At the beginning of this year, John and his wife, Abi, were $44,000 in debt. But they were able to pay it off in five months after becoming more frugal and using a portion of their savings.
The name is John Steiner and I live in Southern Maryland with my better half/muse/wife Abi. I’m 27 and Abi is 25; we’ve been married since December 2015 and have no kids.
I’m the CFO for the family, but Abi is the household CEO.
At the beginning of 2018 we had more than $44,000 in debt. We wanted to become financially independent and were able to pay it off in five months. To do that, we became more frugal and also depleted some of our savings.
In my younger years, I wasn’t always financially responsible; I used to spend a lot of money at bars and restaurants. But when Abi and I married, a new sense of responsibility fell upon me. I thought that if I were to drop dead tomorrow then I’d be leaving her with many financial problems.
Now that we’re debt free and financially independent, I have the peace of mind that if I were to drop dead tomorrow, then she’d be left with no financial burdens.
Our Income and Expenses
I’m an engineer and make $66,000 a year, and Abi is a per diem nurse and makes roughly $58,000 a year. We have a combined income of roughly $124,000 a year — but we live on a budget that is less than $40,000 a year.
Since the start of our marriage we decided to live on a single salary to get into the habit of living with less; the $40,000 budget was a happenstance of this behavior.
We’re currently living on $35,341 annually. Let’s look at the monthly expenses:
We’ve cut costs by only buying certain things new. For example, we buy new underwear, but we started buying all our other clothing from thrift stores for a fraction of the price. As a result, we reduced our clothes expenses in the first five months of this year by half!
Abi and I promised to never take out a car loan, so our 2005 Honda Civic and 2010 Ford Focus are paid in full. We do plan on replacing a car in one or two years, but our goal is to have only one car to reduce our insurance costs.
We rent our home and therefore have no property taxes. Maryland has fairly expensive housing and we’re paying only $200 per month more for our three bedroom townhome, compared to our initial one bedroom apartment. The only reason we got a bigger home was due to an understanding that we’d need the space in the near future.
I also have a life insurance policy in the event of my untimely death which would allow Abi to move close to family, take some time off of work, and pursue any dreams that she may have.
We don’t pay for cable or satellite services. Unfortunately, we had a hard time finding a good Internet provider in Southern Maryland; the best price that we found was with Verizon for $40 per month.
For entertainment, I read aloud to Abi, and we also use our Amazon Prime Student membership for television. We also do a lot of trail running, biking, swimming, and hiking.
We limit ourselves to only seeing six movies a year in theaters. When we do go out to eat, it’s at restaurants where dinners typically cost less than $10.
Our Savings
The extra income that we do have we are allocating to building our wealth for an early retirement. I have set personal and financial goals to achieve those ends.
I contribute 10% of my salary to an employer match 401K and also cover health, dental, and vision insurance for our family. By August 2018 we will have enough saved in the HSA account to begin investing that as well. We have a Roth IRA with Abi’s previous 401K money that we rolled over and are now contributing to monthly. We also have multiple brokerage accounts to invest in the market.
Since we live well below our means we are able to save a lot of our income. I save 15% of my paycheck instantly to a savings account and use the rest to cover our expenses. From my base pay, after all deductions, contributions, and taxes are taken only 55% of my check goes into a checking account. All of Abis earned money gets allocated to our different investment accounts.
We have less than $10,000 at a time, usually $8000 to $9000, saved in a traditional savings account because most of it is being allocated to investment accounts. However, part of the reason for a smaller nest egg is because both Abi and I are educated and work in completely different fields. If I were to lose my job, she would be able to work and support our family and vice-versa. That current flexibility allows us the freedom of not needing such a large nest egg. Even if we were to be blessed with children I could still be a potential stay at home father.
Closing Thoughts and Tips
Since becoming financially independent we’re no longer stressed about money, but we do have lots of goals that require money to achieve. I spoil Abi rotten, but luckily she doesn’t like to spend a lot of money!
Finally, here are a few tips:
- Understand that when you’re in debt you’re essentially enslaved to your creditors; you owe them part of your earnings. If you make $1000 a month but owe $300 a month, then you’re really only earning $700 a month. Debt takes away your freedom!
- If you’re determined and think you can do something, you can do it. Just be sure to set realistic goals.
- Patience is a virtue. Wait for opportunities and also seek guidance. People are willing to help. If you feel overwhelmed there’s a community out there that’s experiencing similar struggles.
- Surround yourself with people who you want to be like.
- Lose the idea that spending more increases your quality of life. Think about what really improves your quality of life and then allocate your funds towards that; drop everything else.
- Read and listen to blogs on financial literacy and financial independence. The topic may seem boring but this is something that you’re going to be dealing with for the rest of your lives. Educate yourself!
- Help others. Volunteering your time or money helping others not only improves others’ lives, but yours as well. It’s a great way to network too.
***
About the Author: John Steiner is the proprietor of the 20SomethingInvestor blog. You can contact him at: john@20somethinginvestor.com
***
If you’re a household CEO who is successfully making ends meet on roughly $40,000 per year or less, I’d love to hear from you. Contact me at Len@LenPenzo.com and be sure to put $40,000 in the subject line. If I publish your story, you’ll get a $25 gift card or an American Silver Eagle!
Photo Credit: Courtesy of John Steiner
Congratulations on having the discipline to live far below your means! What you are doing now will pay off for both of you down the road. It is a sacrifice, but one worth making.
Awhile back, quite a few folks got all over Len for maintaining that it is possible to live on 40 K.
Just plain old denial.
Often, what one “cannot do” really amounts to what one does not want to do badly enough.
Paying off 44K in debt in 5 months is QUITE an accomplishment!
Congratulations!
Thanks RD Blakeslee! We were very happy and fortunate to be able to do it so fast. We both choose careers that were well paying and continued growth. It was difficult to desire to switch our mindset to one of saving, but I think that once we did it has definitely improved our quality of life!
John
John, I can hear plenty of cynics out there saying how your ability to pay off $44,000 worth of debt in such a short time is no big deal because of your combined household income. Obviously it would take people who earn less far longer, but the fact remains that you paid off your debt. The hardest part was changing from a free spending mindset to a savings mindset – in that regard income is irrelevant. Thank you for sharing your story with us!
Thanks Carla! It was really exciting to be able to do it. We did take a lot from our savings, but our thought was we don’t know where we will be in a year but we know this debt will be with us! So we decided to just get rid of it. Now we are having fun being debt free and aggressively investing into our future.
I agree with you as well about the hardest part is switching from a free spending to a savings mindset. What really helped me was the book “Think and Grow Rich” by Napoleon Hill and setting financial goals. Once the goals were set, it made it much easier to resist the urge to buy things!
John
Len, just want to say I enjoy these $40,000 stories. Very inspirational. It’s the best PF blog series anywhere.
Thank you, Joe. The entire series can be found here.
Great job paying off your debt! Here are a few things, however, that are in my budget that don’t appear in yours, making me a bit skeptical:
Vehicle registration, gifts (birthday, christmas), grooming (haircuts, makeup, razors, etc.), cleaning and household supplies, medical expenses not covered by insurance (co-pays, prescriptions and non-prescriptions), electronics (computers, phones), vacations.
I also think $100k of life insurance is too little but you’re young with no dependents so it’s probably fine. Add a kid or two, though, and everything skyrockets up, from daycare to health insurance to life insurance to food to diapers to…
Hey Thomas, thanks for your comment.
I did not add the vehicle registration into the budget since it is an expense every two years. However, since we have two cars we can call it a yearly expense of $135 plus $14 for the required emissions test. That totals the new value to $149 + $35,341 = $35,490.
I didn’t add the gifts, cleaning and household supplies, or medical expenses to my budget, because they are made when needed. I do appreciate you bringing up these expenses though! We can take a look at the costs. I am confident that we are still under the $40,000 mark.
We don’t buy paper towels, we use old t-shirts as rags and have dish towels that we buy from IKEA for $1.99 a piece. We probably replace 5 every year. We rarely buy bleach, so a gallon of it lasts a really long time. We use white vinegar as a counter and floor cleaner, and buy dish soap in large quantities to reduce unit cost. We also buy dishwasher soap off brand and on sale, usually at target. Including all our toilet paper, soap, rags, sponges, and other cleaning supplies. I will put down $800 for the year. We buy these items in bulk, and will generally last over a month. That puts our total to $36,290.
We bought a clippers for $25 from the store, Marshall’s, and Abi cuts my hair. Her mom cuts her hair. We decided to not buy new clothing this year because, last year Abi went the entire year without buying makeup. She now buys mascara at the drug store every four months. the typical cost of $6.99, and she will purchases other items, (eyeliner, eye-shadow, blush, lipstick), when needed. She used to horde makeup, which is why she challenged herself to stop buying it. Altogether she doesn’t spend very much on makeup anymore but again we will say she spends at most $200 a year. Our total is at $36,490.
We don’t really spend money on new electronics. I am using a refurbished Iphone 6 that I bought in 2015, and Abi uses a refurbished LG phone of some sort. It cost us $80 to buy. Again, I didn’t add it to the budget because we have a savings account for bigger purchases when we need to make them. We aren’t the type of people to just buy something when we have a working item already. In fact, I just bought a new to me monitor, to have a double monitor set up for my blog, at the thrift store for $7.00. It works great. We will allocate $400 to be safe. Our total is $36,890.
We are both healthy people and do not spend much on medical expenses. Abi does spend more than I do however, the costs for all our prescriptions are covered by our insurance, dental cleanings are covered completely, and our primary care yearly check ups are $80 a piece. That brings the total to $37,050.
Our vacations are usually with family, which all we need to pay for is gas, or they are camping in the woods which typically costs less than $30 a night. We don’t often do an extravagant vacation, but for instance for our one year anniversary we went to San Diego for a six days. We went in the off season, which made our AirBnb cheaper ($80 a night for six nights, $480), booked the flights well in advance for a great price (under $500 for the both of us round-trip), and spent under $400 on food and ubers. We ate at times with happy hour specials. We treat vacation as a luxury not a necessity, but assuming we do a bigger venture, we will allocate $1,500 to vacation a year. Our total now is at $38,550.
That leaves $1,450 left for other small or unexpected things. Again thanks for the comment, I never considered some of those things part of the budget because they were not necessarily consistently monthly expenses. It is a good thing to think on though!
I appreciate your comments about life insurance. Like I said, I do have 100k in term and 65k in whole. For right now, that fits our family. If we were to have kids, I understand that it would need to be increased. The fact is we are debt free, we have a decent amount of savings, and good money habits. If I was to die suddenly, I know Abi would be okay.
Thanks!
John
Thanks for the reply. I am happy for your success.
Good Article! Thanks For sharing.
John & Abi,
I read through your blog and this makes me so happy. I have known you both so long and for what you have achieved together is inspiring. Heather and I are currently working on our debt, credit, savings. We just recently got approved for a 3 bedroom apt/townhome and during this time we are going to work on our credit and paying off our debt. We have a good plan and so far this passed year since July I have paid down and off my credit cards. I now have a less than 4,000 balance on all the credit cards combined. Besides my two cash reward cards through BOA I am going to pay off my remaining two and close them down after. Im doing it the right way. Heather being a travel nurse and now with me recently passing my boards and working as a nurse as well we will be able to continue to pay our bills on time and pay off our debt. Along with 401k’s, life insurance we are working on our savings accounts while doing so. Our hope is to build a house when our lease is up on our new place. With these goals and the motivation to achieve them I believe we can do just that. I am so happy for you both, I miss you and wish you still lived close but I am so glad you’re living your life happy. I love you both!
Magen! That is amazing! I am so excited for you and Heather. It is great to hear how you have a plan to financial freedom. It all starts with a desire and a plan, the outcome follows. It is great to see the excellent progress you already have made and I am sure that it is encouraging to you to keep at it. LenPenzo.com is a great place to find articles that will help you to financial freedom! I don’t know much but feel free to reach out to me as well and I can give you all that I know! Miss you, hope to see you soon.
John
John & Abi,
What a delightful testimony to thoughtful living and Christian stewardship. One o the larger monthly items in your budget was church giving. It seems apparent to me that you appreciate the idea that what you have in terms of money. time and talent is a God-given gift. Thank you so much for sharing your story and may you continue to be blessed in your responsible life choices.
Thanks Steve!
Proverbs 22:7 is an encouraging passage of scripture that helped change my mindset on money. It was this, and other writings, that helped motivate us to become financially independent.
I am a firm believer in the truth that, the more you give, the more you receive. This does not always mean money, but in experience, relationships, and opportunity. Whether you read the Bible, financial blogs, or other written works of financial importance, this truth is blatant.
In one of my favorite books, “Rich Dad Poor Dad” by Robert Kiyosaki, he so beautifully lays an example how being generous is beneficial for everyone. “So he worked harder to draw more money in, rather than focus on the most important law of money: ‘Give, and you shall receive.’ Instead, he believed in: ‘Receive, and then give.'” In my own personal life, I have extremely generous parents and in-laws that, by example, have shown this law of money to be true. They have been beyond generous with their time, money,and skills, and have always been taken care of.
Thanks for the kind comment.
John & Abi