Debt Free in One Year: A True Story

by Joe Plemon on December 9, 2009

This post was awarded Runner-up in Free Money Finance 2010 March Money Madness contest.

Erin and Jeremy

Erin and Jeremy


Erin, “Debt free for me means that we have more choices, more freedom and less that will hold us down keeping us from what and where we want to be.”

Jeremy, “It means tremendous peace…now we can pay ourselves every month.”

My son Jeremy and his wife Erin accomplished a milestone in their lives yesterday: they made their final debt payments and now, other than their house debt, owe no one anything. With their permission, I interviewed them so I could write their story. This is for Jeremy and Erin: a very happy young couple with a very bright future.

Assessing the Situation

When they got married in January, Jeremy and Erin had a very average household income, $3,000 in a savings account and $21,500 in debt. The debt consisted of:

  • $12,400 Student Loan
  • $4,700 current credit card
  • $4,000 in two old credit card debts
  • $400 personal debt

Jeremy and Erin set a goal…a lofty goal…to get out of debt before the end of the year.

Getting Radical

With this goal before them, these two knew that they needed to get organized and radical. They started with a personal budget that would allow them to use a little of Jeremy’s income and all of Erin’s toward debt reduction. They immediately applied all but $1,000 of their savings to debt reduction, a decision which, because both of their cars are old and high mileage, created some anxiety. At the same time, Jeremy temporarily stopped investing for his retirement in order to free up more funds for debt reduction.

Bumps in the Road

As is the case in most journeys, all was not smooth. Erin sprained her ankle, necessitating a $650 emergency room visit not covered by insurance. She then encountered a battle with bursitis in her shoulder, requiring another $850 for an MRI and costing her a month’s work. Jeremy, however, was able to work enough overtime to keep the momentum moving. Next came $350 in dental work and $600 in car repairs. At times it seemed that they were getting knocked backward every step they took. But they kept getting back up and, each time, furthered their resolve to stay the course.

A New House

Although Jeremy and Erin dreamed of owning their own home, their plan was to put that dream on hold until they were out of debt. But Uncle Sam made an offer they couldn’t refuse: an $8,000 tax credit for first time home owners. They were hoping to buy in 2010 anyway, but, because they didn’t want to miss out on the $8,000, they began house shopping. After a couple of months, they found the perfect house: within their price range, solid but needing some work. They slowed down on their debt payments long enough to save up $3,600 for a down payment and moved into their own home in September.

Other Twists

Two of the credit card debts, both $2,000, had been turned over to collection agencies. Jeremy and Erin decided to attempt to work out settlements with the collectors for these two debts. One was quite willing to settle for $1,200 while the other was combative; making multiple phone calls a day with threats of law suits. As the phone calls escalated, Jeremy and Erin responded with settlement requests through the mail (certified mail, return receipt requested). These mailings magically ceased the phone haranguing and, just last week, the collector agreed in writing to accept their settlement offer of $1,200 as payment in full for the debt.

Everything Falling Into Place

After closing on their house, Jeremy and Erin, with the help of their CPA cousin Beth, amended their 2008 income tax returns, allowing them to receive the tax credit this year. They each received $4,000; the second arriving just as the collector agreed to the settlement. This allowed our happy couple to not only get the nasty collector out of their lives but also wipe out their only remaining debt: $3,000 on student loans. The ecstatic couple called and we celebrated together over the phone.

When asked the most difficult part of the process, Erin said, “Not getting to spend money on things we wanted and never actually seeing the money I was making.”

Jeremy’s response: “The hardest thing for me was not getting to put the $8,000 toward fixing up our house, but to an almost unseen debt.”

A Year To Remember

2009 will be a year to remember for Jeremy and Erin. They not only got married, but they reached their goal of paying off $21,500 in debt. The unexpected expenses and the down payment for the house brings that total to $28,000. $10,000 of this ($2,000 from existing savings and $8,000 for their tax credit) was not squeezed out of their budget, but the rest ($18,000) was! That comes to over $1,600 a month for the eleven months from their marriage to now.

Think about it: in their first year of marriage, Jeremy and Erin set goals, worked together, sacrificed, encouraged one another, kept getting back up when knocked down, and relentlessly stayed the course to accomplish those goals. And, although I didn’t mention it, they tithed steadfastly throughout it all. Does this couple have a bright future? Clearly!

Do I sound like a proud dad? You’d better believe it!

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{ 22 comments… read them below or add one }

Nadine Hamilton December 10, 2009 at 5:49 pm

I’m real proud of those two, they made alot of sacrifices to get to this point and I think they are in for a wonderful life together, I thank God for them.

Reply

Craig Ford December 10, 2009 at 11:38 pm

Joe,
I’m also proud of these guys and I don’t even know them. This is awsome. As a dad you must be extra, super, big, big proud!
Amazing.

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Joe Plemon December 11, 2009 at 5:25 pm

Yes Craig,
There are times to be super proud and this is definitely one of them.

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Jason Perez February 12, 2010 at 6:46 pm

While getting out of debt is great, and congrats to them, I find it odd that they did not pay off the entire credit card bill and instead negotiated a settlement. They made the charges so were fully liable for the payments and did (at some point during the year) have the $4000 to pay them off. Lucky for them the collectors caved. But that is why credit card companies have fees and high interest rates, because some people end up not paying the whole bill.

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joeplemon February 12, 2010 at 8:16 pm

Jason,
You make a good point. And yes, they were indeed liable for the charges. Both of these were old debt, and much of the $2,000 owed had been racked up with interest and late charges. One collector initiated a settlement, but then told them not to send the money until they heard back from him. Almost a year passed before they heard from him and then he balked about the settlement, but eventually agreed. The other collector agreed immediately. Again, I don’t disagree with what you said, but when all parties agree to a payment arrangement, I call it a win-win.

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FinancialBondage.org February 12, 2010 at 8:18 pm

Wish it was one year for me. I’m on year 5. It’s a slow process when you don’t make much money and things cost so much. And I had a transmission go bad 4 months ago… $2,750 repair. I keep chugging away… making progress but it’s slow.

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joeplemon February 12, 2010 at 8:54 pm

Financial Bondage,
You probably don’t realize this, but you are an inspiration. Why do I say this? Because, after five years, you “keep plugging away…making progress but it’s slow.” You have no idea how many would have just given up. Your persistence will be a great attribute for you throughout your life.

I am not trying to minimize the frustrations of such things as transmission repairs. They can really beat a person down. But I promise you: it won’t always be that way. Some day you will look back and be glad that you stayed the course.

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Lisa B February 13, 2010 at 2:32 pm

Way to go Erin and Jeremy!! What an accomplishment for the two of you. We are living the Dave Ramsey life and it is such a blessing to be out of the “stuff” rat race. Continue the great work. You have a wonderful support system!!

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Pat Meller March 8, 2010 at 4:06 pm

#1 all the way

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Janet March 19, 2010 at 3:45 pm

True Really enjoyed the article

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Pat Meller March 29, 2010 at 12:11 pm

I leave a comment for and vote for True Joe Plemon Debt Free in One Year

This method, story, exhibits the most commonsense, sure, and direct way of solving a money problem, and it worked–as it always does.

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Financial Samurai April 4, 2010 at 1:29 am

This is great it made the final Joe!

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FinancialBondage May 28, 2010 at 1:02 pm

thanks for the encouragement Joe. Have a safe holiday weekend.

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joeplemon May 28, 2010 at 1:19 pm

Arthur,
I am glad that this post gives you encouragement. I am sure Jeremy and Erin would be even more glad!

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Arthur @ FinancialBondage.org May 28, 2010 at 8:50 pm

Believe me, there are times when I felt like giving up… But I really want to be debt free. I think it’s been 6+ years, I lost count. As I get older, I find that Time is just moving too quickly for me to keep track of it anymore

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habika June 13, 2010 at 11:03 pm

I find it odd that they did not pay off the entire credit card bill and instead negotiated a settlement. They made the charges so were fully liable for the payments and did (at some point during the year) have the $4000 to pay them off. Lucky for them the collectors caved. But that is why credit card companies have fees and high interest rates, because some people end up not paying the whole bill.
===========================
Debt Free Seattle

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joeplemon June 14, 2010 at 4:55 pm

habika,
You make a good point. And yes, they were indeed liable for the charges. Both of these were old debt, and much of the $2,000 owed had been racked up with interest and late charges. One collector initiated a settlement, but then told them not to send the money until they heard back from him. Almost a year passed before they heard from him and then he balked about the settlement, but eventually agreed. The other collector agreed immediately. Again, I don’t disagree with what you said, but when all parties agree to a payment arrangement, I call it a win-win.

Reply

A. Tatum October 19, 2010 at 8:32 am

@Jason Perez even if you settle the debt you still have to claim the remaining balance you where freed from as income on your taxes at the end of the year. The CC company will send you a 1099-C. So in some ways you don’t totally get away from it.

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Mrs. White March 25, 2011 at 12:41 pm

This is encouraging and a great testimony!

Blessings
Mrs. White

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Abram Baack June 5, 2011 at 3:02 pm

Thanks for a really interesting read, learn quite a few tips here, trying hard to improve my credit , i did a consumer proposal 7 years ago and just now i am starting to rebuild my credit slowly but surely and trying to avoid that credit card trap.

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joeplemon June 13, 2011 at 6:26 am

@Abram,
I am glad you were able to glean some tips. If you can avoid the credit card trap (actually all debt), you will learn that your credit score is not nearly as important as many people say it is.

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Shirely Ruoho July 19, 2011 at 8:31 am

This is a great resource for anybody who weblogs!!

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