Huge debts, paid off fast

To find areas where they could cut spending, Wilkinson kept a record of their expenses, "sometimes down to the individual grocery items." The personal trainer was cut, along with gym memberships. But Wilkinson found a way to get her workouts while making extra money: After a full day as an attorney for the state of New Mexico, she went to work as a package loader from 6:30 to 8:30 five nights a week.

"I met some nice people, and the work was great," Wilkinson said. "And I got extreme exercise every single day."

Wilkinson said she sometimes clashed with her husband and daughter over the need to cut spending. But she found inspiration in debt guru Dave Ramsey's book "The Total Money Makeover," which she read "every day for a year."

"I thought, if these people are doing it (paying off debt) on $40,000 a year, I can do this," Wilkinson said.

In 13 months, the couple eliminated $25,000 in credit card debt while paying about $30,000 a year for their daughter's schooling. (Both Wilkinson and her husband qualify for traditional defined-benefit pensions, which reduced their need to save for retirement.) The layoff threat turned out to be a false alarm, but after a brief celebratory vacation, the Wilkinsons resumed their debt payoff schedule.

Getting ahead by will power

Mary Klein is determined. Klein is a single mother making $12.40 an hour, or just under $26,000 a year, as an administrative assistant for an oil- and gas-producing company in Midland, Texas. She's also a full-time business-administration student at Midland College, attending most of her classes online and doing her homework after her daughter is in bed. (State grants pay her tuition.)

On top of that, she's paying off $5,000 in debt from a hospital visit last year -- her previous job didn't have benefits -- and from a trade-school education that didn't pan out. She planned to pay the remaining $3,000 within five months.

Like Thompson, she's paid twice a month. Every payday, she pays the bills for the next two weeks -- rent, utilities, child care, etc. -- then lives on what's left. The key for her, Klein said, is not using credit cards.

"I haven't charged anything in about six months, which is a good feeling," Klein said.

Klein opted not to pursue her daughter's father for child support. She believes she can pay off her debt without it, plus pursue her next goal: to be a homeowner.

"I plan on buying a home in the next five years," Klein said. "I think I can do it."

Although many parents complain about how expensive children are, Klein said she hasn't found that to be the case so far.

"I think the real secret to children is that they only need food, clothes and love," Klein said. "I buy food cheap, and I take secondhand clothes from anywhere." (See MSN Money's Kids, Work and Family Decision Center for more ideas.)

Using every angle

Greg Cards got the house in his divorce -- along with a $119,000 mortgage, $5,500 in credit card bills and a $29,500 debt to his ex-wife for her half of the home.

He initially took out a second mortgage at 8.5% to buy out his ex and pay off the credit cards. Shortly after that, he transferred the balance from the second mortgage to a 0% credit card, then made $4,000-a-month credit card payments to retire the $35,000 debt in under a year.

Once that debt was gone, he started directing extra payments toward his first mortgage. In 2003, Cards paid off his first mortgage (6.7% interest rate) with a variable-rate home-equity line of credit that started at 3.75%. In November 2005, when the line of credit had inched up to 5.49%, he transferred the debt to a fixed-rate home-equity loan at 5.4%.

He's done this on a base salary of $60,000 by volunteering for overtime, picking up a second job (see "20 ways to make $100 more a month" and "Need an odd job?" for ideas) and trimming expenses wherever possible. To keep his living costs down, Cards:

• Opts for basic TV service -- no premium channels.
• Chooses a dial-up Internet connection ($9.95 a month) over high-speed service.
• Buys food in bulk to last for months. (Read "Secrets of superstar grocery shoppers.")
• Takes his lunch to work.
• Makes a budget for the holidays, birthdays, etc., and sticks to it.
• Applies "extra" paychecks to debt (a biweekly pay schedule had provided a third check two months a year).
• Applies any bonuses toward his debt.
• Sets the thermostat in winter to 63 degrees.
• Sets the air conditioner to 79.
• Buys compact fluorescent light bulbs to reduce electric bills.
• Takes out $25 in "walking around" cash each week. When it's gone, he doesn't spend more.
• Keeps the credit cards at home.
• Shops with a list and buys only what's on the list -- and avoids looking at anything else, including sale items.
• Keeps his car tuned up to avoid bigger expenses.
• Doesn't keep up with the Joneses. He says he doesn't care what they drive, where they vacation or what they wear.
• Avoids buying coffee or food "on the go" but instead eats at home whenever possible.
• Stays away from vending machines at work.
• Doesn't play the lottery.
• Buys broken bags of mulch and fertilizer at deep discounts.
• When shopping for appliances, buys last year's model.
• Budgets vacations and looks for coupons wherever possible.

Cards also initially suspended contributions to his 401(k) -- not something I recommend -- but he was determined to funnel every available dollar to his debt. When he picked up the second job, however, he was eligible for a 401(k) with a great match: $1.50 for every dollar he contributed up to 3% of his salary, plus 50 cents for every dollar contributed after that up to 5% of his salary.

"I had to take advantage of that," Cards said.

He keeps track of his progress in writing and keeps the information near his computer, where he sees it every day.

"I keep looking at the progress I made, and it's a great feeling. This feeling helps me fight temptation of buying stuff that would keep up with the Joneses," Cards said. "I ride by the BMW dealership without blinking an eye because I keep thinking of the progress, the hard work that I had put into getting debt slammed down."

Liz Pulliam Weston is the Web's most-read personal-finance writer. She is the author of several books, most recently "Your Credit Score: Your Money & What's at Stake." Weston’s award-winning columns appear every Monday and Thursday, exclusively on MSN Money. She also answers reader questions on the Your Money message board.

Updated Jan. 25, 2008

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