“Downsizing to a tiny home helped us wipe out $200K of debt.”
Claudia, 32, and Garrett Pennington, 35, a marketing specialist and sales specialist in Lancaster County, Penn.
“Our debt ‘aha’ moment was realizing we couldn’t pay off $16,000 of debt before the no-interest period on our credit card expired back in April 2015. We knew then we needed to turn our finances around.
We started by putting everything on paper. It was shocking to see all our debts in black and white, but it was also a relief to finally face it. In addition to the credit card debt, we had $36,000 in student loans and a $156,000 mortgage. (I know most people don’t consider mortgages “bad debt,” but we’d spent thousands remodeling a home we didn’t love and were overwhelmed by how long it’d take to own outright.)
Our net worth was somewhat offset by a small cash savings and some retirement funds—but we were essentially starting from scratch.
Getting started: We ruthlessly slashed daily expenses and put our home on the market—eventually eliminating the $1,000 mortgage payment—and put 10 percent down on a $70,000, 500-square-foot tiny home. We donated or sold about 80 percent of our stuff, earning hundreds from Craigslist buyers—all of which went toward debt.
We also substantially increased our incomes. I left my part-time nonprofit job for a full-time marketing gig—doubling my salary. We also began an SEO consulting business, which brought in $1,700 per month in its first year alone.
Thanks to the one-two punch of cutting costs and making more, we made massive monthly payments—anywhere from $900 to $7,000 per month.
Crossing the finish line: We paid off our credit card debt within six months, then started aggressively paying off our new mortgage. By November 2016, we owned our tiny home outright. That freed up enough cash to zero out the rest of our loans—and finish paying off all our debt—by March 2017.
My one regret during this time is not saving, which I admit is risky, or investing more. But since being debt-free, we’ve been saving and investing thousands per month. Our net worth now exceeds $100,000—between our home, retirement investments and cash—and we’re working toward our next lofty goal: financial freedom. For us, that means creating passive income streams that cover our annual expenses.
Their advice for others: Set SMART goals, which are specific, measurable, actionable, realistic and time-bound. Knowing where you want to go will make it easier to create a plan to cut expenses and increase income.”
August 21, 2017
August 21, 2017