Living on $27k a Year in the US for Four Years

To what lengths would you go to become financially free? The answer for us? Living on $27,000/year for four years, cutting out everything we didn't need in our lives, and becoming laser focused on getting out of debt.

"Visualize this thing you want. See it, feel it, believe in it. Make your mental blueprint and begin." - Robert Collier

At first, it was hard to breathe or think about the future when facing $120,000 in debt (student loans, car debt, and one credit card).

I still vividly remember my husband saying, "We can do this." He had laid everything out on paper, all the numbers neatly in charts to show us we could be debt free in 2.5 to 3 years.

This was only possible if we limited our expenses, increased our income, or did both. We decided the fastest route to achieving our goal to becoming debt free was only spending money on the bare necessities. After getting this first part down we did find ways to significantly increase our income.

We knew debt was the problem, and we needed to make some drastic changes to become debt free. But how do you fix it?

Budgeting. Yes, the simple act of writing down our monthly income then subtracting our monthly expenses. Making sure not to go over that budgeted amount. When we wanted to save, it was as simple as keeping our monthly expenses below our monthly income and watching our bank account grow.

After we were done hitting our heads against the wall over how simple that answer was, we got focused. We knew we could have a better future for ourselves and family by sacrificing temporarily, only 2.5 to 3 years. Instead of waiting the 10 to 15 years it would take only paying the minimum payments on our debt, while continuing to live paycheck to paycheck without a plan. We did not want to suffer that long!

Our monthly budget was the key to our success, and how we lived on an average of $27k per year for four years. Here it is below:

$400 - food
$170 - utilities
$750 - rent
$200 - gasoline (for two cars)
$12 - life insurance
$149 - auto insurance
$100 - car repairs
$808 - total minimum payments on our debt
$45 - phones
$45 - internet
$20 - hair cuts
$100 - miscellaneous items

The above monthly expenses total $2,799 per month, or $33,588 per year, which was the amount we lived on when we first got married. This number significantly dropped as we paid off our debt (mostly in the order of smallest to largest). When we were able to get the $808/month in debt payments down to $300 we had a monthly budget of $2,291 per month, or $27,492 per year.

By the time we paid off all of our debt two years and eleven months later we were living on $1,991 per month or $23,892 per year. We continued to live on $23,892 for another thirteen months after becoming debt free. Over the four years outlined above, this gives an average of $27,216 per year.

During this time, we did have a small emergency fund of $2,000 to help with anything unexpected that might come our way. For example: unplanned medical bills or a large car repair. We saved our emergency fund first before paying off any of our debt to mitigate going into further debt. This helped us a lot! It kept us focused as well as a little more at ease when tackling our debt.

When we saw how successful we were at eliminating debt we decided to apply that same intensity to increasing our income, and were able to by $100,000/year. This allowed us to pay off the last $60,000 of our debt in a year, quickly grow our savings from the initial $2,000 to a six month emergency fund of $12,000, start giving more, and investing in our future.

We were able to prove to ourselves anything is possible when you put your mind to it, take steps to make it happen, and give yourself no way of retreat.

I want to encourage you and let you know it is possible, and can be done! We are proof it can!

Here's to becoming debt free and having an amazing financial future ahead!