How the $88,000 debt payoff journey helped me to transform
Today’s post is contributed by Amy Nickson, a passionate writer on finance. Amy is a professional blogger who has started her own blog and also works as a contributor for the Oak View Law Group. Please share your opinions by commenting below.
The debt payoff journey was the turning point of my life. Once I was a reckless spender; the debt payoff journey helped me to become a financially responsible person.
Read my story to know my debt journey
The year 2011 wash ruthless; my mom was diagnosed with liver cancer, which took her life after 6 months of struggling. In addition to this, I started getting creditors’ calls that made me realize about my high credit card debt, which was a double shock for me.
Being a single mom, my mother earned our bread, showered love and compassion on me and treated me as a most delicate possession.
She never wanted me to see hurt or sad. She had given me a credit card and told me to use for convenience. I started living a lavish life (planning trips, visiting Starbucks, partying, shopping, and hanging around with friends) with my boyfriend.
My boyfriend wanted me to buy a good car. I soon took out an auto loan to buy a costly car without giving it a second thought.
After college, I started working and earning. But, most of the money went out on leading extravagant lifestyle. As a result, I fell into costly credit card debts.
How I paid $51000 credit card debts that I mostly incurred during my college days
I had no clue where to start; what to do with $88,000 debts including $51,000 credit card debt and $37000 student loan debt, and a car loan.
I was not in a normal state of mind; my mom wasn’t there to support me, not even my boyfriend who influenced me to live a lavish life.
The settlement story
A few weeks later, I called John, my friend and a financial advisor.
After knowing all the issues, he advised me to settle the debts, especially the highest interest rate debt. A few months later, I got rid of the higher interest credit card debt ($16000).
The cost of the debt settlement was too high for me. I decided to pay the rest of the credit card debts on my own.
How debt snowball method worked as a savior
I contacted John for the second time to know how to pay off the debts on my own. He explained me the debt snowball method and suggested me to consider a side hustle to save quite a bit so that I can make some extra debt payments.
As per the guidance, I started paying some extra to the smallest amount of debt while paying the minimum to the rest of the debts. Since I had to manage the living cost on my own, I thought this could be the easiest way for me to get out of debt. Following the same method (debt snowball), I paid off the $35000 credit card debts within 3.5 years.
How I started freelance blogging
I had interest in writing projects. So, I tried to search online to find out blogging related freelance jobs. Soon, I started getting small to big projects. Freelance jobs are well paying. For instance, Wallet Squirrel makes $35 per article on Seeking Alpha.
Honestly, the side income helped me quite a bit to make extra payments on my credit card debts.
After paying off the debts on my own and earning extra, I felt a sense of accomplishment and started working on the other debts enthusiastically.
How I paid $37000 student loan debt
The student loan debt payoff journey was relatively smooth, because the credit card debt journey had taught me to live a frugal lifestyle. I started following the extreme money-saving strategies to pay off my student loan. I paid a little extra than the minimum payments. I followed the same until I paid off the entire loan. After 3 years, I was also free from my student loan.
Financial lessons I learned from my debt-ridden past
To be very honest, the intense financial situation helped me to become financially disciplined. I have learned to live life staying within my means. Since I grew up in a lavish way, I never realized the importance of living a disciplined financial life.
However, thankfully, the bad time helped me to learn how to set aside money and advantages of living a debt free life.
Here are some useful tips that will help you to avoid debts and get rid of them fast:
1. Budgeting is the key to avoid
I realized that without following a budget, it is impossible to keep finance in order. I had no idea how to manage monthly bills along with those credit card payments.
John told me to follow a budget where I include debt payments as the main expenses including other necessary expenses like grocery, utility, transport, etc.
By doing so, I noticed an improvement in my money managing skills. Dealing with bills became easier. And trust me, you never experience financial difficulties if you honestly follow a budget.
2. Cut down junk expenses to set aside money
I truly felt restless and unprotected when the situation needed to save every dollar. But, you have to set aside money if you want to get rid of debts.
To do so, you need to cut down unnecessary expenses like eating out, partying, clubbing, subscribing to unwanted things, etc.
I did the same and was able to save some extra dollar so that I could make extra debt payments.
3. Live within your means
Living a lavish life leads to debts. If you spend more than you earn, you will soon fall into debts.
After college, I started earning but I went overindulged and used to spend more than I earned. Most of the time, I used credit cards randomly, which was enough to accumulate huge credit card debts. Extravagant lifestyle only welcomes debt; so, you need to live within your means.
How can you do so?
- Eat homemade food as much as possible. Try a PBJ.
- Carry a water bottle and lunch from home.
- Skip expensive morning latte from Starbucks. You can make your own coffee that tastes same as Starbucks at home.
- Plan short trips instead of long and expensive gateways.
- Practice home exercise and yoga instead of paying a big amount for a gym.
- Shop grocery when you need and also reduce wasting food.
4. Make your credit card bill payments on time
You should deal with your credit cards responsibly. You shouldn’t buy an item, using a credit card, that you can’t afford; because making credit card bill payment within the stipulated time is very important.
If you avoid paying credit card bills on time, you will shorty fall into costly credit card debts.
5. Save money as much as possible
I took out an auto loan and bought an expensive car, which was a fatal mistake. To pay off the auto loan, I sold the car. Later, I bought a small car with cash. It took quite a bit of time to save money for the car, but buying a car with cash is actually a win-win deal.
6. Consider a side hustle
You should boost your income to get rid of debts fast. Earning some extra, like these extra ways to make money, will allow you to make extra debt payments. You can also be able to save a certain amount, which is a good way to avoid falling into further debts. I started part-time blogging to earn some extra. I had a full-time job, but the income was not upto the mark; the extra income helped me to pay off the credit card debt fast.
7. Get rid of junks to get out of debts
You should remove all the junks. Try to remove junk expenses and junk goods. By doing so, you can easily save money that you can use for debt payments.
8. Choose the right debt payoff strategy
I have mentioned earlier that I couldn’t continue with the debt settlement program due to its high cost. I didn’t have a well-paid job; so, I gave up. But enrolling in a debt settlement program helped me to pay off the highest interest debt fast.
Though a settlement program is a good debt repayment option, it is a costly one. It will also impact your credit score since you are not paying the total debt.
On the other hand, DIY debt repayment options are also effective. You can choose either debt snowball or debt avalanche to get rid of the debt on your own. You don’t need to pay money to a third party debt relief company.
Lastly, I should agree that living a debt free life is amazing. At least you can sleep peacefully without worrying about creditors’ calls. The debt payoff journey made me more mature and complete. Thank you for reading my debt payoff journey patiently.