the how and the why

I've received a couple inquiries wondering just how we managed to pay off so much debt in 2010. For those new to the blog, Mr. Savvy and I paid off a pretty remarkable (to us anyway) $58,000 last year. This debt was made up of a 0% balance transfer (which was about 50% left over from a couple remodeling projects and 50% a second mortgage on an investment property), as well as a car loan.

We did it by cutting back our retirement savings (we still took full advantage of the employer match), eliminating unnecessary spending, and partially by refinancing our primary residence and investment property mortgages to reduce our payments.

For some background, Mr. Savvy and I have always been pretty good at saving money. We actually started our marriage debt-free and I have maxed out my 401(k) since I started my current job almost 10 years ago, with the exception of 2010. We also contributed the max to our Roth IRAs every year, religiously, until last year. We realized last January that we just didn't have enough money to go around and still be comfortable with our finances. Our daycare bills are $14,000/year, Mr. Savvy's employment has been spotty since 2007, and we were spending a lot of money on stuff we didn't need and sometimes didn't really want. We had worked so hard in our 20s to set ourselves up to be comfortable when we had kids, but that's not how it turned out.

So we set a goal, made a plan, and went to work. We had good months and not-so-good months, but being able to focus on just one thing (eliminating the credit card debt) was actually rather freeing.

We also sold some non-retirement stocks and some silver, nothing of huge value (maybe $4,000 combined), but it was nice to reduce the amount of statements coming to the house and to put that money where it actually did some good. One great benefit of our streamlining and debt reduction is that it is so much easier to manage our month-to-month finances right now. This time last year things were kind of a mess. Not so anymore!

We are actually hoping that in 5-7 years we can pay off our house. This is not something we even considered at this time last year.

Maybe over the next few weeks I'll try to put together some posts on our methodology....