Couple pays off $180,000 worth of debt with a simple budgeting trick
An American couple said a simple budgeting trick is the secret behind their success in paying off their debts.
Amanda and her husband Josh said they had a combined debt of US$133,763 (around AU$180,000 at the time), which consisted of 16 student loans, eight credit cards, two vehicles and a personal loan. After 43 months, the pair finally paid off all their debts in July 2018.
They said increasing their incomes and cutting expenses have helped them become debt-free. The pay increase came from raises, working overtime and being on-call. They also put a hold in expensive hobbies and traveling plans while making the most out of work perks, such as carpooling.View this post on Instagram
Increased earnings may encourage more spending – however, the couple managed to resist the temptation using a simple budgeting method: cash envelopes.
Every payday, the couple would take out cash for groceries, gas, spending money and any sinking funds they were saving for to last the fortnight. The cash would then be divided and put into envelopes based on their categories.
“For that two-week period, all groceries come out of the grocery envelope. Same with gas and spending money. Once it’s gone, it’s gone!” Amanda told Making Sense of Cents.
“This method really helps curb your spending because you feel it more when you use cash. It’s also easy to look in your wallet and see how much money you have for each category to stay on track.”
While the technique can help minimise unnecessary spending, you can still have fun with it, Amanda said. “Budgeting doesn’t mean you have to cut out all your fun! Put it in the budget. The point is to know where your money is going and to spend it intentionally.”
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