Debt Diaries: How These 3 People Paid Off Tens of Thousands of Dollars in Debt

Getting out of debt can feel like a Herculean task. That’s particularly true today, when inflation-weary consumers are relying on credit cards to pay for everyday essentials. One recent study found that nearly half of credit cardholders carry a balance month-to-month, and a fifth of them have at least $20,000 of debt.

With average interest rates around 22%, credit card debt can quickly spiral out of control. But it’s hardly Americans’ only source of borrowing trouble. Personal loans, which have had a resurgence in recent years, have lower interest rates than the typical credit card, but the average is still over 12%. And borrowing for major purchases, whether it be a car or college education, is the reality for many.

So what can you do to end your reliance on debt? People who’ve paid off large amounts say that no matter how deep you’re in the hole, a better financial future is possible. Still, there isn't a singular, best way to pay off credit card debt. And despite what you may be told in advertisements, there's no magic solution that can instantly resolve debt problems.

Almost every story of getting out of debt starts with a change in attitude about spending, budgeting or working. You have to stop borrowing at high interest rates and come up with a plan to reduce your existing balances. Here’s a look at how to pay off credit card debt, based on three people’s journeys to becoming debt-free.

The snowball method (and a bigger paycheck)

• Who: Jim Luoma, a 43-year-old fiber optic worker in Virginia
• How much: Hundreds of thousands of dollars of debt across credit cards, business loans and loans from a family member
• How he got out of debt: Increased income, tackled smaller debts first, tracked everything

After starting a small cell tower construction business that didn't pan out, Luoma's finances were a wreck. Between personal loans, 401(k) loans, money he owed his dad and more than $15,000 on credit cards, Luoma was staring down hundreds of thousands of dollars of debt in April 2016. That's when he got serious about his debt and began categorizing all of his purchases to see where his money was going. Extremely strict budgeting never worked for him, but when he started to closely track his spending, he was able to spot instances of overspending and reel it back in.

Luoma also started using a spreadsheet that measured his net worth alongside his debts. Once he realized that paying off debt would boost his net worth just as much as adding to savings, it was much easier psychologically to stay focused on the red.

"That switch to thinking about net worth made a huge difference," he says.

Another source of motivation? Using the debt snowball method, which involves putting all extra money toward clearing out your smallest debts first and then moving one-by-one through your accounts. It also helped that he was earning more money in his subsequent (well-paying) career doing fiber optics work for tech company data centers. Luoma was able to pay off his high-interest debts in less than five years — and later build up some savings. He now makes three times what he did in his previous business, and it's helped him avoid falling back into debt. He does have a low-rate car loan, but no "bad debt."

Asked how he felt getting out of his situation, Luoma says, "Insanely better ... It's such a huge burden. Like, you don't realize how big that weight is until you take it off."

Side hustles and stricter budgeting

• Who: Rho Thomas, 35, a "lawyer turned Money coach" in Atlanta
• How much: Thomas and her husband paid off $678,000 of debt from student loans, car loans and other loans
• How she got out of debt: Side hustling, temporarily reduced retirement contributions, stopped overspending

When Thomas wanted to reduce her work hours to have more time to take care of her baby boy in 2016, she discovered she couldn’t afford it with her debt obligations. That was when she realized it was time to make a change.

She and her husband both had debt from college and graduate school (about $470,000 in student loans at the time) in addition to car loans and other debts. While they had promising career plans in law and medicine, their salaries didn’t make them feel successful when they had all that debt hanging over them, Thomas says.

At the worst point, their minimum payments added up to about $3,500 per month — not counting their mortgage. And even though all the loans had rates below 10%, the interest was a major obstacle. "Seeing people who weren't in the same professions, who didn't have as much income, but they were doing better than us, [that] kind of lit a fire," she says.

It often takes an "aha" moment like this to begin prioritizing paying off debt. Thomas said she created a financial plan to slow her spending. Prior to that point, her approach to spending was mostly care-free: If there was money in their account, they would buy what they wanted, even if it wasn't a strict need.

Instead of cutting work hours, they decided to do the opposite and try to increase their income. Her husband got a second job and Thomas started selling stuff around the house — like baby items her child had outgrown. She'd been maxing out her retirement contributions but temporarily scaled that back, putting in just enough to get her 401(k) employer match. Cutting out non-essential spending — think: new clothes and going out to eat — was also key.

All of these changes allowed Thomas to start making larger debt payments. In an average month, they were throwing an extra $3,000 toward shrinking their balances. She documented her debt journey online in a blog, which laid the groundwork for a career change. In 2021, she paid her last debt bill (aside from her mortgage) and left her law firm to become a full-time money coach who specializes in counseling lawyers.

Help from a credit counseling organization

• Who: Shane Jackson, a 38-year-old academic advisor at the University of Hawaii living in Honolulu
• How much: Paid off over $30,000 in debt accumulated from credit cards
• How he got out of debt: Debt management, gig work, budgeting

In 2020, Jackson had over $30,000 in debt, almost all of which was credit card debt. He says he was unprepared for the high cost of living when he moved to Hawaii a decade earlier. Even though he felt like he was living cheaply, his debt had been gradually increasing across a number of credit cards, some of which he had originally opened for introductory promotion offers. A couple of those cards had teaser 0% rates that would last for a year or two. But when the APRs jumped to 25% or more, Jackson fell further into the hole.

The tipping point came after he supported a family member dealing with health issues. "I overextended myself, not realizing that my debt had gone up more than I was comfortable with," he says. It was a distressing realization, and his debt soon became unavoidable. "It really did affect every part of my life. I just couldn't see a way out."

Jackson began researching debt relief programs online. He decided working with a credit counseling organization would be the best fit for him, and he was specifically interested in a debt management plan. These plans involve giving up all or most of your credit cards and agreeing to pay what you owe in addition to some fees. In return, the credit counseling organization negotiates down the interest on your debt. Through Money Management International, six of Jackson's card companies agreed to 0% interest and just one card was still at 10%.

Jackson was then on the hook for a $683 monthly payment – but that was actually less than his minimum payments before he enrolled in the debt management plan. Adjusting to living without credit cards was hard at first, and there were times when he ran out of money without having them to fall back on. But that motivated him to budget harder and work more hours in a second job delivering with Uber Eats. Four years later, he was out of credit card debt.

It "really sucked" when he ran out of money, Jackson says. But it was a learning experience. "The next month, or the next time I got paid, I made sure to review my budget again and make sure that I wasn't overspending."

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