368. How Kati Paid Off $236K Debt and Saved $89K on a Single Income

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In this episode of the Debt-Free Dad Podcast, host Kati shares her personal journey of balancing debt payoff and savings. With over $236,446 in debts paid off, Kati discusses the challenges and strategies she used to also save and invest $89,500 into her emergency funds, retirement plans, and health savings account. She highlights the importance of an emergency fund, prioritizing debt repayment, automating savings, and making wise financial decisions with windfalls. Additionally, Kati reflects on her parents' retirement experience and shares actionable steps to manage finances effectively. Join Kati as she offers valuable insights to help you take control of your finances and achieve debt freedom. 

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Episode Transcript

Kati (00:00):
When you're focused on getting out of debt, do you
worry about building yoursavings and retirement?
Balancing savings and payingoff debt can feel like trying to
pat your head and rub yourstomach at the same time.
It's doable, but it's going totake some coordination.
Before I ever started payingoff debt, I already felt like I

(00:21):
had gotten a very late and verysmall start to investing for my
retirement.
We all have differentapproaches to this topic, so I
wanted to share my personaljourney with you today.

Announcer (00:34):
You're listening to the Debt Free Dad podcast with
Brad Nelson.
Brad and his co-hostsexperience the anxiety of living
paycheck to paycheck beforelearning the fundamentals of
financial success.
They are now on a mission toempower regular people to pay
off their debt for good andenjoy happier, less stressful
lives.
Keep listening forinspirational interviews, tips,

(00:56):
tricks, and practical advice togain financial freedom.

Kati (01:02):
I'm Katie, your host for today's episode, and I've been
on my journey to debt freedomfor just over seven years now.
And in that time, I've paid offover $236,446 in student loans,
car loans, medical bills, andcredit card debt, all on a
single income.
Now, along with thatmind-boggling number, in the

(01:25):
same last seven years, I havesurprisingly not added up all
the money that I was alsoconsistently plugging into my
emergency funds, retirementplans, and health savings
account or HSA.
When I did the math, I wasshocked to realize that I have
saved or invested over $89,500.

(01:46):
And I didn't even start savinga single penny for retirement
until I was 30 years old.
I was running my own businessand barely paying myself, let
alone having much of a savingsaccount.
But I consulted a financialadvisor and opened a Roth IRA
account.

(02:07):
She said, or she reminded me,that starting to save anything
is better than nothing at all,just like we say about paying
off debt.
So I started putting in $50 amonth.
And after about eight years ofinvestments, I had just under
$6,000 in my account.
Not enough to retire, but itwas something.

(02:29):
After starting the debt-freedads program, Roots of Personal
Finance, I started to budget andreview where my money was
going.
And at that time, I felt likemy finances were stretched so
thin that I stopped makingcontributions to my Roth IRA and
just let the funds continue togrow simply with the interest

(02:50):
and investments I had alreadymade.
Today, that account is just shyof $19,000.
So that proves that compoundinterest can really add up,
which is great when it's workingin your favor.
Now, in the meantime, at mycurrent job, I have the option
to contribute to my 401k fromeach paycheck, and the company

(03:13):
will match up to a certainpercentage.
That is free money that I wasnot going to leave on the table.
Again, it was a small butsteady amount being invested,
but it slowly grew over time.
And I've continued tocontribute to my 401k to
maximize that matching employercontribution.

(03:33):
And it's grown to almost$75,000.
Now I'm only 45, but what's gotme thinking a lot more about
retirement lately?
Well, my dad retires at the endof this year.
He's got a countdown on hisphone that can tell you the
weeks, days, or even minutesuntil retirement.

(03:55):
Not that anyone's counting.
Both of my parents have prettymuch always worked full-time for
my entire life.
Back in the early 2000s, mydad's corporate job ended up
having another company come in,bought them out, and closing the
local offices.
So my dad was offered either aseverance package or he'd have

(04:16):
to relocate to Manhattan to keephis job.
He took the severance packageand ended up opening a hardware
store in a very rural county.
I called this his midlifecrisis, but honestly, it's
probably the happiest he's beensince he was a boy growing up on
the farm.
As you may remember, 2008,2009, the economy took an

(04:43):
unfortunate downturn.
And their rural county took abig hit.
When a grocery store closes,then a church, and then a bar,
you know it's dire.
My dad ended up having to closethe hardware store, and they
moved out of the apartment abovethat store.
And dad found another job.

(05:03):
Now, while my parents didn'ttake any money out of their
retirement fund during theirtime in the hardware store, they
also weren't contributing tothat account for almost a
decade.
They're feeling that impact nowand tightening up their
finances for retirement.
And they've made some greatmoves.
I'm so proud of them.

(05:24):
They've paid off their cars,they're paying down a lot of
their mortgage, and they're nottaking on new debt.
But I have taken note andrealized that with all the debt
I have paid off, and even thoughI have another 20 years to go
until retirement, I have thefunds to start contributing to

(05:44):
my Roth IRA fund again.
And doing that will make a hugeimpact on my final retirement
numbers.
But I'm also putting myself ina much better position simply by
not having all that debtdragging me down anymore.
So let's break it down withsome steps that might help you.
Number one, build an emergencyfund first.

(06:08):
We're starting with a goal of$500 to $1,000 to start.
This protects you from puttingnew emergencies on a credit card
and undoing your progress.
I swear this is the mostimportant tip that I thought was
impossible until I did itmyself.
And then I'm like, okay, allright, maybe I can do this.

(06:30):
Number two, focus on payingdown debt to free up your
finances.
So if you pay extra on yourdebt with the lowest balance,
especially credit cards orpayday loans, while you're
making minimum payments on yourother debts, this will help you
keep that momentum and progress.

(06:52):
Once you've paid off thatsmallest balance, you're gonna
snowball all that money you werepaying towards it and start
hitting the next lowest debtbalance.
Number three, automate yoursavings, even if it's small
amounts.
Set up an automatic transfer tosavings right after payday.

(07:13):
Whether it's $10 or 10% of yourpaycheck, it will grow over
time and keep you in a goodhabit.
Number four, use windfallswisely, tax refunds, bonuses,
side hustle income.
Put at least 80% of those bignumbers toward debt and keep 20%

(07:36):
in savings until you're in astronger spot.
Number five, cut those quietleaks in your spending, audit
your monthly subscriptions,cancel unused memberships, and
try to cut down on those impulsepurchases, redirect that money
to savings or your debt payoff.

(07:57):
And number six, keep short-termsavings goals separate from
long-term.
Use a high yield in savingsaccount for your emergency fund
or long-term savings with decentinterest.
And many online banks arecurrently offering about 5%.
This keeps that money slightlyout of reach and a little less

(08:22):
of a temptation to spend.
Finally, number seven, resistall or nothing mindset.
That's a trap.
If you're saving somethingwhile paying off your debt, that
keeps you from feeling likeyou're standing still
financially.
Even a small savings balancecan reduce stress and keep

(08:42):
motivation high.
Remember, every little bithelps, whether you've paid off
your debt or you're still onyour journey to debt freedom.
It's all going to have apositive impact in the long run.
So until next time, thanks forjoining us at the Debt Free Dad
podcast.

Brad Nelson (09:01):
Now listen, if you're ready to break free from
living paycheck to paycheck,which if you're listening, I
hope you are.
You want to reduce financialstress, you want to build
savings, you want to finally payoff debt for good, but you're
not sure where to get started.
Don't worry.
We've got you covered here atdebt free dad.
Simplify my money is sent eachSunday to your email.
We make it easy.
And Simplify My Money, it'syour step-by-step roadmap to

(09:23):
better financial control.
And you're also going to learneasy to follow strategies to
manage your money effectively.
You're going to get stress-freemoney decisions that will help
you simplify your financial lifewith proven tips that actually
work.
You're also going to gain thetools and the confidence to
tackle your financial goals headon.
You can sign up for Simplify MyMoney by clicking the link at

(09:43):
the top of the show notes.

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(10:11):
Catch you next week.