how we paid off our debt

Before FIRE there was Debt

The Kiwi and Keweenaw debt payoff story. How these Millennials paid off over $50,000 in student loan and medical debt and then used their debt payoff experience to save towards financial independence and early retirement.

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In 2010 the reality of the debt my husband and I had taken on to complete our undergraduate degrees became a reality. We were not yet engaged/married, but had been dating for four years, blended our finances, and moved in together. We also still didn’t understand money, but we were quite frugal.

Our debt helped us get our money under control and ultimately discover financial independence/early retirement (FIRE).  Lake Erie Road Trip

After the excitement of moving in together and filling our place with second hand furniture, cookware, and dogs. We added up our debt and realized had accumulated over $50,000 of debt in our first five years of adulthood, which took the next five years to payoff.

You can read all about our debt payoff story here. And, in case you don’t want to read all the details, here’s the rough breakdown of all of our debt:

  • $51,000 student loan debt
  • $4,500 medical bills
  • Fortunately, our debt was almost evenly divided, and we blended our money as soon as we moved in together. I would not necessarily recommend blending your money so early, but it worked for us. I enjoy dealing with financials, while Mr. Kiwi avoids all things money (including spending it).

We lived frugally, car-free, and managed to save 50% of our income as grad students, which we planned to use towards a down payment on a house. Silly us, we were super focused on the American dream, owning four walls, and a yard of our own. Even though we had a super cheap rental situation, half the cost of the mortgage we eventually decided to take on.

In 2010, we discussed and decided to accelerate our debt repayment, and in five years we paid off this expected and unexpected debt while paying for a wedding, buying two cars, buying a house with 20% down, and saving (not yet towards FIRE) using tax advantaged retirement accounts.

Debt and Friendships

And, while it may be a little unorthodox, we’re pretty open with friends and family about our FIRE journey. And we definitely didn’t hide our frugal ways during debt payoff. Being honest about our finances helped improve our relationships and led to us getting FREE housing for six months.

College planning isn't as easy as enjoying a sunset
Enjoying local beaches instead of exotic ones

This also helped quell the push to extend our budget and travel extravagantly. I’m a sucker for a good trip, and visited eleven countries during undergrad and grad school. But I slowed down my travel while paying off debt, and mostly stayed in the US and Canada to save some money and maximize my limited vacation time. This meant saying no to joining a few friends on international trips, but has led to my friends developing some affordable travel traditions, including:

  • An annual winter wine weekend
  • At least 2 weekends/summer at a northern Michigan cottage

When you add on the inevitable wedding or two every year we get lots of quality time with friends to keep our relationships strong, while sticking to our financial goals.

I was amazed by how supportive the people in our lives were to help us find ways to save money. We are open about our values and goals (i.e. to live debt free) and people overall responded positively. Overcoming the taboo of talking money is tough, but helped us bond with our support system.

While paying off the debt we contributed to meet the company match of our 401k plans when available. Plus, we kept an emergency fund of $1,000, and put all of our remaining money towards paying off our debt. We figured you can’t spend money you don’t have.

Debt and Early Retirement

By developing a better understanding of money and setting up boundaries, we were learning the basic skills needed to save over 50% of our income and save towards FIRE (which doesn’t require saving at that crazy high of a savings rate).

Paying off our debt together bonded us as a pack. We had many financial conversations that led to us choosing to accelerate our debt repayment. And achieving a goal of paying off our debt years ahead of schedule made FIRE seem more achievable. Make your spending match your values

Sometimes I’m grateful for the debt we took on, since it pushed us to set goals in our early twenties. We value the flexibility having money can provide, especially as we continue to cope with chronic pain and the medical needs that come with it.

We finished paying off our medical, student, and car loan debt in early 2015 and have shifted our debt repayments to savings. Now, we spend money on our values, but still avoid lifestyle inflation. We were saving ~75% of our income, which helps give us options. Those options enabled Mr. Kiwi to go back to grad school.

And as we get closer to achieving true FIRE, that flame is changing. Our definition of early retirement is a lot more flexible, and it more about achieving a life we both love. And being flexible means we get to take the scenic path to financial independence, which will include more opportunities to fail (safely), but hopefully end up with a better quality of life.

Learning the financial skills to focus and pay off our debt has helped show us grace and embrace that’s there’s no perfect way to achieve FIRE.

What’s your scenic path to financial independence look like? 

15 comments on “Before FIRE there was Debt”

  1. What a journey! You’re so fortunate to have support on your FIRE journey! I’ve had some family members get straight-up aggressive about the whole thing; like my journey is a judgment on them somehow. Urf.

    Debt is also what made us wake up. We were newly married in 2015 and wanted to buy a house. Surprise! You can’t buy a house if your money is tied up in debt payments! That led to the journey we’re on now to get rid of all debt and start getting wealth in the black.

    I’m proud to say that our student loans and car payment should be gone by the beginning of 2019. 🙂

    1. Reply

      Woo! You are so close to getting those student/car loans paid off. Congrats!
      And, bah, your personal finance choices are not a judgement on another persons. Sorry that some of your family has been aggressive!

  2. It’s interesting how many FIRE stories start with a big chunk of debt. I’m another one of those – $24k in student loans at 8.5% interest rate led me to debt payoff blogs that led me to MMM. Paying off debt and interest sure teaches you the skills that translate into working toward FI.

    1. Reply

      Ah 8.5%? Bah, mine were at 6.8%, which still feels high!

  3. Reply

    Awesome story and huge congrats on paying off that debt. That’s no small feat!

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  4. Reply

    Great story on how you guys paid off that debt and had some great support along the way especially having free housing for a while.
    I had a bit less student loans($40K at 4% Interest) but it took me longer than usual to pay it off. I paid the minimum for about five years until my fiance(now wife) pushed me to take my finances more seriously. At the time I really prioritize my money at not a high level. I immediately took action and paid it off a few months after our wedding. After paying off that along with my credit cards, I paid better attention to my finances its working out for the better(heck, I have a PF blog now…lol)

    1. Reply

      Haha, it helps to have someone push (I mean encourage) you along. Sometimes I wonder what my single money journey would have looked like. I think I would have inflated my lifestyle a bit more.

    • GYM
    • 2018-01-31

    Amazing story, thank you for sharing. I think the debt really pushes individuals to continue saving that amount and investing it- which is fantastic. Saving 75% of your income is dayammmn impressive!

    1. Reply

      Thanks! I’m grateful we only took on a manageable amount of debt, and that we were able to leverage it to increase our financial literacy. I credit our debt for our savings today.

  5. Reply

    We haven’t told anyone about our FIRE plans. Whenever we bring anything up about FIRE (without even mentioning that we are trying), our friends and family assume that FIRE people are crazy. We will probably retire and not tell anyone. Except for the blog readers 🙂

    1. Reply

      It’s surprising to me that most people judge FIRE so harshly. We definitely got a few weird looks and judgy words fired our way. Fortunately, those we are closest to are supportive, even if they aren’t on the path to FI alongside us.

  6. It’s amazing how debt repayment can actually set the scene for FI. Inspiring post!

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