By Morgan Quinn / GoBankingRates
November 17, 2015

What does it take to knock out $157,000 in debt in just three years? You don’t need a magic wand or a winning lottery ticket.

Maria Nedeva is a wife, mother and researcher who lives and works in the United Kingdom. She moved there from Bulgaria after receiving a scholarship to a British university. After a year of studying, she was offered a job at the university, where she met her husband on her first day of work. The couple has been married for 22 years. Like other spouses, they’ve faced challenges. But nothing prepared them for the 2008 financial crisis that rocked the global economy and flipped their lives upside down.

GOBankingRates talked with Nedeva about how the couple’s financial life imploded, including the day she discovered that she and her husband were over $90,000 in debt — and it was growing. Read on to find out how one handy spreadsheet, and a healthy dose of discipline, helped her family turn a financial crisis into financial freedom.

Bringing Debt to the Marriage

I didn’t bring any debt into the relationship; quite the opposite, in fact. I had some savings. My husband and I didn’t discuss money before we got married. In Europe generally, and in the UK more specifically, this is not considered to be the thing to do. Still, I was very surprised when on the morning of our wedding I saw a credit card statement of my husband’s and something like $7,600 on it.

Using Credit Cards to Live

Very little of our debt was on my credit cards, approximately $4,600. The rest was on credit cards in my husband’s name. Still, it was our debt. He just used his credit cards more than I did. Some of our debt was accumulated slowly over time but the financial trouble of late 2007 and 2008 didn’t help. During that time, my husband worked as a consultant statistician and companies simply stopped letting work out. When you work for yourself you always hope that the next contract is around the corner; when it doesn’t materialize you can end up borrowing a bit more. This is what happened in our case.

But we also didn’t manage our money well in the first place. I had no idea how much I earned, how much we spent or how much regular household staples cost. Getting in debt was probably inevitable.

Accumulating More Debt

One evening I was tired from a long workday. I looked around at our rundown kitchen. The ceiling was cracked from a bathroom leak. I just kind of lost it.

I told my husband that … I was convinced we have debt and I’d like to know how much it is. A couple of days later, my husband came up with a number — $91,000. I had an absolute fit. The thing is that the number kept growing and it reached $157,000.

Taking a Debt Consolidation Loan

I knew we needed do something about it right away. At first, I just wanted the debt to disappear but I believed paying it off was the right thing to do. I don’t believe there were other viable options. In the UK, bankruptcy is a very serious thing and our situation wasn’t that desperate.

I thought about selling our house. We have quite a bit of equity and we could have paid off the debt and bought another house with a small mortgage. My husband discussed our situation with the bank manager and we decided to take out a consolidation loan to pay it off. The loan was for 10 years and secured against the house. It gave us the breathing room to rework our finances and start paying the debt off while developing the discipline and sound habits that underpin financial success.

Learning About Money Management

I started with the basics: Rich Dad, Poor Dad and The Richest Man in Babylon. I still think that these are very good books. Both help beginners start thinking about managing their finances in a different way.

I read a lot more than those two books though, including academic articles on accounting and finance. This isn’t technically necessary but I’m a university professor so when I research things I like to do it properly. There is also a UK-based site I used a lot at the beginning: the Money Saving Expert. It has a wealth of practical information but even more importantly, there is a vibrant forum where readers can exchange information, ideas and support each other. This is really helpful when you are first starting out.

Cutting Costs

I wouldn’t call it drastic but we did manage to reduce our monthly spending by a very large amount within a matter of weeks. I used a system I developed and call the ERR strategy to money management. (It stands for Eliminate waste, Replace and Reduce consumption). First, I looked at our monthly spending and eliminated all waste. You’d be surprised how many automated payments go out long after you’ve stopped using the service; how much you waste on pricey insurance policies and how much food, clothes and other consumables you plainly throw away.

We cut approximately $530 per month from food costs. We started cooking more but making a weekly menu and buying only (the ingredients for the meals) we cook made the biggest difference. Next, we changed the way in which we do things. We still went on vacations but we used friends’ houses or booked accommodations and flights separately to save money. We also started having movie evenings at home.

Lastly, we reduced our consumption. I learned to have six pairs of high quality shoes rather than 45 pairs. We applied this to buying clothes, gadgets and other stuff that clutters homes and lives.

Budgeting for Fun

Fun is the salt of life and life can be a great bore if it loses its taste. So when paying off debt aggressively, it is important to budget to have fun. I started playing tennis in the park with my son, which was great fun and costs nothing. We’ve also had great days out in different parks for the cost of an ice cream.

One of my favorite things we did was host dinner parties at home. Cooking turned out to be really fun and we could chat with our friends. Our friends even gave us a challenge: to prepare a three course French dinner for $2.25 per person. We actually did it and it was a total success. More importantly, it was great fun.

Avoiding Splurges

At first it was very tempting to go into complete denial and stop allowing myself and the rest of the family any frivolity. The problem is this usually makes life so miserable that it backfires and someone ends up splurging.

What I learned is that even when people are on a strict budget, they need to allocate some money for having fun. Our lives became much more enjoyable when we finally set up an “I’m so worth it” fund dedicated to just having fun.

Treating Yourself

I’ve always had a bit of a problem with treating myself to the things that make my heart sing. My husband is the same way. This became a big issue when we started paying off the debt.

To ease our way into being able to do some of the things we love without guilt, we started transferring $75 per month into separate accounts. This money could be spent on anything that made us feel good, like a concert, going to the theater, a trip to London or a new handbag. I’m saving mine for a motorbike.

Using Budgeting and Tracking Tools

I used a very simple Excel spreadsheet I developed for tracking the debt. Whenever I needed the motivation to keep going, I’d open the spreadsheet and gaze lovingly at it. Weird, I know, but it worked every time.

I also developed a money management tool to match the ERR strategy. It’s basically like updating your accounts once per month. Expenses are divided into three groups like spending on food and gas and are fairly detailed. When I first started, this system helped me spot that we were spending over $91 per month on sweet treats, which was totally unnecessary. Every little bit helps.

Paying the Loan

I sometimes joked that our strategy was simple: Spend less, earn as much as you can and throw the rest at the debt.

We made continuous loan payments, even small amounts. There was no penalty for making multiple payments so we just put money toward it whenever we could. We also made sure that we paid off half of the starting debt very quickly because the faster you get to the middle, the faster you’ll repay your debt because that’s when you start paying off more principal than interest.

Celebrating the Last Debt Payment

Our last payment was in early February 2013. I was facing 80 or so students when my phoned beeped. It was a text from my husband saying done and dusted. That meant he had made the final payment on our loan. Needless to say, there was a new spring in my step when I left that lecture theater that day.

That evening, my husband and I shared a bottle of Casa Real 2010, a very expensive bottle of wine I brought back from a work trip to Chile in December 2012 and kept specially to drink when the debt was paid off.

Working Toward Financial Freedom

At the moment we are working toward being financially free by October 2018. We’d like to have enough passive income so that I don’t have to work if I don’t want to. We’ve built a fairly large cash reserve and some small deal investments to prepare for larger scale investing. We are experimenting with different options beyond stocks, shares and index funds.

We are not saving for anything specific. We are just focused on building sustainable wealth.

Giving Advice

Before you do anything, exhale and calm down. You can’t make any sound decisions if you have negative emotions controlling you. Once you are calm and collected:

  1. Look to reduce spending where possible but avoid dramatically reducing your quality of life.
  2. Earn more. Making more money is not difficult but you’ll have to learn to spot opportunities and act on them.
  3. Focus on the life you want and the rest will fall into place.

This article originally appeared on GOBankingRates.com.

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