How to Strategize Against Debt

Source:Yahoo Finance
From putting spare change to work to going on a spending fast, these folks found creative ways to chop their debt.

Anna Newell Jones

Strategy: Go on a spending fast for a year
Advice: Get creative. There are endless ways to save.

I had been spending over my means for a while. Every month I was spending at least $300, overdrafting my account and feeling horrible about it.

I realized I had all these wants and it was an insatiable thing. I would say, "Oh, I love this top from Anthropologie," and then as soon as I got it everything would be great... until I wanted something else. So I knew I needed to do something drastic. And one day, it clicked.

I decided to start a spending fast for the new year, which meant no spending on anything except absolute necessities -- like my mortgage, utilities, car payments -- oh, and hair dyeing. That was one "want" that I turned into a necessity as I started to see my roots grow in.

I can't buy clothes, no coffee out, no eating out. To save money, I've done the normal budgeting things like buying generic brands of groceries. But I've also started wearing all black and dyeing my clothes to extend the color. I've been re-gifting, growing my hair long to avoid haircuts, stuffing two loads of laundry into one and eating a lot of old canned food I've found in my cupboard. I also make random stuff to sell in my spare time. I have a store at Etsy.com where I sell zombie portraits of people, super cute baby onesies and banners, tags and shipping labels.

My year-long spending fast began on January 1, and so far, I have saved $5,772.25. $4,800 of that went to credit cards and the rest will go to paying my parents back the $3,247.97 I owe them and my $10,000 in student loans.

Lance Pickett

Strategy: Live without the little things
Advice: Don't go too far -- like trying cloth diapers to save $60

My wife and I owed $18,000 in student loans, $6,000 in car loans, $2,000 in credit cards and $152,000 in my mortgage.

We were living paycheck to paycheck and I was tired of seeing my bank account zero out every month. So we wanted to get out of as much debt as possible as soon as possible. We started by saving an extra 1/12th of our total required expenses -- like mortgage, utilities and Internet -- each month, in order to have one month worth of bills saved up at the end of the year. Then we got excited and doubled that. In three years we had six months of living expenses and threw that into a high interest CD at 5%. That really got us going, seeing the money grow -- and we became obsessed with eliminating debt.

We just really took a look at what we need and only spending money on those things. I used to eat out a lot and that cost me $200 a month. Now we invite friends to "eat-in" at our house. We have a garden and purchase produce from co-op programs. Before we became debt-obsessed we would also get nice Christmas gifts for each other, but now we limit each other to $50.

Now, if there's something we want we put it on our "Dream Board," a cork board by our bedroom door that we see everyday. And it will stay there until we're debt free. It also has the loan schedule for our house, and each month we scratch off a month. Next to the schedule, we post our ultimate "want" that we agree to purchase -- with cash of course -- once our house is paid off. I have a 2010 Camaro waiting for me.

Cutting back so much has been hard, but we've learned a lot along the way. My wife learned some things are worth paying more for after trying to use cloth diapers -- which most people use as burp rags -- pinned inside training pants with plastic pants over them for our two kids, all so that she could reuse the diapers and not spend $60 a month on Pull-ups. As a result they both got horrible rashes, so we switched to a cheaper brand of regular diapers.

Altogether, we've paid off around $90,000 since 2005.

Jowharah McNeil

Strategy: Put spare change to work.
Advice: Cut back, use cash.

I was laid off for 18 months and had two credit cards to pay off, so I had to learn to be creative. My husband and I have been trying out a cash-only spending system and we're only allowed to spend $40 a week per person on non-necessities. That means once the cash is gone, it's gone -- no more spending.

While doing this strict new budget, we noticed we had a lot of loose change everywhere -- in our cars, leftover from doing laundry -- so we started collecting all the change we could find and putting it in a jar by the door. Every month, we would use whatever money is in the jar to make payments on one of the credit cards. The minimum payment is only $39, but we usually paid an extra $50 or $60 using the coins we collected so that we can get it totally paid off as soon as possible.

Since we started collecting the coins about six months ago, we've already paid more than $560 of the $1,000 balance on the card, so this is really working for us.


Brian Leigh

Strategy: Track your expenses
Advice: Don't limit yourself too much, or you will give up.

I was able to pay off $22,000 of my $35,000 in credit card debt over the past 24 months just by looking really closely at where I was spending my money.

Being young, I made foolish mistakes with my credit cards, so when I started really wanting to knock out my debt, the biggest thing for me was tracking my expenses. I started by adding up how much I had been spending on meals and found out I was spending almost $55 a week just on lunch at work.

After that, I sat down, got a little notebook and started tracking every single thing I spent money on. I did that for a couple months, and then I came up with a payment plan. After overestimating how little I could live on the first month, I decided to take small steps.

I readjusted my allowance until it worked with my lifestyle. I started to bring my lunch to work four days a week, I shopped for groceries for one week and would then eat only leftovers during the weekend. I learned how to cook and found foods -- like broccoli -- that I can use in multiple meals so I don't have to waste anything.

To make sure my money goes where I need it to go, I set up two checking accounts and two savings accounts. I deposit $250 into the first checking account every two weeks --when I get my paycheck -- to use for everyday expenses. When it runs out, I don't go out.

I put another $250 into the first savings account as an emergency fund. Every five paychecks, I remove $1,000 from this account and apply it toward my credit card debt. I deposit $100 into the second savings account every paycheck. This account is used for long term goals, like a down payment on a house or a big vacation I want to take. Everything else gets deposited into my second checking account, and my bills and rent are automatically paid out of this account. Those automatic payments include an extra $1,000 toward my non-credit card debt -- like my student loans and car loans -- every month.


Jaime Tardy

Strategy: Budget!
Advice: Save, save, save before you quit your day job.

A couple years ago, I decided I wanted to have a baby and quit my job. But there was a problem. My husband and I were in debt, and I made two-thirds of our household income. So I couldn't just quit.

I started out by sitting down and adding up all our debt -- which ended up being around $70,000. The first thing I thought was, 'Wow, we really need to start getting rid of this. We should sell our car right away.'

After some prodding, my husband got on board too. We sold his car and were able to immediately get rid of $19,000 of our total debt. After that, we knew we were totally doing this.

Craigslist and eBay became our best friends, and we sold everything from a kayak to a weight bench and a computer monitor.

My husband did some website design jobs on the side to make some extra money, and we printed out a budget each month so we knew exactly how much we could spend and what we would be spending it on.

We saved on gas costs by limiting the amount of driving we did, and we put ourselves on a grocery budget of $300 a month. On top of that, we cut out cable, lowered our phone bill as much as humanly possible and switched our car insurance twice in one year to find lower rates.

By the time I quit my job for good -- which was less than two years after I started the budget -- we had paid off $70,000 in debt and put $23,000 in the bank as an emergency fund