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Debt Reduction: Share Your Story

Written by Nickel - 25 Comments

I frequently get e-mails from people who are in over their heads and looking for advice on how to get out of debt. While I do my best to point these people to relevant articles and provide some general guidance, I never hear back from them as to how things are going.

With that in mind, I thought I’d kick off the week by asking you guys to share your debt reduction stories. Whether you’re still formulating a plan, have made some progress, or have already gotten yourself out of debt, I’d love to hear your story.

Our debt reduction story

My wife and I have a rather boring story, and we like it that way. While we use our credit cards regularly, we’ve never carried a balance. We’ve also always paid cash for our vehicles. In fact, the only thing that we’ve ever borrowed for has been our home purchases…

When we bought our first house, we only had 10% to put down, so we used an 80/10/10 (80% first mortgage, 10% second mortgage, 10% down). We scratched an fought to get rid of that second mortgage, which we killed off within a couple of years. Four years after buying our first house, we had a job-related move and we plowed the profits from our first house into our current house. That was roughly three years ago.

About 18 months ago, we then refinanced into a 15 year mortgage. In the time since then, we’ve been working hard to pay off our mortgage early. We’re still have quite a ways to go, but we’ve made great progress.

Your debt reduction story

Please leave a comment letting us know how far you’ve come and/or how far you have left to go. If you have any tips or tricks to share, I’d love to here those, as well. Go ahead, don’t be shy…

Published on July 13th, 2009 - 25 Comments
Filed under: Debt Reduction

About the author: is the founder and editor-in-chief of this site. He's a thirty-something family man who has been writing about personal finance since 2005, and guess what? He's on Twitter!

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25 Responses to “Debt Reduction: Share Your Story”

  1. 1
    Neil Says:

    Hi

    After an averagely irresponsible financial life I was plunged into crisis when my income suddenly dropped (by half) about 5 years ago.

    I did what no one should and ignored the problem, borrowing more money in the process.

    I was eventually brought to my senses, but by then the problem was too big to solve through budgeting. I ended up going through the UK equivalent of chapter 13 bankruptcy (called an Individual Voluntary Agreement). I re-mortgaged my house to pay off an agreed proportion of my debts and was then debt free. I have remained so for 3 years now.

    Whilst some people may have doubts about the morality of bankruptcy (even I think I may have got off a bit lightly) it does provide a second chance for people with overwhelming debts.

    I’m not proud of my story, but am trying to put my life back on track and be responsible from now on.

  2. 2
    tomasz Says:

    Is it more of a mental commitment.

    I committed myself to living on as little and using the rest to pay off my debt consistently each month and looking for ways to make extra money on the side to reduce the debt further.

    I was still living at home so I didn’t really need to budget or have savings, although this may be different for others that have their own place or even a mortgage.

    One more tip, find out why it is you spend so much and are in debt? Are you using spending money to fill a void or perhaps like me, spending money on finding the “magic key” to get rich fast and you just keep going form thing to another and never achieving anything.

  3. 3
    Rachel Says:

    I got in debt through a bad marriage. We never had the money for anything despite the fact that we were making really good money. We had seperate bank accounts because I just couldn’t trust him with my money. After the divorce I found $400 Verizon bills where he had talked to his mom for hours during peak times. When we divorced my income was cut in less than half & unfortunately I didn’t adjust my spending. I continued to buy gifts like I had the same budget, go places with friends, & eat out. I guess in some ways it was numbing the effects of the divorce.

    Now, 4 years later, I’m married to a fantastic guy! :) I’m crazy about him & he loves me back. We work really well together & in the year & 1/2 we’ve been married we’ve managed to pay off 3 credit cards. We’re working on the rest. We hope to be debt free by 2010 except for our home. We have a budget & we both stick to it, I clip coupons, I cook at home, & we shop for sales. We almost never buy anything full price. The best thing we’re learning is to seperate our needs from our wants.

    Good luck to all others pursuing a debt free life!

  4. 4
    jennifer Says:

    I never thought about paying of my credit card debt while I was single…I just saw it as my ‘national debt’. When I got married and my husband had some debt, I thought “how are we going to have kids, if we are already in the hole?”
    Then, he quit his job and we were really poor. We had $16,000 in credit card job and he wasn’t working. We had my condo that was not rented, so we were paying 2 mortgages!! I cried alot.
    Then I decided I wanted to be debt free by the time we had kids. HONESTY is important–whether it’s to yourself or your spouse. You have to be honest about what you owe/spend! Sounds simple, but it isn’t. Bills come in staggered throughout the month and you really don’t have any idea how much you owe until you write it all down.
    I got a notebook and each time one of our statements would come in the mail, I wrote down the balance and the interest rate. I found out my husband was paying late fees.
    Once we got our total debt, I organized the debt by highest interest rate to lowest. I transferred balances until all of the balances were under 2% interest rates and started paying off the ones where the interest rate was going to expire soonest.
    *We stopped eating dinner out (big savings)–but not all outings. We used coupons from the entertainment book or restaurant.com. Or when we met friends out, we ate half price apps/drinks at happy hour.
    *We started inviting people over to our house for bbqs and game nights. We canceled cable and home phone lines. We got a family cell phone plan.
    *I stopped shopping. I wasn’t a big shopper, but I would go browsing–dangerous and depressing once your realize you shouldn’t be spending. So I just stopped going. I don’t feel like I’m missing much even though we are doing better financially now.
    * I sold lots of stuff on craigslist and ebay–just stuff around the house that we didn’t need. I had the time and we needed to clear stuff out, so why not?
    *We bought generic. We bought groceries on sale. We bought napkins instead of paper towels.
    *We raised the thermostat in the summer. We had fires in the winter. We bought flannel sheets :)
    *I packed my lunch for work.
    *I stopped getting manicures/pedicures and now do my own.

    It’s not any one thing by itself–it’s all of these together. We got of debt in 2 years–one of those my husband was unemployed! There will be set backs–cars break down, A/Cs go out–don’t use that as an excuse to give up on your ‘financial diet’.
    Don’t be discouraged by just saving a dollar here or a dollar there, IT ADDS UP.

    We did it with only one of us working, 2 mortgages, and $16,000 in credit card debt.

    It can be done!! And the feeling once the debt is gone….I don’t think I can even describe how it makes us feel. Maybe just a little more carefree :)

  5. 5
    Steve Says:

    I used credit cards in college, but didn’t carry balances. I had a decent savings (from working as a kid / teen) and was still working in school. I didn’t keep a budget, but I don’t think I was over-extending myself.

    We spent a good portion of my savings on our wedding, then the rest of it when we bought a condo. By this time, we WERE over extending and collecting credit card debt. Since we were both handling our own credit cards, but pulling from the same bank accounts to pay the bills, we were in a tug-of-war over who’s card could get paid: I never knew her balance, she never knew mine. We each assumed the other’s balance would be $0 (HA!) and that all the ‘left over money’ in the bank account would be used to pay down our respective card.

    Obviously, that doesn’t work. Something finally clicked and I asked to see her accounts. We looked behind the curtain and didn’t like what we both saw.

    Roughly $15k in CC debt (plus mortgage, her student loan, her new car, my used car) … things had to change. I consolidated debts, transferred balances to 0% or low APR cards, and began the snowball method. I opened high interest savings account and began a budget. We both received raises that went exclusively towards the snowball. With an idea of our “fixed” expenses, we could control the “variable” and apply the rest to the debt. We also use a very simple version of envelope budgeting (one envelope, a set dollar amount each week, this is all we get for EVERYTHING: gas, groceries, dinners out, concert tickets, etc.).

    We’re currently down to about $10k in CC (plus mortgage, her student loan and her car; my car is now paid off). We’re making significant progress, though. Each month, the snowball grows and grows and it feels good. More importantly, we don’t feel stifled or smothered by our efforts. We’re still living a full life, but we’re AWARE of what we’re doing. We talk and share and update each other constantly.

    Once the debt is down, we’ll continue to grow our (admittedly small) emergency and retirement funds. I’m in my late 20s, she’s mid 20s, and we’re holding off on expanding our family until we are debt-free. Baby steps, indeed.

  6. 6
    Jenni Says:

    Most of my debt is in student loans. I’m a graduate student in a science field, and my undergrad education was costly. Almost all the loans are deferred and not earning interest, except one.

    I have no credit card debt, and pay off my balance every month; the only other debt I have is my car loan. This has the highest interest rate, and I’m currently accelerating payments on it. At the rate I’m at right now, I should have it paid off in two more years. That’s two years early!

    After the car is paid off, I’ll switch to making payments on my private student loan (the one earning interest). It’s going to take a long time to pay off those thousands of dollars … but the education I received was definitely worth it.

  7. 7
    Journey2mymba Says:

    I will keep you posted with my progess. I am writing about it in my blog. I am trying to get 110k out of student loan debt.

  8. 8
    Sara Says:

    When my husband and I got married three years ago, we both had some school loans to pay off, and I ended up having to buy a car. These weren’t huge amounts of money in the grand scheme of things, but for us they were big. I had let my student loan default, but my husband was such a good influence in the financial department that I was motivated to get my finances in order, too. He read Total Money Makeover and we decided that we wanted to be debt free by the end of last year, and we made it by the skin of our teeth. Now we are working on getting our emergency funds built up, and once I finish school (finally went back after quitting nine years ago. Nothing to show for that loan!), I will focus on maxing out my Roth IRA. I also have a VERY small line of credit on a card that I am using to build my credit back up.

  9. 9
    Engineer@EADFL Says:

    I started blogging just after we hit rock bottom. We were in debt up to our eyeballs and then some.

    I guess for us we just kept going along thinking only about how much it added to our monthly out of pocket and never thinking about the true cost of things. We were always concerned with how much a month it costs us, meh what’s another 20 a month for this or 30 a month for that.

    Rock bottom… we hit 204,000 in debt. 2 and a half years later, things are different, we are now at just under 100,000 left in debt. The debt we have are student loans, etc… no more credit cards.

    I am a firm believer in the notion that we got ourselves into debt, and we have to be the ones to get ourselves out of debt.

    It’s like weight loss, there isn’t a pill or a simple phone call to make debt go away. Hard work, determination and a lot of sacrifice will make it happen.

    Thanks for all your inspiration at FCN, it’s one of the first blogs that inspired me along my path to recovery.

  10. 10
    MikeS Says:

    I was debt free once and I’m working towards that goal again. The first time was when I graduated college and had been living beyond my means while in college. I had racked up roughly $15K in cc debt. I was able to pay that off and then save for a wedding.

    Now, it’s a little bit bigger hole. If I count everything (mortgage, my wife’s student loans, car loan, and some credit card debt) it’s going to take a little longer to dig out, total owed is about $230K. The credit card debt arose because my last job was commission based and when the economy was heading south last year, my pay went with it (down about 50%). I’ve since switched to a salary job and the credit card debt will be gone by early 2010.

    My wife and I are doing this on just 1 salary. She’s staying home taking care of our 20 month old daughter. We’re not doing anything magical, just keeping an eye on our expenses and living below our means.

  11. 11
    kev Says:

    Ahh… The dark years. I remember them well. I was your typical consumer-driven moron. I wanted what I wanted when I wanted it and gave little thought to my irresponsible behavior. I had a great job with a decent salary, but bad financial habits ultimately catch up with everyone – regardless of how much they make. My finances were a total mess. My account was never balanced, I never knew how much I had, how much I owed, What my rates were, etc. Total Chaos pretty much sums it up. My “outs” eventually became greater than my “ins” and I started sinking fast. It finally hit home when I tried to pay my Mortgage one month and realized there wasn’t enough to cover the check. At that point I was done. My exact out-loud word was “Enough!”.

    I made one last sporadic purchase after that. I went to Best Buy and picked up the latest version of Quicken. That same night, I sat down at my computer and properly introduced myself to all my debt. I lined everything up and took hard look at the reality of my situation – it wasn’t pretty at all. I remember thinking “Oh My God… What Have I done?!”. I knew nothing could magically fix it though – it was all on me until the very end. I rolled up my sleeves and went to work.
    Quicken became the hub of my financial operations. I started tracking every cent I made and every cent I spent and a working budget soon followed. The first couple of months were hard as I started unwinding the damage, but things turned around quickly after that. Two years later – I am completely debt free except for the Mortgage and have a nice fat savings account. With the exception of this post, I’ve never looked back.

    I agree with tomasz – it is a mental commitment. Once that commitment is made there is no going back. It’s pretty much ingrained into your DNA from then on.

  12. 12
    Kathryn Says:

    The dumbest part of my debt story was that I knew better before I even got started. For a trip to Ohio to attend my cousin’s wedding, my then boyfriend loaned me his credit card to pay for flight and hotel. When I returned he told me to keep it for a while. Every month, I paid him the full balance, and every month it got bigger and bigger, to the point where I couldn’t afford NOT to use it if I wanted to make it through the month. I finally bit the bullet and gave the card back to him with the lesson learned: credit card debt is too easy to rack up!

    If only I had stuck to that lesson! My first CC in my name was a store card to buy a TV, of all things, even though we had one that actually worked. Next, it was a bank with a tiny credit line. My family warned me to be careful with that thing and I assured them I knew better. From there it grew to a total of five bank cards, two store cards, a new car, plus a house with my husband, his five bank cards, and a $30k loan he took out. By this time, I was married with two children, and though I battled the balances and tried hard to save up, I never felt like we made progress.

    Then we got divorced. He kept responsibility for those accounts in his name, I kept all those in mine, he kept the house, and I got the car and a lump sum of money from the difference in our employee retirement accounts. That lump sum was my new starting point.

    I used that cash to pay off all my credit cards, which allowed me enough monthly wiggle room to begin saving money. Today, the balance on my car is less than $2k and I have a balance of nine dollars on one credit card. In two more months, I’ll have zero debt, a great credit score, savings of over $5k, and a small but positive net worth. I still feel like I’ve got a long ways to go to feel “wealthy”, but it’s so much better now than it’s been in my entire life!

    I only hope I can pass on to my girls what I know, so they won’t make the same mistakes I did.

  13. 13
    Erin E Says:

    I got the dreaded Freshman year credit card when I was in college. I actually did pretty well with it until a few years later. I made the foolish mistake of giving out my information over the phone (and authorizing use of it for some GREAT magazine deal, seriously) and wierd charges started occuring. But I was 20 and lazy and AMEx was mean, saying that I had authorized the charges. I disputed them for years, and didn’t pay that portion of my bill and they didn’t go away. Anyway I ended up with close to $5K in bogus charges, late and overlimit fees. Seriously because I did not nip it in the bud. Not a huge amount but really annoying and it ruined my credit. but it was just about 7 years later that we went to buy our first house — now I have perfect credit.

  14. 14
    Tim Says:

    My wife and I have basically been living on my income and either using my wifes income to invest or pay down debt. Through this economic downturn we have seen my income reduced about 30% which has gotten us into a little bit of debt however.

    One of the strategies that we use is to pay cash for our cars and the day that we buy a car we save monthly to buy the next one. Currently we save $400 per month towards our next cars. That amount goes into a savings account with ING Direct.

    I think the biggest obstacle when it comes to personal finance is self discipline. We have been very disciplined and because of this our future looks bright.

  15. 15
    SingleGuyMoney Says:

    I’ve managed to pay off over $40k in credit cards and car loans since I since I got serious about my personal finances.

    I’ve been blogging for 2 years and I think that has helped me to stay out of debt and continue to improve my personal finances.

  16. 16
    Matt Jabs Says:

    Before January of this year (2009) me & my wife had over 15,000 in high interest consumer debt, and no savings.

    You can all follow the story in detail on my website, but in just 6 short months we have reduce our debt by $4,000, increased our savings by $2,500 and have increased our charitable giving to just over 10% of our gross income!

    We did all of this by inventorying and reinventing our lives one small step at a time! It’s all about baby steps…

    “A journey of a thousand miles begins with a single step” – Lao Tzu

  17. 17
    Roberta Says:

    We managed to accumulate over $150,000 in debt from unsecured loans and credit cards within the past 25 months. The rates were quite good, then, while we’were employed. But the amount keeps rising each month now, as our rate has jumped signficantly to a whopping 29.99% and fees assessed for not paying at least the minimums and our monthly payments. We both lost jobs last year due to the credit crisis before Obama was nominated, as we are both in the finance/banking and insurance industry. We are afloat with just the bare minumums of living; our monthly rent, utility bills, groceries, medical care,. TO help us get out of debt or save money, we donated our pet three months ago, cancelled netflix, cable tv, and our association memberships. We never buy music; we now get it wherever it’s offered for free. We watch tv now on the computer only; and rarely use alot of utilities to conserve money. We were thinking of cancelling our phones, because most often not the people calling us are either collection agents, debt collectors or reliefers advertising their services, debt collector’s lawyers, or credit company. We just don’t know what to do, and may have to do the one thing that can help us re-build our finances: chapter 7.

  18. 18
    No Debt Guy Says:

    My common law and I are fairly lucky that we have good secure jobs. In July of 2008 we bought a house and had a mortgage or $316,000. A year later the balance is around $271,000.

    Our goal is to pay off the entire mortgage in four more years! I am looking forward to being truly debt free!

  19. 19
    Neil Says:

    @Roberta

    If there is truly no other way out then chapter 7 might be the best route for you. A lot of debt reduction blogs etc. start from the point of having excess income that can be applied to reducing the debt. Sadly this isn’t always the case. I myself went through the UK-equivalent of chapter 13 (see above) and I’m now very glad that I did. If I hadn’t I would still be struggling with overwhelming debts.

    Of course chapter 7 is not to be entered into without a lot of thought, and will have a long-term effect on your credit score, but at least you will have started along the path of rebuilding your finances.

    Neil

  20. 20
    Rosa Says:

    I came out of college with about $400 in credit card debt and $3000 i had borrowed against my life insurance policy to pay tuition. A few years after I graduated, the credit card embarrassed me big time (raised my minimum payment *while I was traveling*, so I went to buy a dress to wear to my mother’s wedding and the card was declined.) So I scraped together the cash and paid it off.

    Didn’t have a credit card for the next several years, but didn’t make much of a dent in the $3000 – grew to $4000 – loan, either. Lived within my means (rented room, bike, dumpster diving) and put 20% into my 401k but kind of ignored the debt.

    Then, I hooked up with Mr. Supercheap – man was living in a walk-in closet, working full time while going to school full time, and mostly eating out of dumpsters. We lived together for two years, then bought a house. Had roomates in the house the first three years so we could double-pay the mortgage. We were both making serious money and not living any differently, so I paid off the debt and bumped up my charitable giving and savings – also pressured him into putting his money into (conservative) investments instead of just hoarding it in a checking account.

    Then we had our son; I spent two years as a stay-at-home mom (bumped our savings rate back to 10%, spent about $4000 out of savings.) I went back to work 2 years ago now, and I don’t know that I’ll ever find the kind of hourly for part time that i had before (and being partnered with a workaholic, I really can’t work full time – did it for a year and our family started to fall apart), but my partner has gotten a lot of raises in the last ten years, so our joint income is the same.

    It’s kind of shocking – I spent all those years low-consumption mostly for idealistic reasons – but we’re actually at the point where we are trying to figure out what to do with all this money we have. Right now, we’re putting more into the stock market instead of paying off the house even earlier (we’re on track right now for 14 years total, 8 left from now) but we’re kind of paralyzed with choices.

  21. 21
    Thomas Says:

    When I hit my “bottom” I had a car loan balance of $26,000, $6,000 in CC debt, mortgage of $242,000. That wasn’t too bad, BUT my checking had $100, savings had $0, 401K had $30,000. I was 33 and only putting in 5%. I decided interest sucks unless it’s paying ME. I became a mad man to pay off everything ASAP.

    My method (in order of priority):

    *Put all extra money into my $6000 in CC debt and made it disappear within months
    *Opened an ING account, adding $250/month, then $365, then $415
    *Checked my balances at least weekly to watch the savings grow, the debt shrink – Motivating!
    *Bumped up 401K from 5% to 8% when I got a 3% raise
    *Opened an ING account, adding $250/month, then $365, now $415
    *Transferred my car loan at 4% to a fixed credit card at 2.99%
    *Paid $85/month extra on the house
    *Moved everything to ING from checking and back to checking when I needed to pay the big bills – Hey, it’s maybe $1 interest, but it’s $1
    *Made extra payments on the car loan, even $17 extra is something.
    *Every windfall – tax return, quarterly dividend check of $72, side job for $80…whatever…it went to the car loan or the ING savings. Tax return split 50/50 savings/car note.

    Little stuff:
    *Brought lunch to work every day
    *Made cheaper dinners
    *Movies on demand for free (they suck, but whatever, they’re free)
    *You get the idea and it only took 2.5 years.

    I still spent a bunch of money on an expensive hobby, but was able to make my system work. Don’t go without any fun, just pick the one or two things that make you truly happy and reduce the rest.

    I’m debt free (sold the house and now split my girlfriend’s mortgage) and I’m watching all these accounts grow and it feels great.

  22. 22
    robert Says:

    never blogged before. forgive boring story. 2003-2007 things blowing and going paid off all debt (credit cards, auto loans, finally mortgage as 38th b-day present to myself). caught hell from most all people in my life, but after last two years wouldn’t trade peace of mind for anything. nice to see like minded people out there.

  23. 23
    Curtis Says:

    We’ve been in debt and out several times over the years. However, I have developed an absolute aversion to it. It limits freedom, choices and robs one of peace of mind.

    We are debt free aside from our personal residence and the rental properties we own. These are cash-flow positive and I am on a plan to pay these off in 7.5 years. Total mortgage debt: $255,025.00 (We currently have land in Costa Rica for sale and two small rental properties paid off). The above mortgage total is the balance of five properties.

    We are starting with the personal residence. I am attempting to refinance the 3 of the other properties to 4.5% 15 year fixed mortgages and saving an additional $2,000.00 per month in a payoff account until a property can be paid off in full. In the meantime, the monies provide a cash cushion and margin of safety. When the property can be paid off, the freed up monies will snowball toward the next mortgage. Rinse, lather, repeat.

    In the meantime, new car paid cash, and like an earlier poster we set $400.00 aside in an ING “New Car Fund” (currently $4,000.00 strong) so that we can pay cash for the next car in approximately 6 years and still have monies left building in the fund. We have a rental savings account with 7 months of reserves to which we add 18% of the gross monthly rents monthly. We have 6 months eFund.

    We are committed and on track. Hopefully we can reduce the 7.5 year goal even more. We’ll see. This blog is extremely encouraging! It’s nice to have access to the participation of so many like-minded people.

    I wish everyone success in fulfilling their goals!

    Curtis

  24. 24
    llbigwave Says:

    I just stumbled upon this article, so I’m quite late to the party, but here goes anyway. :)

    In December 2007, our home HVAC system failed and had to be replaced. We had been married four years at the time, and had been way too undisciplined with money. I realized that we didn’t have any cash to replace the HVAC unit, nor would we be able to avoid credit card interest. That hit me pretty hard, since I hadn’t paid interest on a credit card in six years, and didn’t want to start again.

    The day after Christmas, I sat down and developed a spreadsheet to track our debts (total $235,000 at the time) and our liquid assets (total $16,000 at the time – $15K locked in CD’s so we couldn’t use it to pay for the HVAC). Since then, we have committed to spending much less than we earn, and using the difference to pay off debt and increase savings.

    Today, 49 months later, our debts total $99,000, and our liquid assets total $88,000. That’s a debt reduction of $136,000 and a liquid asset increase of $72,000, for a total progress of $208,000! (That doesn’t consider retirement funds, which we have contributed to as well.)

    We have had our share of struggles and stumbles, but we remain committed to the program. We plan to be completely debt free in October 2013, with sizable emergency funds and investment funds left over.

    As a few other posters have stated, it simply has to be your #1 priority, and you must be committed to it. We do without a lot of toys and experiences, but I firmly believe that the benefits outweigh these costs, so I do it willingly.

    As Curtis said, best wishes for success all around!

    P.S. I should have noted one major factor in our success so far: finding a way to monetize what had been a very expensive hobby. If you enjoy something and do it well enough, you can probably find a way to earn money from it.

  25. 25
    Curtis@PayOffMyRentals Says:

    Very funny…I was reading this article today and found my story toward the bottom of the comments that I had posted 3 years ago next month.

    So, here’s an update (nearly 3 years later):

    Our mortgage debt was $255,025 now $155,423. That’s a 100k in just shy of three years.

    Our house is paid off and we now own 3 of the 6 rentals. The remining rentals are on a fast-track payoff plan. Otherwise, we are debt free, funding our ROTH IRA’s

    We were able to sell the Costa Rican property and used some of those monies to pay off the house.

    We nixed the pre-paid car plan opting to keep ours longer and use the monies to pay more on the exisiting mortgages.

    Point to take home: Don’t get discouraged by how far you have to go, or how impossible it may seem. Rather, make a plan and stick to it. Time will march on and take care of the rest.

    This was a fun exercise.

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