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How One Family Paid Off $118,000 in Debt

The Kroezen Family (Amy Kroezen)

When Amy Kroezen, 29, graduated from the Art Institute of Atlanta in 2008, she couldn't find a job that took advantage of her interior design degree. "I was turned down for job after job, and even advised to go wait tables by a design firm until the economy got better," she says.

To make matters worse, she soon had to start payments on her student loan debt. She and her husband, a dance instructor, owed about $116,000 in student loans and $2,000 in car payments. "I had no idea how we were going to spend the next 10-plus years paying $990 a month in debt. How would we ever own a house, have a child and have any quality of life?" Kroezen recalls asking herself. She felt physically ill, just as she had as a child when she heard her parents talking about money.

So Kroezen and her husband, a native of Australia, decided to do something about it. In April 2009, they committed to paying off their debt within four years by dedicating one of their incomes entirely to paying off debt and then living off the other income. At the time, Kroezen and her husband were each earning between $32,000 and $35,000. Now a growing family with a 2 and a half-year-old daughter and another baby on the way, they are very close to achieving their goal - and they say their strategy could work well for other families, too.

[Read: 25 Ways to Improve Your Finances in 2014.]

According to a December survey of more than 2,000 adults from Think Finance, an online financial products company, about three-quarters of Americans will carry debt into the new year, including credit card debt (36 percent) and car loans (28 percent). Here are six strategies that can help those Americans - and you - climb out of debt in 2014:

1. Downsize. Not only did Kroezen and her family start living off only one income, but they moved into a cheaper apartment that was minutes from each of their jobs, which meant they could also save money on gas. That also made it easier for them to live off just one income.

2. Use the envelope system. Whenever Kroezen got her paycheck, she turned it into cash and then distributed those bills into envelopes dedicated to different costs, including food, rent and other essentials.

[Read: The Benefits of Envelope-Based Budgeting.]

3. Get ready to work and get support. "It's not easy," Kroezen acknowledges. "You need a good support system whether it's family, your spouse or a friend." She adds that aiming to get out of debt, not become rich, will help keep you from feeling overwhelmed.

4. Be super frugal. Kroezen and her family cut out all spending that wasn't absolutely necessary. That meant repairing broken items instead of buying new ones, skipping restaurants and making her own coffee. "There will be times you feel depressed over it, but remember the end result is going to outshine all that," she says.

Her family still lives on about $19,000 a year, so they can save the rest. She even built her own furniture when her family moved into a new house, and asked family members for power tools as gifts for Christmas. She's since built a king-size bed, dining table and toy box. She also makes her own cleaning supplies and grows some of her family's food, too.

5. Pay off the most expensive debt first. Not everyone abides by this approach, and instead prefers to pay off the smallest debts first to build momentum and a sense of accomplishment, but many financial advisors recommend paying off the most expensive debt first. That helps reduce interest and fee payments. Credit card debt is often the most expensive debt that people carry, followed by auto loans and student loans. Any debt with a variable rate can go up quickly when interest rates start to rise.

6. Stay inspired. Certified financial planner Jude Boudreaux learned how to stop overspending with the help of a vision book - a collection of images of financial goals, which helped keep him and his wife focused and on budget. Boudreaux's vision book includes images of where they want to vacation and their condo, which they want to pay off. He flips through it when he needs to remind himself to avoid spending on unnecessary items.

[See: 10 Ways to Upgrade Your Finances in 2014.]

Now, Kroezen and her family live in Nashville, where Kroezen is a stay-at-home mom and her husband works in the insurance industry. Kroezen has paid off $103,168 of her student loan, and she says she would have completely paid it off were it not for the birth of her daughter. She and her husband also bought a home and put down a $20,000 down payment on it. They pay off their credit card bills in full each month.

"We will attack the mortgage in the same way as the student loan, although we may take a month off and buy some clothing, which we haven't done in years," Kroezen says. Her family is also growing, with another baby on the way.

If going debt-free is one of your goals for 2014, these strategies might help you get there.

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