Kristin Moras


 I'm Kristin, author of The Mulberry Patch. I write about living a slow, simple, and sustainable lifestyle amidst a fast paced modern world. 

How We Paid Off $50K+ of Debt in ONE Year and Changed Our Life | Part Two

How We Paid Off $50K+ of Debt in ONE Year and Changed Our Life | Part Two

Shortly after finding out I was pregnant with my son Ezra, my husband David and I got serious about tackling our financial debt. Like most people, we had let a multitude of minimum payments stack up (student loans, credit card, mortgage, etc.) to the point where we felt overwhelmed and overspent. The heaviest part of the situation was always feeling like we could never get ahead and eventually we just accepted it as a part of our life.

In my last post I went into detail about how we ended up with not just a little bit of debt, but 50K+ worth of debt (not including our mortgage) and today I want to talk about two important things:

1.       How to avoid accumulating debt

2.       The nitty gritty details about how common consumer and student loan debt works

Tomorrow I’ll cover how we used the information I talk about today to set up a game plan for eliminating debt + what our game plan was and how you can create your own.

Before I get started…

Note: I’m not a professional financial advisor. If you find yourself in a serious situation (i.e. facing bankruptcy, managing debt for business purposes, etc.) you should contact a professional. The purpose of this post is to share with you my family’s story + what we did to change our situation in the hopes that you might find motivation, inspiration, or guidance on your own journey.


First off, I don’t believe debt is a fundamentally bad thing. It can help people achieve some pretty great things: pursue an education, purchase a house, and provide comfort for their families… just to name a few.

The problem is when we fail to recognize debt for what it is: money that is owed to a person, bank, or company.

Debt is not free money – it is borrowed – which means that we never possessed it in the first place. Credit card companies, banks, and other companies selling major consumer goods (furniture, car, etc.) are really good at making us feel like we are getting a great deal, when in reality we either end up paying more in the long run (via interest), or ruin our credit when we can’t keep up with payments.

My husband and I learned this first hand when we started making payments on our student loans. To be honest, we had no concept of what we were getting ourselves into when we took out our loans. We knew we would have to pay the money back, but our young 18 year old selves had no idea just how high those payments would be once we graduated.

Now, almost 7 years later, we’ve learned a few essential truths about debt.

The nitty gritty details about how common consumer and student loan debt works

1.       Pay attention to interest rates

The average interest rate on a credit card is around 15%. That’s the average. Some credit cards can be as high as 28%! Even if you lucked out and got a card with a 10% interest rate, the monthly payments would still be around $450 (assuming you had about 5K in debt – the national average is around 16K).

But wait a minute! I have a credit card for that amount and my monthly minimum payment is only $42! What’s the deal!?

In a nutshell that $42 is the cost of the interest. That’s why most financial advisors and websites say to make payments higher than the minimum, otherwise you are only paying the interest collected, while leaving your principle amount ($5K in this hypothetical) untouched.

If you absolutely need to take out a credit card, pay attention to the interest rate, try to keep expenses as low as possible, and always pay more than the minimum – even if it’s only $5 more – but more on that later...

But what about student loans? Interest rates can be as low as 5% on those.

Think about this: let’s say your university of choice costs 10K a semester, but you only borrow half of that. Assuming you took out a loan at a 5% interest rate, by the time you graduate you’ll have borrowed around $40K (eight semesters at a four year university). That means your monthly payment will be somewhere around $506.40 (you can see the full break down here) Also, the interest rate works the same way with student loans as it does with credit cards. If you don’t make more than your minimum payment, you’ll be stuck paying your loans for very, very long time.

Note: Most student loans will start billing you for the interest accrued + the principal amount, but there are options to negotiate a lower monthly minimum if you are struggling to make payments. Don’t do this! You always want to pay down the principal amount as much as possible. I’ll talk about ways we managed high monthly payments in tomorrow’s post…

2.       Be weary of 0% interest credit cards

Have you ever opened your mail or been contacted by your bank about opening a credit card with 0% interest for the first year + bonus incentives for making certain purchases? I have and let me tell you I signed up immediately… two different times to be exact.

The first time my initial thinking was, “Great! Now I can purchase new tires for my car… buy clothes… an iPhone.” I kept telling myself that it was like free money, because I could buy all this great stuff that I “needed” and I’ll just pay it back later. Plus, I was getting double point rewards for making these purchases at specific times the credit card company told me about. Surely, this would mean I could take a great “free” vacation or something equivalent by the end of the year.

The reality? A year later came around and I was already near the limit of the credit card, without the money in the bank to back it up. Even though I took advantage of the bonus point purchases, my reward balance was nowhere near what I thought it would be. It was barely enough to treat me to a nice dinner, or maybe an hour long massage.

The second time I took advantage of one of these “special promotions” was when my bank told me I could take out a line of credit, with no interest for one year, plus great bonus point incentives, and transfer my previous line of credit over at no charge. I thought, “Great! Now I can pay off my previous debt, without collecting interest, and maybe get closer to that reward I had previously envisioned.”

Another year passed by and I bet you can guess what happened… I was no closer to paying off my debt, had a higher interest rate than previously, and still didn’t have the reward points I thought I would have for a nice vacation…

I tell you all of this, because I feel like it happens to a lot of us. Credit card companies and banks know just what to say to make us feel confident, that with their help, we can take on the world and get ahead. The truth is, if that were the case they wouldn’t send out weekly advertisements in the mail. If everyone actually took advantage of the 0% interest rate, always paid off their card, and utilized the reward point system, they wouldn’t be in business. Sure, some people do… but not many.

In full disclosure, we do still have a credit card that we use to accrue travel points. We keep the balance at $0, but we sought this credit card out, not vice versa, and we didn’t apply for it until we got rid of our previous credit card debt. Also, we made sure that we had a few other things in place before venturing down this path again… but more on that tomorrow!

3.       Consumer credit cards don’t actually save you any money

Here’s another scenario: Have you ever gone shopping at a major department store and while checking out the sales person asks “Would you like to save 25% on your purchase today?”

You exclaim, “Why, yes. I’d love to!” Then the sales person immediately follows up your statement with, “When you sign up for our exclusive in store credit card…”

Most of us would say no thank you, but many of us would then end up getting the card, because the sales person says “oh, well you’ll get to save an additional 5% off of all future purchases.”

Here’s the thing (and I can speak from experience) you aren’t actually saving that 25% or the following 5% on your future purchases. The store is still getting that money back in the form of, you guessed it… interest. Similar to the previous lesson, if you know you don’t keep credit cards at a $0 balance (to avoid paying the interest), you will probably end up spending more on your purchase in the long run, via the added interest, than if you had just bought it outright.

Ok. Whew! That was a lot of information!

If you’ve made it this far in today’s post, congratulations! And thank you for reading and sticking with me. As I mentioned earlier (sorry to be a tease!) tomorrow I will go over how we used the information I talked about today to set up a game plan for eliminating debt + what our game plan was/is and how you can create your own.

Also, what are your thoughts/opinions on what I’ve talked about so far? Do you agree/disagree? Are there some hard lessons you’ve learned on your financial journey that I didn’t cover today? I’d love to hear from you!

How We Paid Off $50K+ of Debt in ONE Year and Changed Our Life | Part Three

How We Paid Off $50K+ of Debt in ONE Year and Changed Our Life | Part Three

How We Paid Off 50K+ of Debt in ONE Year and Changed Our Life | Part One

How We Paid Off 50K+ of Debt in ONE Year and Changed Our Life | Part One