As of May 29, 2012 I made my last debt payment and officially became debt free!!!

I share a lot of my progress here on this blog with all the ups-and-downs along the way. But there’s still more to the story.

In March 2011 I finally faced the harsh reality that I was over $14,000 in debt, had no savings and my financial life was out of order but I didn’t know how to fix it.

I had just gone through a divorce, so my personal and financial life were in shambles. I was single and barely bringing in enough money to pay the bills.

So I asked myself “How am I a workaholic but still be this broke?”

While I enjoyed my job (working as an accountant no less), I still felt like a hamster on a wheel; like I was just treading water.

So I made a financial game plan, became debt free and turned my life around.

Paying off debt on a single income

My total debts were as follows:

Credit Card #1: $1,833.17

Credit Card #2: $909.12

Car Loan: $11,342 (original cost was $16,575 but I put money down)

Total: $14,084.29

And my total income was as follows:

Full-time job: $37,072

Bonuses/side jobs: $5,000

Averaged $3,496 per month or about $42,000 per year.

How to create a “get out of debt” plan

The first thing I did was use a program to tally up the total amount of my debts. I started working to create a super simple plan to chart my progress and set up automatic payments to all my creditors.

I calculated the total amount of interest payments for each debt — so I knew which one to attack first — and started paying down the credit card debt first.

Not only did it have the highest interest rate and it’s unsecured debt which makes it a riskier debt to have than my car loan. Plus, they were smaller balances and it was easier to start small and work my way up.

My initial reasoning for being debt free was to finally be rid of the banks and credit card companies always having their hands in my pockets.

I have a rebel streak in me and got sick of people telling me what to do with my money! But after the year went on, I found other inspiring reasons to live a debt free lifestyle.

One of the driving forces was to create a life of freedom, to travel more and even build my own online business on the side so I could work virtually anywhere.

That’s the motivation behind my business and blog.

I really enjoy being a finance freelance writer, and this blog has given me a platform to be accountable to all my career and financial goals.

Step 1: Create a difficult but attainable timeline

I made double payments on my auto loan, and tossed any extra money towards it throughout the year. I even worked at H&R Block for a couple tax seasons at nights and on weekends to make extra money.

But then, in November 2011 I got even more serious (some call it gazelle intense) and created a new debt goal. My mantra for the new year was “Make 2012 Epic” and I desperately wanted to become debt free.

After inputting my loan and payment information into the debt app system, it gave me a payoff date: December 21, 2012.

At first that date seemed very reasonable. I planned to make double payments, and put any extra side income or savings towards the loan balance.

However, I gained momentum as I saw my debt decrease and I revised my initial goal to July 2012 — which took some serious motivation and sacrifice to hit.

Step 2: Make the necessary sacrifices

As you can see, by looking at the numbers, I paid off $14,000 in 14 months with gross income of about $42,000 per year.

Which means I was only living on two-thirds of my income. It was rough in the beginning — let me tell you.

But once I viewed the budget as a spending plan and had more control of where my money went, I learned to love living below my means.

Here’s some of the things I gave up to make it happen:

I’m not a big shopper so going to the mall isn’t something I had a hard time giving up. But the most difficult for me was the TV and going out to movies. I love watching shows and relaxing in front of the television.

But I realized those activities were a big hindrance to my time and production, and kept me from reaching the debt free lifestyle I wanted to achieve.

Step 3: Create multiple streams of income

The next step I took was to increase my earning potential. I started spending a lot of my time marketing myself and my skills. I cut back on my expenses as much as I could, and now it was time to find new streams of income.

Like most people, I didn’t think I had enough time to work another job. But what I discovered is, if it’s your priority — you make the time.

And since getting out of debt was my priority, everything else came second.

My social life and sometimes even sleep took a backseat to reaching the ultimate goal.

My plan paid off and I started earning over $500 per month of income as a virtual assistant!

In addition to maximizing your earning potential, you should look for opportunities to reduce the cost of your debt.

For example, if you have student loan debt, I learned that you might be able to lower your student loan interest rate by refinancing and consolidating with one of the many companies.

Or, you might be able to refinance mortgage and auto debts to lower the cost of your debt.

Maximizing your savings potential, alongside maximum earning potential, can payoff big time.

Step 4: Stay motivated and celebrate small wins

The journey to getting out of debt was a long one. You may think $14,000 isn’t a lot, but when you’re looking up at that mountain of debt, just try to tell me how small it is — because it feels enormous.

I also had to make this journey alone, with no partner or spouse to help me through the bad times. Honestly there were a few days I wanted to quit, but the blogging community and readers helped me through it.

I can’t thank you enough!

One of the most important things I did, was celebrate the small wins. Even if it was just finding the courage to keep going, I rewarded myself in a small way.

You might be more intense than I was and be able to pay off your debt faster (more power to you!), but there were times when I needed to be human and take a break.

The point is, I knew with my determination and discipline I’d accomplish my goal. And if it took a few extra days or weeks to keep my sanity, then I felt that slowing down was qualified.

How I paid off $14,000 in 14 months

There are many other strategies I implemented while becoming debt-free and tons of awesome financial tools I used along the way (which I might expound on later).

But when you put all the elaborate plans and gadgets away, the biggest tool in your financial arsenal is YOU!

There’s no secret formula or magic sauce.

Your decision to get out of debt and your application to that process, is the only thing that will determine your success or failure.

That’s what I finally learned — after years of living with debt and trying to take control of my money — I was both my biggest obstacle and greatest motivator.

Are you ready to get out of debt? Start planning your next step is towards becoming debt free!