We Paid $200,000 in Debt in 2023. Here are Some Wealth Tips

We paid off a lot of debt in 2023. And since we like to be honest, it wasn’t that easy and it was intentional. Because of this, it isn’t as simple as copy and paste. The goal of the blog post is to record how we ended up strategically reducing our liabilities. This reduction didn’t impede our wealth growth either.

It’s truly the best of both worlds for our household.

Table of Contents

Debt is Just Math. Unfortunately, that’s where the anxiety kicks in.

“Most people make accountability, budgeting, and cash flow management a chore. Well, most people are broke, so don’t do that.”

According to a 2020 Quartz article, over 90 percent of Americans experience math anxiety. 17 percent said they had high levels of anxiety. 11 percent of university students have high enough levels of math anxiety to warrant counseling. Now pair it with social media and unending dread and you have a potent mix of Anxious Entitlement.

With an audience primed for self-destruction, give them a credit card. American households carried over $19 trillion in debt by the end of 2023.

So much so the average household debt peaked at over $100,000. For as much as social media would like you to think that this can be solved by venting, the only way to tackle these expenses is by paying them down.

I added all of these tidbits to remind you that you aren’t alone. You are similar to most Americans, however, you need to adjust your habits and goals if you want to be financially independent. Incremental changes today, beat jumping out of the financial plan without a parachute tomorrow.

How Do We Pay Off Our Debt?

When I started paying off my student loans (2012), I had to first face how I ended up with $110,000. While the first $30,000 was undergraduate loans, the remaining $80,000 was unnecessary wasteful graduate school time. I didn’t even finish. On top of that, I took the pause and capitalized, an extra $10,000 in 2014. How I got here (financial neglect) was not how I would get out of this mess.

As such, I started tracking my expenses and took on whatever job came first.

Eventually, I started sharing my exploits on social media to subtly force everyone to be more transparent with themselves. See how I stated, “You need to be transparent with yourself.”

Most people carry so much guilt and shame from debt that they make it worse by not acknowledging it. Even worse, they ignore the interest and their problems compound. Seriously don’t do that.

Once we became honest with where we were, it was easy to recognize where we needed to go.

Debt Repayment over Time Not Shortcuts

	2021	2022	2023
Mortgage Principal Repayment x2	$10,759	$12,000	$12,832
Misc. Loans i.e. Auto and Personal	$3,327	$879	$5,021
Student Loans	$0.00	$0.00	$88,696
Credit Card Repayment	$98,827	$111,173	$97,853
Total	$112,790	$124,052	$204,402

*CC repayment is due to our exclusive use of CCs

Over time, my wife and I were able to transform our cash flow in a way that allowed us to invest on the front end to save on taxes and pay off debt strategically. By investing in our 401ks, we lowered our Adjusted Gross Income (AGI) on our tax return, which lowered our student loan payments.

First, I paid off my undergraduate loans in 2015. Since my wife only had $10,000 left, we prioritized her repayments to free up mental space by 2020.

No need to worry about where the next auto debit was coming from, which helped us move money into our individual retirement accounts (Traditional IRAs) which lowered our AGI again.

Since I’m a federal employee, we took advantage of the Public Student Loan Forgiveness (PSLF) program and paid less than $45,000 until nearly $89,000 was forgiven. In total, we must have paid less than $55,000 for $150,000 worth of student loans. All of this while investing the difference.

This proves that every debt repayment strategy has to be unique.

You have to get good with money

Sounds crazy but It's true. We were able to pay $100k in total debt repayments in 1yr. Here's our best advice for married millennials.

A lot of people dress financial literacy under the thin veil of paying off credit cards and hyper-focusing on debt. If you are over the age of 50 and headed toward retirement, that’s a great call. However, if you are under 35, you should never sacrifice time on your wealth journey.

Your relationship with money can be the end of you. It’s not just how you spend it, it’s how you use money that matters. Most people are forgoing opportunity costs if you don’t run the math. I recently spotted a great example of this with the image question from the AFROS on F.I.R.E. Facebook group. Ref. to Question 1

With the mere mention of a paid-off home, most people chose option B. However that’s the wrong choice. Why? Math. Paid off is a misnomer, it’s irrelevant to the data. When all things are equal, always take more money. It’s worth over $400,000 more than the paid-off home.

Here’s the Math

If you keep the same investment of $500,000 at an annualized rate of return of 8 percent for 20 years, that’s $2.3 million (Exhibit A). If you chose $100,000 with $2,550 invested per month for 20 years that’s $1.9 million (Exhibit B). The longer this goes the more likely that Option A starts to invest $2,550 per month as well and now you have critical mass and compounded time.

**Exhibit A** – had more upfront and earned more with no more contributions

**Exhibit B** – Paid more and earned less.

All this to say don’t make debt pay off such an emotional ordeal that it becomes an enemy to you. I still remember seeing a financial couple hold on to $100,000 in cash during 2020-2023. Even a conservative index ETF approach with $VOO would have yielded a portfolio valued at $206,942 from April 1, 2020 to January 30, 2024.

Instead, they settled for a growth rate of 0.01% in a bank savings account. They made $40 but they are happily paying off debt since student loans restarted. They could have saved even more on taxes by maximizing their 401ks, IRAs, and HSAs.

The Game of Debt Repayment is not Black and White

When it comes to paying off debt, the financial game is not black-and-white or clear-cut. You have to have a vision for your money and understand what it takes to get you there. Beyond that, prioritize your money in a way that doesn’t exclude the wealth-building segment. Pay off your debt as a team if you are married. And focus on what you need to do versus what everyone else is doing.

If all of this went over your head, it means that you might be suited to outsource the job to a certified financial planner to work with you 1-on-1. There is no shame in that.

The goal is to ensure that you make the most of your time and money. No matter how the math is expressed, it comes down to how you choose to live your life. Even if you choose to pay off debt quicker, that’s also ok. As long as you understand the opportunity cost and what you stand to lose or gain. I wouldn’t leave money on the table. Especially if it’s worth half a million dollars in sweat equity.

Disclosure: This post is brought to you by the Neighborhood Finance Guy. We highlight financial literacy information, resources, and more on your way to money management goals and personal wealth. Our goal is to help you make S.M.A.R.T. +E.R. decisions with our money. We do not give investment advice or encourage you to adopt a certain investment strategy.

Your personal finance is up to you. If you take action based on one of our recommendations, we didn’t earn a dime in 2022 or 2023. We operate independently. We are aspiring broke artists (at this rate) but luckily we didn’t quit our jobs.