By Cameron Huddleston GOBankingRates.com
WWR Article Summary (tl;dr) In 2013, Jessi and Patrick Fearon took action and started a journey to become debt-free. Over the next two years, they paid off what they owed on two credit cards, a car loan and student loans. Here is how they did it....
When she was pregnant with her second child, Jessi Fearon came to a realization: The $55,000 in debt she and her husband, Patrick, had was going to make it financially impossible for her to remain a stay-at-home mom.
Even worse, she knew they weren't going to be able to afford their insurance deductible for the delivery of their child.
She had a realization: "We don't have $10,000 to pay for this baby I'm already pregnant with," said Fearon.
In 2013, the Fearons took action and started a journey to become debt-free. Over the next two years, they paid off what they owed on two credit cards, a car loan and student loans.
The month before they wiped out their debt entirely, Jessi and Patrick managed to come up with $5,000 to put toward her student-loan debt, even though Patrick's take-home pay was just $3,250 that month.
Just how did they do it? Through the following:
MONTHLY BUDGET PLAN FOR EXPENSES AND MONEY When the Fearons were trying to figure out how to get out of debt, instead of opting for debt consolidation, they decided to use the debt snowball method.
Jessi and Patrick listed their debts from smallest to largest. "There's something about writing that stuff down," Jessi said. "It forces you to take responsibility."
It also helped them realize they could get out of debt by starting with the smallest amount they owed, $450 on a credit card, and working their way down the list. Having a plan helped them avoid feeling overwhelmed by debt management tasks. "It keeps you from panicking," Jessi said.
THEY LIVED ON A BARE BONES BUDGET When the Fearons started their journey to debt freedom in 2013, Patrick had a home remodeling business and they were paying for health care out of pocket. "It was not cheap," Jessi said.
Patrick got a corporate job with great health insurance benefits, which helped free up some room in their household budget for debt payments.
But with Patrick's take-home pay of $3,250, the Fearons still had to keep expenses to a minimum. "We lived by a bare-bones budget," Jessi said. They lived especially lean in July 2015 in order to make a $5,000 payment on Jessi's student loan debt.
Jessi had been slowly plugging away at the $30,000 she owed after first paying off credit card and car loan debt.
By the middle of 2015, she had a little more than $8,000 left but wanted to wipe it out before their third child was born. "We decided we wanted to pay off as much as we could in one month," she said.
That July, they managed to cut $1,400 out of their monthly budget to put toward debt, Jessi said.
The Fearons turned off their air conditioner and used a fan to slash utility costs. A couple months prior, she cut her monthly cellphone bill from $80 to $20 by switching to a low-cost carrier. And they didn't spend money on anything that wasn't essential. "We did not do anything or go anywhere," Jessi said.
THEY SLASHED GROCERY SPENDING One of the ways the Fearons kept expenses to a minimum, especially in July 2015 when they paid off $5,000 in debt, was by keeping grocery spending as low as possible. Most months, they spent about $400 on groceries to feed their family of four. But in July 2015, they got it down to $320, Jessi said.
They had already been saving money on food by shopping at discount grocery chain Aldi. The Fearons also had a garden, which helped them save money on produce. And they limited grocery purchases in July 2015 by eating what they already had. "We cleaned out the freezer and the pantry," Jessi said. "We ate some weird things."
For example, they had frozen shark that her husband had caught during a trip to Florida. Jessi said she had to watch YouTube videos to figure out how to cook it. She ended up making shark nuggets.
PATRICK PICKED UP ODD JOBS In addition to working full-time as a project manager for a restoration company, Patrick worked odd jobs in his spare time to generate extra income to get out of debt. He mowed yards and did contracting work like tiling bathrooms, Jessi said. And when he got a $500 bonus check from work, they put that toward their debt.
JESSI WALKED DOGS In 2013, Jessi started walking dogs while she was pregnant with her second child to generate extra income. She was still doing this gig in 2015 when she was pregnant with her third child.
"I walked four dogs every day in the Georgia summer heat, hugely pregnant and with my two other small children in tow, to earn extra money to throw at our debt," Jessi said. "I will confess that it wasn't fun." But it gave them about $300 extra each month to use for paying off debt, she said.
THEY GENERATED EXTRA CASH ONLINE While the Fearons were paying off their debt, Jessi started a blog called Budget Mama. Initially, she was earning only $100 every two months, but that additional income was helping them get out of debt.
By the summer of 2015, she was earning about $1,000 a month from her blog. In July 2015, she used an entire month's worth of blog earnings to help make the $5,000 payment on her student loans.
She also cashed out the earnings she had from taking online surveys and using cash-back websites like Swagbucks, Ebates and Ibotta. The Fearons also used Digit, an app and website that connects to your checking account and automatically transfers small amounts to a savings account. They had accumulated $500 in their Digit account, which they cashed out in July 2015 to make their $5,000 debt payment.
THEY TAPPED THEIR SAVINGS TO GET OUT OF DEBT Although they were focused on paying off debt from 2013 through 2015, the Fearons managed to set aside money in savings, too. They built an emergency fund of about $5,000.
They made weekly transfers from their checking account to a savings account to build a fund to cover any potential repairs for their cars, which were several years old.
The Fearons were also putting money into what they call a slush fund. They would put any money they had left at the end of the month after covering bills and regular debt payments into this fund, which served as a buffer between their checking account and emergency fund.
They had $700 in this account in July 2015, so they pulled $600 out to help make their big debt payment. And, to free up more cash, they didn't make any contributions to any of their other savings accounts that month.
Using some savings, slashing expenses, exploring money-saving tips and generating extra income helped the Fearons put pay off $5,000 in debt in one month. They paid the remaining $3,200 on Jessi's student loans the next month, August 2015. "It's amazing what you can do when you and your spouse work together as a team and when you're willing to make tough sacrifices," Jessi said.
The Fearons will be entirely debt-free once they pay off the remaining $21,000 they owe on their mortgage, which they hope to tackle by the end of the year, Jessi said. It might take a little longer, though, because her blog, now called Jessi Fearon, Real Life on a Budget, has done well. And that means they have a bigger tax bill they'll need to cover this year.