Marching To Debt Freedom – Couple #3 – Month 06


This couple has been married for many years and have one child.   They have HAD IT with their debt and have been marching toward debt freedom since November 2007.  They are THROUGH with credit cards.

What went well this month?

We took out a 401(k) loan to pay off four high-interest credit cards.  This allows us to pay a MUCH lower interest rate, and even better… we pay the interest back TO US! 🙂 We are now hoping that we can take advantage of some 0% interest offers and transfer the remaining balances to those cards.

What were the challenges/struggles this month?

Trying to not get discouraged about not getting it all paid off now!  We are also planning on making higher payments on the lowest debt as soon as we see what the 401(k) loan payment does to the paycheck.

Updated Debt Freedom Date …

Month By Month Progress …

What has helped you stay on this Debt Freedom March?

Knowing that one day we will be DEBT-FREE and not live paycheck to paycheck!

How has this Debt Freedom March impacted your marriage relationship?

We are actually closer now and get this: WE DON'T FIGHT ABOUT MONEY!!!  We both know what we owe and we are both on the same page to GET IT PAID OFF!

Sangl says …

Couple #3 has completed part two of their three part plan to restructure their debt.  Their credit cards had hugely punitive rates – all of them 20% or higher.  This was really killing their ability to attack the debt principal.  With the majority of their debt now at a much lower interest rate (some of it at 0%!), they are now positioned to make tremendous strides toward Debt Freedom!

In my meetings with thousands of people, I have seen situations like this completely intimidate someone and they allow it to prevent them from taking charge of their finances.  Couple #3, I applaud you for sticking with this!  You guys CAN do this, and you will!  And all of us will have this front row seat to cheer you on.  Way to go!

Readers …

Would you leave some words of encouragement for Couple #3 in the comment section? 

If you are totally intimidated by your financial situation, I would be glad to help in any way that I can.  We offer FREE one-on-one financial counseling through NewSpring Church in Anderson, SC.  I have even begun offering a very limited number of on-line appointments.  If you are interested in receiving financial counseling, please contact me HERE


  1. chris on June 6, 2008 at 4:02 am

    Joe: Unless I’m missing something, there must be something wrong in your Month by Month progress spreadsheet.

    They started with 34.4 months until debt freedom, but they now are at 37.3 months. It appears they went backwards. Yet I know from they are working hard.

    And their total debt paid off went up, then down and back and back up again.

    Was the 401-k loan a last resort effort to kill higher cost debt?

  2. TurtleLover on June 6, 2008 at 7:46 am

    I too am confused with the payoff amounts/dates … as I was with Couple #1 … so I assume there is something there that isn’t mentioned. As for the 401k loan… I have now learned the reasons for NOT taking a 401k loan but… it’s not like I haven’t done one myself. Hopefully this will get you to where you want to be and you never have to take a 401k loan again. We all gotta start somewhere! Keep up your march to debt freedom!

  3. Travis on June 6, 2008 at 10:21 am

    Couple no. 3….
    I applaud you for putting yourself out there! I believe that you are going to win with money because you care enough to seek out a plan.

    This is not meant in a mean spirited way at all. It is just a point of view. (my point of view) I am not living your life, I have not walked a mile in your shoes, I am not on the ground with you. I want to say KEEP UP YOUR PLAN!! I just want to offer the information so that anyone else my use it. If they deem that it fits their situation.

    Couple 3 says in what went well this month……
    “We took out a 401(k) loan to pay off four high-interest credit cards. This allows us to pay a MUCH lower interest rate, and even better… we pay the interest back TO US! ”

    It is the “…we pay the interest back TO US!” That catches my attention. The underlying tone is that it is good idea. I fear that others will say to themselves…..we should do that too!!

    I get it…. You felt like you could not make strides because of the 20% credit card interest and the amount of debt. I would offer up that those feeling may not be ALL ABOUT interest.

    Here is my point….

    I would have put the 401k loan in the struggles/ challenges column.

    I would have felt like….Boy, this was a hard decision to make! We were just so intimidated by amounts and the high interest credit card rates. We just were not making progress and we felt like a 401k loan was our best option.

    It sure sounds appealing to borrow your 401k money and pay yourself 8% interest back. (you even put a smiley face on it) However, here is the flaws or pitfalls.

    Your 401k money was put in “pre tax” and now with your loan you have to pay it (plus the 8% interest) back with “after tax” dollars. Then when you retire and withdraw your 401k money, you pay taxes again. Not to mention that your unplugged your 401k investments that are earning compound interest for the duration of your loan payback period and until the time at which you start your retirement withdraw. This resulting in even more loss to the net-worth.

    Here is real “x-factor”…. What if? What if, you are not able to pay the loan back on schedule. ie….. layoff, quitting, or death. Oh yeah… these things are not going to happen to you. Don’t kid yourself!! I am sitting here because the company that I work for has cut the staff by 52% and for those of us that remain employed the work week is cut by 20%. Pick up the paper any day of the week and you will find that battles with illness and tragic accidents do happen to good people ALL THE TIME. If any such things should happen to you, the 401k loan is due in full. If not repaid it is treated as an early withdraw. Thus, resulting in 10% penalty and income taxes are due.

    If you are reading this and are thinking about a 401K loan…. I challenge you to have a BIGGER IHHE moment!! I have been to Joe’s FLE seminar and he showed how getting rid of the 19k car payment can affect your net-worth and ability of make strides in paying off debt. ($500/mo car payment plus car looses $300/mo in value = net-worth chance of MINUS $800/mo)

    Think about what stuff COSTS YOU, not just how much stuff cost you THIS MONTH.

    With all that said…. (Just being real) My wife and I may have done the same if in Couple #3’s situation. We didn’t need to because we were never intimidated by interest rates or how much we owed.

    But… I can feel in my heart how others do. I guess that it would depend on how overwhelmed we were at the time.

    This stuff is PERSONAL finance. The whole person comes into affect.

    If you are considering a 401k loan…hear this. You will not be doing yourself a FAVOR by putting a cutie little spin in your mind about paying yourself interest.. I AM NOT SAYING THAT IT’S ABOUT RESTRUCTURING YOUR DEBT. I am saying that…the mindset of “this is good for us” is bull…. face the music and use that as reason to do what is necessary to propel yourself forward.

    Couple #3 – KEEP YOUR HEAD UP!! (please don’t think that I am dogging on you.) Quite the opposite!! You are on your way…just don’t let your guard down, face up to where you are and keep moving!!

    Believe me…. It is good over here!! Keep up the fight against debt….it is worth it!!


  4. Terry on June 6, 2008 at 12:51 pm

    Having only been started for a short time on the way to debt free, it is really helpful to read some of these comments!
    I guess it’s best because I am able to know others problems(briefly)and this empowers me with the knowledge that I am not the only one with a load of debt to get out from under!
    You guys hang in there, and maybe we will all get to go to a JOE SANGL DEBT FREE CONVENTION some day and be one of the folks to testify that WE MADE IT!!!
    That will feel very good I just know!!

    Later, T.W.

  5. Joseph Sangl on June 6, 2008 at 5:14 pm

    The reason that the Debt Freedom Date went UP is because Couple #3 applied less money toward debt this month. Since the total of the monthly payments was less this month, it meant that the calculation yields a higher number.

    Look for it to recover SUBSTANTIALLY over the next several months!

  6. Mike & Ann on June 9, 2008 at 10:43 am

    It really is hard not to be discouraged at times, but hang in there, there is a pot of gold at the end of this rainbow. You will be able to bring home a whole paycheck and owe nothing but utilities. How awesome would that feel.

    Not to mention all the great things you can do for God, family and church with the extra money once your debt free. It will be a liberating experience.

    God has allowed us to pay off a tremendous amount of debt with only the house and car left to go and they are almost history too.

    The excitement mounts with each debt paid off.

    YOU CAN DO IT!!!!

  7. Melissa on July 10, 2008 at 10:58 am

    I whole-heartedly agree with Travis. Taking a loan from your 401k is not a smart thing to do and Travis did an excellent job of explaining the reasons why.

    Excellent post, Travis.

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