How One Inspiring Saver Found True Love, Shook Off Debt Denial, and Paid Off $123,000

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American debt is on the rise, up 3.8% from last year. We're carrying higher mortgage balances, more credit card debt, and significantly higher student loan burdens (which are up an astonishing 11.5% from last year).

For students in particular, it's easy to overspend. The cost of college is staggering and, to make matters worse, few students come to campus prepared with financial literacy training. Both federal and private loans are readily available for most students, but so are a barrage of credit card offers. Credit is so easy to obtain for many students that, according to one recent survey, most college graduates are shocked to discover how much debt they've racked up.

A Young Dentist in Debt

Just ask Paul Amato, DDS at LeCuyer Amato Dentistry who, according to one debt calculator I ran his numbers through, owed over 85% of his first year take-home pay to creditors. "When I finally sat down and looked at the numbers," he says, "the interest was like a gut punch." Amato had finished dental school and had landed a well-paying job, but even so, the path he'd taken to get there had left him struggling with more debt than he could manage. (See also: 5 Inspiring People Who Paid off Over $100,000 Each in Debt)

Being in Debt Denial

Amato graduated with $120,000 in student loan debt and and another $40,000 in credit card loans. Shortly after graduation, he took on an additional $40,000 in auto financing. All told, his debt burden was 2.5 times that of his first year take-home pay and he didn't even have a mortgage to show for it. "I had six credit cards," says Amato. "I never added up how much I was paying on the cards. I just paid the minimum. I wasn't thinking much about the interest. I was really kind of careless."

Looking back, Amato accepts he could have lived on his student loan disbursements alone. He didn't need the credit cards. "I overdid it," he admits. "I had friends who had money I didn't have and I wanted to hang out with them. I wanted to do the things they were doing." Amato also accepts that he could have bought a less expensive car. "At first I thought it wasn't a big deal. Then I saw it was a huge deal. I was paying a lot in interest. I paid that car off and I kept it for eight years. But now I have a more practical car."

Amato admits to being in denial about the debt he was accruing until he and his then girlfriend (and now wife), Rebecca, got serious, moved in together, and started talking about their money. "She noticed that I had a lot of credit card bills coming in," says Amato. "That's when we sat down and started looking at everything together."

Getting Motivated

"Rebecca had no debt and she always paid everything off. She was a buy-what-you-can-afford kind of gal," says Amato. "She wanted me to get my finances in order before we committed to a relationship." (See also: Say No! 7 Reasons You Shouldn't Get Married if You're in Debt)

Every month, the two would sit down and review Amato's balance sheet. It quickly became clear that he'd need additional income to make a dent in his debt. "I filled in wherever I could," says Amato. "I took hygienist shifts. I'd drive one to two hours away to take an extra job. If there was somewhere I could work, I worked." (See also: What 20-Somethings Can Do About Credit Card Debt)

In addition to increasing his income, Amato also lowered his living expenses. "We lived on the cheap," he says. "We lived in a modest apartment in a questionable part of town. We didn't have cable. We rarely went out."

It wasn't always easy, Amato admits. "I wanted to spend my money every time I got paid. Rebecca really kept me rooted in reality. She'd say, 'You can have those things one day but now is not the time.'" (See also: 10 Dark-Side Motivations to Get You Out of Debt)

Digging Out of the Hole

Amato tackled his debt by paying the minimum payments on all debts except his highest interest loan. "I paid off the credit card with the highest rate first and then I kept going, in order," he says. "Then came the car loan and eventually I started doubling up on my student loan payments."

Reset Goals

Life isn't always a linear journey, though, and Amato reprioritized his financial goals several times along the way. After making his final credit card payment, Amato bought the engagement ring. A few years later the Amatos bought their first house. The big purchases didn't re-open the door to bad habits, though. "Ever since I paid off the credit card debt, I've been much more savvy about other bills like car or home-owners insurance. I'm a much better saver." (See also: How to Trick Yourself Into Better Credit Card Behavior)

Refinance

Amato also consolidated his federally-funded student loans. The rate on his private education debt was substantially higher so he kept those loans separate, and paid them off as early as he could. During those early years, as Amato's income grew, he kept his standard of living low, and paid as much toward his debts as he could.

"I became even more Type-A. I could see the light at the end of the tunnel," says Amato. "If I could run a tighter ship, I could be more profitable." It was a philosophy that helped Amato with his personal finances, but also within his professional practice.

Shift to Retirement

Eventually, the Amatos eased off their student loan and mortgage repayment strategies and focused more on boosting retirement savings. Today Amato still has $80,000 in student loans and a substantial mortgage balance to contend with. They've since filled the house with 18-month-old twin boys and, because of the frugal choices they made early on, were able to put Rebecca through dental school without taking on any additional debt. "It helped that we didn't have to re-buy books or equipment," says Amato. "That made her cost less than when I had gone to school."

Looking Back

"Paying off that credit card debt really gave me a lot of perspective about living beneath my means," says Amato. "Without that debt I can take life into my own hands and work toward my long-term goals. I want financial freedom. I don't want to be constrained by debt."

What Amato learned is that financial freedom isn't about how much money you make. It's really about how you manage what you have. "I made some poor decisions early on," he says, "but fortunately I was able to learn from them."

Have you retired a significant debt? Tell us your story in comments!

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