How I Got Out Of $45K of Debt in 2 Years

I’ve never been good with money. I lived paycheck to paycheck, had a mountain of student loan debt, didn’t have an emergency fund or a savings, and was in a terrible car loan. My mentality was that I would never get out of debt so why even try. I remember the day where I thought, […]

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I’ve never been good with money. I lived paycheck to paycheck, had a mountain of student loan debt, didn’t have an emergency fund or a savings, and was in a terrible car loan. My mentality was that I would never get out of debt so why even try. I remember the day where I thought, this is my life and I will always have debt. I think back to that day and it is such a good milestone for me of how far I’ve come. It’s true what they say – money is a mindset. That’s the real journey I’m on.

About four years ago, I received $10K as a gift from a relative who had passed away. I knew I had to do something smart with it because it was already burning a whole in my pocket. It was burning so fast that I had already spent $4K of it.

At the time, my brother was investing in real estate and I was observing his journey. I would call him once in a while and pick his brain on what he was investing in, where the market was at. I had started looking at real estate myself, more so just dreaming of a life where I could be investing money. One day he mentioned something called an FHA loan. It’s a loan that is insured by the Federal Housing Administration (FHA) where you only have to put 3.5% down on a loan, but you do have to pay a mortgage premium. That got me thinking what could I purchase with my $6K.

My rent at the time was $1600 and it was going to go up by another hundred dollars. I started to think, well what if I bought something that was of equal value. At least I would be investing in my own house than just tossing money away for rent.

In the winter, I slowly started to look for real estate that would take an FHA loan. Everybody around me told me it was a terrible idea. Some said the market would never grow in Seattle, others said I wouldn’t be able to manage owning on my own. The one thing I’ve always been good about was following my intuition – whether that’s to a pile of nachos or a real estate deal. It was definitely tough going against everyone’s opinions and very disheartening too. But I knew I had to do something with the $6K before it evaporated.

Typical to my personality, the first apartment I saw I loved so much I decided to put an offer on it at asking ($260K). I had no idea what I was doing. Luckily, my agent was literally the best agent I could ever dream of, held my hand through the whole process. Redfin had connected me to her when I asked to go on an open house of the apartment.

The one thing I didn’t realize about purchasing real estate was closing costs. I told my real estate agent that I literally only had $6K and no money for closing costs. With her wizardry she was able to get me out of closing costs and get the seller to accept the offer before a massive open house that would kick me out of the running with higher offers coming in.

Before I knew it, I had an apartment that was mine! My first investment on a total whim. Talk about a leap. The reason I felt comfortable taking the leap was my agent encouraged me to go through the buying process and reminded me that I could back out at any time, even up to the very last signature. If all I have to lose is $200 for the inspection, I thought, then I can try it. The plan had worked – my new mortgage payment had only gone up by $200 compared to my rent, something I could manage and luckily had prepared for by cutting costs elsewhere. It felt really good to have an investment under my belt, and I promised myself I would start to do better with the rest of my finances.

Fast forward two years, and the Seattle real estate market had exploded. I had just moved in with my partner and was struggling to rent out the apartment. After trying AirBnB which resulted in me getting caught by my HoA I knew it was time to sell it. I trusted my intuition again when everyone thought I was crazy and should hold onto it for the next 10 years.

Almost 2 years to the day ( I made sure closing would be after the 2 year mark so I could avoid capital gains tax), in December my apartment went up on the market. Within a week it had sold (talk about crazy housing market!) for $425K.

I can’t tell you the relief I felt the day I paid off all of the debt. It would take me a few months to settle into the mental freedom of not having to be shackled to debt for the rest of the foreseeable future. I quickly squirreled away the rest of my nest egg and vowed to live a new life.

I know this is a unique way to get out of debt, but I hope sharing it shows there are many ways to get there. More importantly, it’s how to get out of the mindset of scarcity and debt. I still struggle and even 6 months later I still slip into the old me who felt out of control of her finances. I remind myself what my new mantra is – I am going to retire as early as I can!

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