Debt Free Story: How to “engineer” your debt payoff

I am excited to share a great Debt Free Story with you today! Read on to see how Taylor and his wife “engineered” a $97,000 debt payoff in just 10 months.

Tell us about yourself.

My name is Taylor, aka The Grounded Engineer. Growing up, I was a kid that enjoyed building things with legos and taking things apart to learn how they worked. In high school, I took a few programming courses and electronics courses. I was strong in Math and Science and at the time, I wanted to become a high school math teacher.

As I looked into the salaries for teachers, I realized that my earning potential would be limited. Instead of teaching, I pursued a degree in Electrical Engineering. I’m an Electrical Engineer by trade, but now I work in technical sales. I enjoy interfacing with customers to understand the technical problems they are trying to solve. On the side, I work on small “engineering” projects around my home – I’m always looking for things to optimize/automate.

How much debt did you have?

For undergraduate, I had almost $79,546 in student loans. I’m not proud of that – I didn’t do a great job of contributing money from working during college toward my tuition. However, I wasn’t making much and most of what I made went toward housing expenses (and beer.)

In graduate school, I was better. The total cost of graduate school was $72,624 and I took out $30,600 in student loans. I paid about $10k out of pocket and my employer covered the rest. We also paid for my wife’s graduate program out of pocket during the same time so she didn’t have ANY student debt! This was about $12-$15k each semester that we paid out of pocket.

I’ve never had credit card debt – yay!

We had two car loans that we paid off last year (2016.) I was introduced to the personal finance community by Scott Alan Turner in December of 2015. At that point in time we had about $97k in student loans and car loans. By September of 2016, we paid off that debt.

We are left with our mortgage, which is currently sitting at $270k. I am constantly battling paying it down versus investing. Currently, I take a hybrid approach of 50% toward the mortgage and 50% toward investments. The excess money going toward the mortgage and investments is after our monthly expenses, which include maxing out our 401(k) and HSA (working on the Roth too, but we are not there yet.) Because I’m in sales, the excess money fluctuates each quarter (that is when our bonuses are paid.)

What was the defining moment that made you decide to tackle your debt?

My wife was at a meetup for her graduate school program at a coffee shop. I was sitting in my car waiting for her to finish up so we could head out on a four hour journey to go visit my parents. I searched “personal finance” on my podcast app and Scott Alan Turner popped up.

I alluded to Scott Alan Turner earlier, but he was the catalyst for us tackling our debt. I downloaded one episode and I was hooked. I still listen to Scott’s podcast – he publishes 3 per week.

What was your plan for paying off the debt? How did you prepare?

Here is a link to the five steps we followed to get out of debt.
Step 1: You need to start tracking where ALL of your money goes
Step 2: Create a budget and develop a plan to find ways to save money
Step 3: Build an emergency fund
Step 4: Develop a plan (e.g. Debt Snowball) and apply extra savings toward debt
Step 5: Begin investing for the future

Where did you find the extra money to put toward the debt?

We optimized our budget to find savings of close to $1,180/month. During our debt payoff, we also received some more from an inheritance that definitely helped to expedite the payoff process. Finally, when we got close to the finish line we tapped some of our emergency fund to complete our debt payoff journey. We did replenish it back to a healthy six months of expenses ?

How long did it take you to pay off the debt?

I was paying off our debts for about five years, and I was paying them off fairly aggressively. Then, once we focused on our budget, we developed a plan and paid off the remaining $97k in about ten months. So, it took us almost six years to get out of debt, except our mortgage.

How did you stay motivated to continue on your path to debt freedom?

I got hooked into the personal finance community. Reading articles of other people that got out of debt was inspiring, and that kept me focused on our goal to eliminate debt. I still listen to Scott Alan Turner’s podcast each week. ChooseFI is another popular personal finance podcast that I recommend. Finally, I started my blog, The Grounded Engineer, in July of last year. Writing within the personal finance arena kept me focused as well.

Did you make any mistakes or hit obstacles that slowed or stopped your progress?

Fortunately, we did not hit any obstacles!

How is your life different now that you are debt free?

Minus the mortgage, it is great. Having the peace of mind that we are not wasting money on interest payments for things that don’t provide extra value in our lives is a feeling I can’t describe. We have more money to invest in our future, and I’m working to define a concrete early retirement plan.

For me, early retirement would enable me to go into teaching. I like the idea of working at a community college and teaching in areas around technology. Plus, you get summers off, and I would love to travel around the world with my family during the summers.

Back to the mortgage, I look at paying it off as an investment in a small bond. Obviously, it is a bit riskier. But, if there is another housing crash we will hang on to our house and wait out the market. I’ve seen some really good articles on this topic lately from Physician on Fire and Need2Save.

What advice or actionable tips can you give people who want to pay off their debt?

Here is a link to my “getting out of debt” articles on my website: http://thegroundedengineer.com/category/getting-out-of-debt/

Some of my favorite articles are:

$1.3 trillion in student debt: Is college the best option after high school?
What is a debt snowball and how can it help you get out of debt?
How much time do you spend budgeting?

Thanks for sharing your inspirational story of debt freedom, Taylor! 🙂