How We Paid Off Over $20,000 in Debt in 12 Months on One Income

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I just realized something the other day.

This year, we paid off over $20,000 in debt, while making less than $40,000 a year.

I’m not gonna lie, it feels pretty great!

The debt snowball method has seriously saved our sanity. Being in debt is NO fun, but paying it off is AWESOME!

Using the debt snowball method, as well as throwing as much extra money as we could/were willing to, we paid the equivalent of around 50% of our income to our debts!

We learned the debt snowball method from Dave Ramsey. He recommends saving $1000 for a small emergency fund, and then paying off your debts one at a time, smallest to largest.

We have been following this plan since the day we got married, but there always seems to be SOMETHING that interrupts the cycle.

A baby is born, a hospital bill, a broken car, whatever it is, there have been several times when we had to stop, rebuild up our emergency fund, and start over.

But this year, we did something I can’t even believe! We paid off over $20,000 in debt while on ONE income of less than $40,000 a year.

In fact, not only did we pay off that debt, we did it during the very same year we had two cars break down, replaced one of them, bought a house, moved twice, and got a new (lower paying) job.

Its been a ride.

But is is so possible. It takes is determination, self control, and motivation.

My number one piece of advice is: pay immediately when you have the money! If you let it sit, it will magically disappear.

Ask me how I know…

Before I get to the list I want to say one more thing. If you’ve been reading the blog, you may already know that we are pretty dang frugal. That has helped us pay off debt immensely.

But unlike some other debt-pay-off-ers, we choose not to be the most frugal we could be.

We still allow our selves a little bit of fun money, and we don’t only eat rice and beans. We make compromises in plenty of areas, but there are some areas we just don’t want to.

Paying off debt is SO important, but we also want to live a happy life, while being responsible too.

We don’t want to feel like we can’t live reasonably comfortable lives until we are debt free, or be grumpy all the time, and quite frankly eating nothing but ‘rice and beans’ would do that to us. 🙂

Having a little wiggle room helps us stay positive and motivated.

Some people can do it, more power to you! The more sacrifices you are willing to make, the faster you will get out of ‘financial bondage!’

So lets get to it:

What debt did we have?

  • Student Loan
  • Car Loan
  • Home Loan

We paid off our final student loans, became debt free, (yay!) then our cars broke down (boo) and we bought a new one. (don’t tell dave ramsey). But then we paid off that car, and now all that’s left is the house!

Here is what we did:

  1. The 5th Week Rule
  2. Tax Returns as Forced Savings
  3. One Car Family
  4. Income From Side Gigs
  5. Live with Family Between Moves

Here is how we did it, in depth.

1. The 5th Week Rule

crop woman writing in calendar

For better or worse, I am a huge budgeter. Which also means I am a huge worrier! 😉

One of my favorite budgeting ‘hacks’ I have adopted is something I call the ‘5th week rule’.

It works like this:

Most months only have 4 weeks. If you get paid weekly, you get paid 4 times a month. There are a couple months throughout the year that have 5 weeks, and you will get paid 5 weeks that month.

If you set up your budget to pay your regular bills fully using only 4 weeks of paychecks, you can use that extra 5th week to pay off debt without even NOTICING it is gone! Woot!

If you are paid bi-weekly, this works too! Create your budget to pay your bills in two paychecks, and have that extra third (that comes from the extra 5th week) go towards debt.

If you are paid monthly, then I don’t know what to tell ya as we have never been paid on a monthly schedule. That would be a little more work to figure out, and I think it would definitely take a little more self control. It is totally still possible though.

I love this method because it can be a substantial chunk of money. Putting $500, $700, $1000 at a time towards debt feels SO good, but what feels even better is that you don’t feel it at all, since your bills and other budget items are already paid!

2. Tax Returns as Forced Savings

american dollar bills and vintage light box with inscription

A lot of financial advisors say that you should correct your tax withholdings until you pay nothing, and receive nothing. This way you aren’t loaning the government any money for free.

Now, I will say that this makes sense if you would otherwise use that money to invest. But if I am honest, I am not in the investing stage of my financial journey right now.

Instead of adjusting my withholdings to receive more at every paycheck, I leave them as is and use it as a “forced savings account.” This way I am not tempted to use the money each month, but instead it is just refunded to me in a large lump sum once a year that I then pay towards our debt.

If you have kids you might know how great they are for taxes. (Ha!) We often get very large tax returns that make it easy to pay off large portions of debts once a year.

Is this method right for everyone? Probably not, but since we are willing to live a little more frugal each month and ‘save’ the excess, it really works for us.

I would also like to mention that any ‘extra’ money we receive from tax credits, or unneeded ‘stimulus’ funds go towards our debt as well, but I didn’t count stimulus money we received and used as part of this post.

3. One Car Family

our old car

We previously had two, fully paid off cars. They were a little old, and they both decided to break down within months of each other.

We sold them both for as much as we could get, and then made the crazy decision to only replace one of them.

(I would like to note that we weren’t very ‘car-frugal’. This is one area we are personally not willing to compromise a TON on. We purchased a 5 year old car that had low miles, a mild smoke odor, and was in good condition. We were not willing to buy a $2000 dollar junker car and do it again next year. We valued reliability more than cost for this one.)

Our gas budget lowered significantly. Our insurance was cut in half, and our maintenance and registration cut in half also.

Was it hard at first? YES. We used to drive to the library a lot. We used to take outings and play at friends’ houses. But we have adapted and I can honestly report that I love only having one car. Here’s why:

  • We only grocery shop once every two weeks, instead of multiple times a week.

    I now plan our groceries so that we make a trip every two weeks. It is working out very well so far. I also occasionally schedule a bulk order from Azure Standard, which I LOVE and keeps our food storage in the green.
  • Our friends come to our house.

    Our friends have been so gracious to adapt with us and come to us to play every time. This also helps me keep the house cleaner 😉
  • It helps us slow down.

    For my kids at least, slowing down and not taking as many car outings has been a huge blessing. They do sometimes mention how they miss going to the library in particular, (we are no longer in walking distance) but avoiding the hustle and bustle has been so nice, and we spend a lot of time playing together at home or outside.

A few ‘workable’ cons to only having one car are these:

  • We had to switch doctors and dentists to find ones that were open on Saturday.

    Its always hard to leave a doctor you like, but so far Saturday appointments are working fine for us.

    If there were an emergency, we have several people close by we could call to help us if we needed a car. And of course we could always call an ambulance.
  • We have to say no to some activities or invitations.

    Sometimes this is a hard one, but I always tell myself “there will be more” and we find something else fun to do instead.

I actually kind of hope we remain a one car family for a while.

I love how much it saves us! I also love that instead of having one car that isn’t used quite as often, we are being much more efficient with the one we already have.

4. Income From Side Gigs

Revenue from my Etsy shop

I have a few hobbies that have made us a little bit of money, I sew for friends and neighbors as well as run an Etsy shop.

When I started my Etsy shop a few years ago, I wasn’t looking for income, I was just looking for a hobby. I bought a Cricut machine and starting working with Iron On Vinyl, which is so fun.

I was so excited to realize that my products had a small but steady demand, and in a short time I made back 10X what it cost me to start, only ‘working’ 1-3 hours a week.

You can read more about my experience in this post.

I wasn’t attempting to work from home, but my hobby was bringing in a little bit of money that was useful for throwing at debt!

Sewing is such a great skill that has allowed me to earn easy cash from people who need clothing alterations. Its something I enjoy and can do quick.

If you have a skill that is useful to people, you can make some extra money on the side too, even with kids around.

I also like to sell things on Ebay and make some extra money there.

5. Living with Family Between Moves

carton box and tape with scissors on shabby table

When we bought our house this year, we decided to move out of our rental a little bit early and live with some family for a few months until our move in date.

We were extremely fortunate that our family was willing and happy to share their home with us, and although it wasn’t ideal, it helped us save quite a bit of money during those few months.

Would I do it again? I don’t know.

It is so nice to have your own space, and it is a LOT to ask someone if you can invade theirs. It is not something that many people want or even can do, but I added it to this list because it is something that helped us save a few thousand dollars this year. For that reason, I would say it was worth it.


We also had some extra money from an energy rebate that was available in our area after purchasing a new water heater and propane tank. We got a $500 check in the mail that went straight to our debt.

If you are making home upgrades to more energy efficient appliances, ask your dealers about rebates, you might get lucky like we did!

Another bonus tip: we also used a good amount of Christmas money we were gifted to pay off debt. That’s called adulting. 🙂 I’d rather be out of debt than have some new thingy-ma-bobs.

Those are 5 of the most important things we did this year to pay off $20,000 in debt (plus two bonus tips) while on one income of less than $40,000.

It seems impossible, but looking back it was actually totally fine and doable. We survived! And now we are a little bit closer to our goal to be debt free, we just have to pay off our home.

Closing Thoughts

One of my favorite Bible verses regarding finances is Proverbs 22:7.

“…The borrower is a slave to the lender.”

Proverbs 22:7

Being in debt is sometimes unavoidable, necessary or even useful, but is still a form of bondage. It feels so good to be self sufficient, as well as being able to be charitable to others financially.

In the midst of all our frugality and debt payments, we will never compromise on charitable giving. We frequently donate to organizations and charities we believe in, because we feel it is our duty to use our money to serve God first.

Would we pay off debt faster if we never tithed or donated to causes we believe in? Yes. But money isn’t why we are here. We are here to serve.

Ultimately, paying off debt will help us serve our family and our fellow men better. Paying off debt is a long road, but it is so possible when you take small steps, and are willing to make life changes.

If we can do it, I think anyone can!

  • If you would like to read some super random but useful ways we save money as a family, check out this post.
  • If you are interested in learning more about taking control of your finances and your debt, Read Dave Ramsey’s book. His steps are easy to follow and can turn your life around.
  • If you want to help your family eat better on a lower budget, check out Azure Standard. I love buying their bulk foods because they are often times cheaper per oz than Walmart! They are healthy and a great company to support.

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