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How We Got Out of $50,000 Worth of Debt

It’s taken 12 months for newlyweds Angela and Ted Jalad to go back to enjoying even the smallest of life’s splurges. Today they celebrate, as the California couple has erased a staggering $50,000 worth of debt in just one year’s time.

“We had just gotten married and we had all these bills. And so I thought to myself this isn’t a good way to start a new life together. And we realized we didn’t want to keep working our butts off just to keep paying off this debt,” says Angela.

Here’s the breakdown: As of January 2012, the couple had two personal loans consisting of consolidated credit card and student loan debt worth $15,000 each, plus a $20,000 car loan for a grand total of $50,000, close to the average annual income in America. 

They knocked out the first personal loan by allocating their entire $8,000 tax refund toward it, as well as the proceeds from selling Angela’s car ($3,000) and Ted’s luxury watch ($1,000). They also used the $3,000 they’d saved since January and, by April 2012, they’d deleted a third of their debt.

To pay off the remaining $35,000, they lived on half of Ted’s $6,000 monthly paychecks and put Angela’s entire $1,500 monthly income toward the debt. By August, they’d wiped out the second personal loan and the car was finally paid off in December.

A spending allowance for Ted proved essential. He limited himself to just $100 a week in cash for gas, food and incidentals. Gone were their days of eating out. Their grocery list shrank to just 10 basic items they’d use for all three meals: eggs, milk, bread, salmon, chicken breast, broccoli, asparagus, Brussels sprouts, berries and oatmeal.

An even greater sacrifice came with the couple’s living arrangement, when they boomeranged back to live at home with Ted’s mom and dad. “We wanted to get our own place, but after we looked into our finances and realizing that we pay $700 to stay here and just to help with the mortgage and the utilities, we can save half or even more than half,” says Angela.

Their work schedules offered the perfect arrangement to save money, as well. With Ted working nights and Angela working days, they were less tempted to go out and spend on dining and entertainment, and managed to get by with just one car. Being homebodies, the couple skipped some vacation opportunities, including Paris and a cruise with family.

Now that their debt is behind them, Ted and Angela can focus on their future. This year it’s all about saving. In fact, they’ve already shored up roughly $10,000. “We don’t want to pressure ourselves to getting a number like [$50,000]. We want to relax a little bit, but we want to be smart about our choices still,” Angela says.

What do you think? What are some tradeoffs you’re making to pay off debt? Connect with me on Twitter @Farnoosh and use the hashtag #finfit.