me Out of Debt; or, Why Living Frugally Is Only Part of the Solution
Leo Babauta
This man is now debt-free. . . . keep reading
Start With the Tithe
The Howards
Paying God first is important, as this couple found out, though not at the very beginning. . . . keep reading
A Seven-Step Solution to $75,000 of Debt and $2,000 a Month Child-Supprt Payments
He could have declared bankruptcy. He didn’t. Instead, he cut costs. . . . keep reading
1999: $60,000 in Debt, No Ph.D. in Physics, a Drop-out. 2004: Debt-Free
Bill Corley
A flash of insight made this possible. I hope you have had yours. . . . keep reading
Seven Hints to Getting Out of a $67,000 Debt Burden
You must be maniacal about budgeting. . . . keep reading
How to Pay Off $60,000 in Debt, Starting with $20,000 a Year and Three Kids
R. A. S.
This is the way to structure your life even if you have no debt. Abandon pretensions. . . . keep reading
No Debt, No Mortgage: Four Years
Jim Barry
This is the way to do it if you have no pretensions. Pretensions involve a lot of debt. . . . keep reading
Get a Second Job
Roger Fossum
Somethimes cutting expenses just won’t cut it. . . . keep reading
The Wrong Way to Get Out of Debt
This is a guarantee of misery. It’s like hiding booze from an alcoholic. . . . keep reading
Four Months to Debt Freedom
Barak Strickland
From an $8,000 debt (1987 dollars) to zero debt in four months. . . . keep reading
Keep It Simple, Stupid!
Laurel Peart
If the plan is too complex, you may not follow it. . . . keep reading
Ignoring Good Advice Until the Results Start to Hurt
J. Glatham
This man did not take his father’s advice until the pain was intense. . . . keep reading
Debt-Reduction is a Joint Effort. It Takes Teamwork.
John Geltemeyer
Two of you got into the hole. Two of you must dig your way out. . . . keep reading

Switch Debt on High-Rate Credit Cards to Low-Rate Cards to Pay Off the Debt Faster
Raymond Reiss
Be merciless with your present credit card companies. Make them compete. . . . keep reading