In this season we celebrate death. I am celebrating the death of my debt. The death of the person I used to be and the habits that didn’t serve me. This month I laid the last of my credit card debt to rest. A total of $18,312.27.
At the height of my debt, I was sinking deeper and deeper because I refused to look at my behavior and how the decisions I was making were not serving me. My credit card debt was a result of years of living out of my means and not creating limits around my spending. Three maxed out credit cards and thousands of dollars of debt weren’t enough to make me face my actions.
I finally hit my rock bottom in 2018 when I realized I was spending as much on eating out and drinks as I was on my rent at the time. Seeing this after tracking my spending shook me to my core. At the time I was already a mother. I was already the breadwinner and here I was still spending beyond my means. Tracking my spending finally made me look in the mirror and clearly see it was my actions that were keeping me down. So here are the steps I took to get out of debt….
1. Self-awareness and ripping off the band aid. For years I didn’t want to look at my debt or my spending patterns. Then after a suggestion from someone to use an app, I downloaded my transactions for the month prior and did a line by line audit of where my money was going. I was shocked into action. I suggest, begin by just taking a look at your debt, take an accounting of what you owe without judgment or shame, no need to feel bad about your debt, just be aware of it.
2. Learn about Personal Finance. When I started my debt pay off journey, I was still not fully financially literate. So, I immersed myself in personal finance content. I started with the podcast So Money by Farnoosh Torabi. I watched the budget moms youtube videos for hours too trying to learn how to build a dang budget. I invested in courses and workshops that helped me learn about investing. Follow me or some other financial person on IG to start learning about some money tips, and look for offerings from myself and others.
3. Build a plan. I started with building a budget by paycheck that I learned from @TheBudgetMom. I built a budget that included the things I loved within limits so I wouldn’t deprive myself. Part of my plan was consolidating my credit card debt. I did this because my debt was between 3 high interest credit cards, so in order to cut my interest down I consolidated the amounts into a single loan with only 8% interest. Create a plan taking into account your income and expenditures how you can begin to pay down your debt. Set short term and long term goals, something that is doable for you.
4. Stay away from debt tunnel vision. I call my life pre-budget tunnel vision. I was working more, getting paid more but somehow not making much progress. Why? Because I had debt tunnel vision. I was so focused on paying off debt that I had zero savings and no structure. I would throw a large random amount of money at my debt and then come up short on my actual expenses. So when things came up that I needed money for and I didnt have the cash I tapped again into credit cards to get by. We are told that we need to be completely debt free at the cost of savings, at the cost of investing, but that IS NOT the case. Did I want to get out of debt? Yes. Did I want to sacrifice compound interest and my sanity in the process? NO!
In order to break this cycle, you need to plan ahead for sinking funds. Sit down and look at the next few months on your planner, make a note of anything you need money for and work that into your budget. So when you need the money, it will be ready for you to spend.
5. Find a System that Works for you. I stopped using my credit cards and used the cash envelope system. Using the cash envelope system helped me become super aware of my spending and I learned to manage my limits. Once the money ran out of my envelopes I was done, there was no more spending to be done. I would take a $50 bill to the grocery store and if I went over I couldn’t just swipe the card. I had to leave things because I only had the $50 bill which was my limit for that trip. I used the cash envelope system for 1 year and I stopped using credit cards for 2 years so I would stop racking up more debt. There are many ways to track your money and spending, and it might take some trial and error, try out some methods and find what works best for you.
6. Track all Your Spending. I tracked everything I spent. I knew exactly how my money was flowing. This may feel a bit overwhelming at first, but you will quickly get accustomed to it, and it will help you stay on track with your goals. And can give you insight into where you may want to cut back.
7. Automate payments. I automated my debt payments so I always knew exactly how much I was going to pay and when. I based my payment off my actual budget. So I made sure I had money for not only my expenses but for other things I loved to do like eat out. The difference was I had a set amount I planned on spending, instead of spending and then figuring it out later. Automating payments, helps you stay on track with your bills, and keeps you accountable to your budget. You can either automate payments through the bill companies themselves, or you can set up payments through your bank. You can usually do this online and set up the preferred date for the payments to go through. It’s a super easy way to track spending.
8. Make extra payments to debt when you can. Whenever I had a money windfall from stimulus money or paid over time, I put extra payments to my loan. You can always keep half for fun and the other half for debt. Any extra payments you make cuts back on the time it will take to pay off your debts.
9. Reduce expenses. In 2020 when I started working from home full time, I sold one of our cars and used the money to pay off my student loan. This made room in my budget because I reduced the expense of insurance and gas. This allowed more room in my budget to pay off more to debt and save. This is where tracking can come in handy. You can see where you may be overspending on things that are not true necessities. Or you can make more conscious decisions about sacrifices you can make to reach your goals. Where can you cut back?
10. Expand your sources of income and charge your worth. I started a side hustle and worked overtime when I could to bring in more money. Do you have a skill that you can create levels of exchange for? We often under charge for our skills because we don’t think we have enough experience or we are not as good as others. Value your time and energy properly so you are not burning out, and yet are still able to create extra income.
Most importantly, I stayed consistent and dedicated to my plan for three years! I did this all while supporting my family on my income, less than 100k and continued to invest in my retirement plans. CONSISTENCY AND PLANNING will get you far. I still spent money, I still took little vacations, I still ate out, but it was all planned and budgeted for ahead of time. I became more intentional with what I spent my money on. Saving my spending for things I really wanted and loved.
It’s possible to shift your behavior, heal your relationship with money and change the trajectory of your money story. Once my feet reached bottom and I finally faced my debt reality, I was able to ascend into abundance and prosperity. If you want to do the same with your money, you can join me in the 2022 Money Empowerment Program.
In the program we not only create a financial plan but we address our feelings around money, we work to understand our money triggers and heal them. Changing the trajectory of your money story is 10% about your numbers and 90% about your money mindset.
You can find out more here: https://90daymep.podia.com/