Exactly How I Paid Off $20k of Debt in 7 Months
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Confession time: I have credit card debt. Part of me has been putting off publishing this post until I’ve fully finished paying off my debt. I think it’s the perfectionist in me who wants to say, “I’m debt-free and this is how I did it!”, while having everything wrapped up in a pretty box with a neat little bow.
But the perfect time very rarely, if ever, rolls around. So instead, I’m here to say,
I’m on my debt-free journey.
I’ve paid off $20,000 of debt in 6 months. Happy dance! As with all things in life, paying off debt isn’t about doing things perfectly, but there’s value to be found in showing up perfectly imperfect. And it’s always more fun to have friends along on the journey, so thank you so much for being there for me.
My relationship with money used to be very much like my relationship with food. Disordered, During a restricted season, I’d regularly exceed my savings goals of 20k. But over time, I would begin spending what I had in savings.
Yeah, I know.
Those credit card bills really were painful. Today I’m grateful for the small changes I made over the years that now mean my harmful relationship with money no longer exists. But the reality is that the debt is still there and I am literally still paying for it...and the interest. Eek!
How It All Began
The first credit card I had was back in college. There were reps from a credit card company on campus and I did what I thought all university students should do — I opened my first credit account.
Over time, my balance slowly increased and I managed to pay off some of the credit card debt, but never all of it. At the time, I normalized my behavior because I saw many adults in my life doing the exact same thing. I thought that if I carried a balance and paid the minimum payment on time, I was creating a good credit history and I was on the right track for financial stability. Boy was I wrong.
I also took out college loans, again believing this was a smart move all university students made. Thankfully, at the same time I was applying for scholarships which I received. I also applied to a loan forgiveness program which I was eligible for because I was teaching in a low-income part of San Diego.
Fortunately, I did make some financially sound decisions along the way which helped mitigate the damage. Phew!
Fast forward 20 years and I’m now healing my relationship with money. This process doesn’t happen overnight. It’s a journey of reflection, lessons, releasing shame, and finding support from friends and family.
The Importance of Speaking Up
When I first started sharing my experience with debt with others, I was surprised to find that most people could relate to my situation. They often said that they had debt as well, but we’d never spoken about it before I brought it up. Simply talking about our debts opened up more conversations and took away feelings of shame.
Our Stories Are All Different
Before I dive in any further, I want to stress that everyone has a different personal finance story. We all have different expenses and incomes — that’s why it’s called personal finance.
How I got into debt might be very different to how you got into debt. At the same time, the tactics which work best to heal your relationship with money might be very different to mine.
The secret is to really think about what works best for you and choose that path. There’s no sense in following someone else’s journey if their situation is vastly different from yours.
5 Ways to Own Your Debt-Free Journey
Although there isn’t one magic solution that can help everyone get out of debt, there are tools we can all benefit from to heal our relationships with money. Here are five tools I used to progress through my debt-free journey. I hope they provide you as much value as they did to me.
1. Start Talking Money. If you’re stressing over paying your bills, living paycheck-to-paycheck, or you find your credit card balances increasing, it’s time to take a real look at your relationship with money. So grab your journal and a pen and let’s get to work.
Carve out a 15-20 minute window and jot down your answers to the following questions. Before you read them, let me remind you that you’re doing this exercise because you want to change your relationship with money.
Don’t rush through the questions. Read each of them and really think about your responses before writing them down. You’ll get much better results this way than just quickly summarizing your answers in your head.
● Why do you want to change your relationship with money?
● Are you spending because you don’t want to miss out?
● Have you set up a budget, only to fail?
● Do you know where your money is going?
● Do you have an emergency fund?
● Are you an emotional spender?
● Do you feel consumed by bills?
● Have you considered bankruptcy?
2. Understand That a Spending Plan is Your BFF. It’s taken years to find what works for me. Whenever anyone said the B-word, Budget, I totally cringed. This word was so restrictive to me. Every time I heard it, I immediately thought, “Great. Now I won’t be able to go out to eat, travel, or spend money shopping.”
Having a budget felt the same as being on a diet to me. If you want to know more about how I feel about diet culture click here. Every time I tried to budget, I found myself slipping back into old habits and adding to my debt.
When I switched the word “Budget” for “Spending Plan”, I practically fell in love. While I couldn’t relate to “Budget”, I could wrap my head and heart around “Spending Plan”.
Having a spending plan meant I was in charge of my money and could allocate where I spent it according to what was important to me. I created categories for each area of my life and decided how much money each category got. It was essential that I didn’t feel restricted, so I made categories for parts of my life that were really important to me, such as travel, fun, money, beauty, and clothing.
The next step was to find a system that worked for me. I’m obsessed with the You Need a Budget (YNAB) budgeting app. If you are not a fan of the word “Budget” like me, just ignore that part of the title.
This app puts you 100% in control of your money. All you need to do is put your finances in each month then track your expenses. Make sure you’re honest and track all your expenses. There’s no value in lying to yourself.
If I overspend in a category, I can allocate money from another category to the overspent category. If I underspend in a category one month, I can roll that money over into the next month. Snap up your free trial and get ready to watch your money grow!
3. Track Your Income and Spending. Call me crazy, but I now track my money and actually enjoy doing it. The point when I started tracking my money was the point when my relationship with my finances really began to change.
I used to be impulsive when it came to spending. But after I began tracking my money, I’d pause and really consider if a potential purchase was something I truly wanted. I also looked at my budgeting app to check how much I had to spend within that particular category.
Say I wanted to buy new running shoes. I’d check my category for clothing for the month within the app. If I had enough money in that category, I’d ask myself “Are these running shoes really what I want to spend this month’s clothing money on?” If my answer was “Yes!”, I’d move forward with the purchase.
I also had some ah-ha moments when tracking my spending. Seeing the categories in which I regularly overspent or underspent opened up my eyes to my shopping habits. Again, it’s not about doing things perfectly, but about being consistent and regularly showing up. Over time, you’ll begin to notice patterns in your spending.
You may even find yourself negotiating prices to help you reduce your spending in certain areas which are essential for everyday living. This happened to me last month with my internet bill. I complained to my provider that I was paying too much and they gave me a discount. Lesson: it pays to speak up.
4. Try Living on Cash. With cards and payment apps, cash seems to be a thing of the past, but it doesn’t have to be. Paying for a lot of things with cash can help you kickstart your commitment to stop adding to what you already owe.
When I began paying in cash for everything, my credit card balance was no longer increasing. This is where the magic started happening for me. I was living on a spending plan, part of which included paying off debt each month. As I was paying for everything I could in cash, I wasn’t adding any more debt to my credit card.
5. Embrace the Snowball or Avalanche Method. You might be wondering what a snowball or an avalanche has to do with getting out of debt. Let me summarize for you: EVERYTHING.
In the past 7 months, I’ve used these techniques to pay off $20,000. I can tell you they’re not just cute gimmicky names. They’re tactics that really work. Before you start paying off your debt, you need to decide which method will work best for you.
The Snowball Method is all about you paying off your debts smallest to largest, regardless of the interest rates. Paying off debt can certainly feel overwhelming and if you’re paying minimum payments, it can really feel like you’re treading water. I’ve been there and it has literally kept me awake at night.
But by completely paying off your smallest debts, you soon begin to feel empowered and learn that you can curb your spending and get your debt under control.
The Avalanche Method is where you pay your debts off from the highest interest rate to the lowest interest rate. Mathematically, this method makes the most sense, as you remove the high-interest fees the fastest when you attack your highest interest debts first.
However, this method might take longer if your highest interest rate card has the highest balance. You might need to be patient to see results and some people can lose motivation by doing it this way.
Wondering which method I used to tackle my $20,000 debt? I did a combination of the two. Let me explain.
First, I paid off my high-interest card with a $4,500 dollar balance over two months. After my first credit card was paid off, I got to work on my next debt.
I paid off a low-interest card with a balance of $4,900, which also took two months. I then put the money that I had been using to pay off my previous two debts toward my next credit card debt.
Over the next three months, I paid off a high-interest card with a balance of $9,800. This might seem like the snowball method, but I did have a card with a balance of $2,700 with no interest to help me out.
Because of the pandemic and all the uncertainty in the world last year, my financial health was in limbo. When reflecting on my finances, I had to go through the possibility of being laid off, receiving a salary cut, losing my housing money, and having unforeseen traveling expenses because of COVID. As soon as I knew I was returning to my full salary, I put my debt pay-off plan into action.
How much you earn greatly impacts how quickly you’re able to pay off your debt. If you think you’re underearning, it’s worth considering a side hustle to boost your income and help you become free from debt faster.
One thing I know in my heart is that it’s a lot easier to get yourself out of debt when you can share your journey with others. There’s so much value to be found in sharing what’s working and what’s not working, both for yourself and the person or people you’re sharing with. A small factor that’s obvious to you could be the hidden golden ticket someone else needed to solve all their financial worries.
What About You?
Are you on a debt-free journey? Or have you ever been in debt and are now totally free from it? I’d love to hear from you. Comment below with the tactics you’re currently experimenting with, or the ones you used to successfully get yourself out of debt. There are so many different ways of achieving the same goal — it’s great to see how others get there.
I’m Here For You
Remember: support isn’t all about giving. You can’t pour from an empty cup. Reach out to others and ask them for support. Some people need an accountability person, a friend, or a coach to keep them on track. If you’ve got no one you can turn to, I’m always here for you. Get in touch and we can work through this together.
You’ve got this. We’ve got this. I am still on my debt-free journey and will be sharing more with you very soon.
