How I Ditched Debt: Whipping Up a Payoff ‘Tornado’
In this series, NerdWallet interviews people who have triumphed over debt. Responses have been edited for length and clarity.
Steven Donovan, Even Steven Money
Who: Steven Donovan
How much: $118,000 in 5 years
Steven Donovan didn’t get an education in personal finance growing up. The topic wasn’t covered at his high school or college, as is the case for many Americans. So Donovan had to figure out how to manage his money, overcoming one stumbling block at a time.
Donovan was carrying about $118,000 in debt when he realized he needed some personal finance know-how. He had student loans, some credit card debt and a car loan. His salary of $40,000 at the time was just enough to get by. Then his private student loan issuer suddenly tripled his monthly payment and he had no choice but to confront his debt head-on.
He started reading books from some of the big-name personal finance authors, including J.D. Roth and Dave Ramsey. During his five-year payoff journey, he followed a number of personal finance bloggers who offered the information and motivation he needed.
The bloggers who helped along the way inspired him to start his own online resource to help others. With Even Steven Money, Donovan serves as a financial coach to those who need help managing their money. He recently talked with NerdWallet to share his story, which may inspire your own journey to get debt-free.
What was your debt when you started, what is it now?
I had around $118,000 when I decided to focus on paying it off. Today I have no debt.
How did you get into debt?
When I left college my credit card debt was around $5,000. For my student loans, I had a private loan that was $20,000 and a federal that was about $35,000.
Then I had a loan from my parents that was $38,000, which was for school and living expenses. So right out of college, I had around $98,000 in debt from school. Then a few years out of college I decided to buy a Mercedes-Benz, which was about $18,000.
Before I started seriously paying off my debt, what I owed on my credit card fluctuated a bit, so I was carrying around $118,000 around the time I decided to pay it off.
When did you decide to get out of debt?
There were two moments that drove me to get out of debt. One was when I started to get a little more involved in personal finance. I read blogs and made an account with Mint to track my finances. I went on there and put in my bank account info — checking, credit cards, all that. When I went to put it all in, I couldn’t bring myself to enter in my student loan info because I didn’t want to see a negative net worth. … That was a big realization for me: That I was so far in debt that I was afraid to put in the info.
Another big moment, fast forwarding a bit, was when I moved to Miami from Chicago. In Miami, I was working first as a volunteer basketball coach, then doing side hustles like mowing lawns via Craigslist and selling items from Ross, Marshalls, Nike on eBay. Then only later on did I find part-time work at a kiosk in the mall. I was just trying to make minimum payments on my debts and cover groceries.
About a year into living there, I ended up getting a letter in the mail from my private student loan company. Since finishing college I had gone into forbearance and paid the minimums … [but now] my payment was going to triple. It upended my budget and something had to change. I tucked my tail between my legs, moved back to Chicago to save money and worked where I did when I was in college. It was a very humbling experience.
How did you get out of debt?
Moving to Chicago was a big part of it.
Starting out I was able to live with family for a few months, and then once I got my job I shared an apartment so housing costs were relatively low. Plus selling my Mercedes and taking public transportation and walking or biking to work made a big difference. Selling my car was really big for me, and I saved close to $500 a month and got rid of a big chunk of my debt right there. So low housing costs and transportation played a role.
My cost of living was less, but most of why I moved back to Chicago was to obtain a full-time job. At first, I was working at a golf course that was essentially full time, and very shortly after I did obtain full-time work at U.S. Bank as an assistant branch manager. I was also looking for a side hustle, and I ended up getting into selling men’s gently used clothing and new clothing on eBay.
Then I realized that, now that I have money coming in, what can I do to pay off my debt? I started using the debt snowball. For me, it made sense to choose the debt snowball because I hadn’t had many money wins so far. And anything I could pay down, I felt really good about.
On a parallel track, I did what I call the “debt tornado.” My philosophy is, no one hates your debt more than you. If you really don’t like your debt, you kind of end up getting angry about it and you want to do something about it. So I channeled that anger into paying off the debt I disliked the most. I chose the student loan company that tripled my payment and I decided to tackle that first.
How did you stay motivated?
The biggest motivation for me came from reading personal finance blogs and websites. These blogs also inspired me to start my own blog to write down what I was thinking. And that became my accountability partner.
I was also commenting on a lot of blogs, and if someone was going through a struggle, I would think, “That’s similar to me. What can I learn from them? How can I encourage them?” That was really beneficial for me.
Then, after a few years in Chicago, my wife and I married. The biggest changes financially at that time were I received an internal transfer, which was an increase in salary. Being married, also I had a partner who really encouraged me and supported me when I was paying off my debt.
We decided as a couple that whatever debt you brought into the marriage you were responsible for (a mortgage in Florida for my wife and my personal debt for me). We split costs everywhere else, including housing, utilities, groceries, etc. … Our combined household income was low six-figures.
What education in personal finance did you have before this process?
In high school, I didn’t have any personal finance education. I maybe had an economics course, but there was no personal finance education offered. My parents, of course, instilled hard work in me, but personal finance wasn’t a part of that.
When I went to college I knew I wanted to be in business, and I did get a finance degree, however there wasn’t a personal finance aspect there, either. Where I learned everything really — beyond trial and error and going to the ATM and finding out you don’t have any money — was the internet. I relate more with personal stories I read online that I can apply to my life.
What are your financial goals, now that you’re debt-free?
The next step for my wife and I is figuring out what makes us happy and having that. We want to go from financial freedom, which we have now, to being financially independent … My wife works a 9-to-5 job now, and I’ve quit my day job and transitioned into focusing on my website and working as a money coach, helping people just like me who were struggling and paying off debt. So we want to figure out how we can get by on our income without having to work 9-to-5 jobs.
How to ditch your own debt
Looking to ditch your own debt? Here’s how:
- Know what you owe, and work to stop the bleeding: The first step to paying off your debt is seeing how much you have to pay down — and stopping yourself from increasing that amount if possible.
- Really understand your spending: See where you’re allocating your dollars and where you can make changes. Creating a budget or using a spending tracker gives you a detailed understanding of your cash flow, so you can see where you might be able to make cuts or rearrange things.
- Find your strategy: There’s no “right” way to pay off debt. Find a debt payoff path that works for your lifestyle, budget and debt load.
Photo courtesy of Steven Donovan.
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