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The Long, Grueling Road: Getting Out of Debt

A few brave Americans say the only way to escape debt is the hard, sweaty way.

Forget consolidation loans, extended credit lines or fancy debt relief agencies. A few brave Americans say the only way to escape debt is the hard, sweaty way.

But in the end, it's so worth it.

"Debt is one of those things that can tear a marriage or a family apart," said Cherie Lowe, 37, a married mother of two from Greenwood, Ind. "We took the approach that debt is out to get us. It wants to destroy us. It wants to take away our ability to educate our children, save for retirement, live life to the fullest."

Since 2009, Lowe has been chronicling her family's journey from indebtedness to financial freedom on her website, the Queen of Free. She recalls the horror she felt when she realized how much debt her family had accrued — $127,000 — "with hardly anything to show for it." Terrified for her family's future, she sprang into action.

"I streamlined everything, from what kind of toilet paper I bought to how we prepared meals and cleaned the house," she said. "We never went out for dinner. By the fourth year, we weren't eating meat except on weekends."

Lowe stopped buying clothes, made her own laundry detergent and disconnected the family's landline telephone. Leaky faucets were fixed, windows were weather-stripped and electrical appliances were unplugged when not in use.

"People think utility bills are fixed expenses, but you can call up the companies and ask for a reduction," she said. "If you have cable TV, call and ask for the 'poverty package.'"

As it turned out, even that was too expensive at $12 a month. "We cut it off."

"If you pay the minimum payment on a credit card at a 23 percent interest rate, you could literally be paying for the same pair of shoes for the next 20 years."

For most people, escaping from debt is a battle yet won. In 2013, household debt spiked to its highest level since 2008, due to rises in mortgage balances ($56 billion), student loans ($33 billion), auto loans ($31 billion) and credit card debt ($4 billion.) According to recent statistics, the average American household carries $15,270 of credit card debt, $149,925 of mortgage debt and $32,258 of student loan debt, totaling $197,453. And that doesn't even count a car payment.

Like the Lowe family, Phil Werz of Leesburg, Va., had to sacrifice for years to dig himself out of debt.

Werz, 52, now a public relations and marketing manager at Lansdowne Resort, says he racked up $30,000 in loans and credit card debt after leaving his job in 2008 to attend golf school and teach at a golf academy in China.

"When I got back to the states, I shared a house with a fraternity of divorced, white-collar guys trying to save money," he recalled. "We were all doing the same thing, sharing expenses and trying to pay off our lives."

Determined to turn his life around, Werz says he became hermit-like, living in a room "no bigger than a mattress" and denying himself pretty much everything he had enjoyed. He paid off his high-interest credit cards first, then tackled his educational and travel debts. By working extra jobs and allocating all his tax refunds to debt repayment, Werz was debt-free in 30 months.

"I remember the night I made the last payment. It was the most liberating experience ever," he said. "Outside of my first career hole-in-one, I don't think I have ever had a better feeling than not owing anyone on earth one red cent."

"The idea of delayed gratification is almost nonexistent these days. Nobody wants to say, 'You can't have it.' But you know what? You can't have it."

Certified financial planner Christopher Kimball, 54, from University Place, Wash., says paying off the high interest credit cards first, as Werz did, was exactly the right strategy.

"Those high-interest credit cards will eat you alive," Kimball said. "If you pay the minimum payment on a credit card at a 23 percent interest rate, you could literally be paying for the same pair of shoes for the next 20 years."

Still, Kimball understands how tempting credit cards can be.

"I didn't have a lot of money growing up — I always wished I could buy great stuff," he said. "I racked up $20,000 in debt by the time I was 25. People who say, 'Money doesn't buy happiness' — that is a myth. Of course money buys you happiness! It may not buy lasting happiness, but all things being equal, money gives you a better life."

Kimball says he might have ended up bankrupt if a local pastor hadn't intervened. He counseled him to pay off his credit cards and start fresh.

"I just paid and paid and paid," he recalled.

The experience changed his life. Kimball, who has been debt-free ever since, now advises others to do whatever it takes to get out of debt.

"The idea of delayed gratification is almost nonexistent these days," he said. "Nobody wants to say, 'You can't have it.' But you know what? You can't have it."

Bruce Specter, 55, a mortgage consultant from Reno, Nev., says buying small, or not buying at all, is key to avoiding a debt cycle that often begins with large purchases like a home or car.

"Most people talk to a Realtor or car salesman before talking to a lender. That makes absolutely no sense. They'll tell you what they want you to spend, because they're chasing a paycheck."

Specter calls the underwriting system archaic and illogical. "The home you qualify for is based on debt-to-income ratios," he said, meaning, consumer debt divided by gross income. This allows buyers to qualify for considerably more than they can afford.

"From then on, you're shackled to debt you can never really get free from."

People overwhelmed by debt sometimes seek the support of financial management companies, which offer a range of solutions such as bond-secured credit lines to repay revolving credit card debt. Consolidating debts with a bank loan or credit union, or transferring a balance from a high-rate credit card to a low-rate card, are other options. But even with the aid of an experienced agency, getting out of debt is not easy.

"There's no quick scheme," cautioned Lowe. "It's a lot of personal choices. If you leave your money in your savings account, it will grow legs and walk to Target. So use that money toward your debt instead.”