How to Get Out of Debt
I’m not a financial planner and I’m not rich. But I did pay off all of my debt in the summer of ’17 and it was one of the best feelings I’ve ever had in my life. Maybe better than graduating from college, because the debt was so stupid in the first place, dragging it around for 11 years had become a heavy and costly burden. College took five years and it was free and fun. Debt…not fun.
In 2012 I decided I wanted to pay off that debt; it had grown to about $13,000 and in every dollar I saw every mistake I made since I opened my first credit card in 2006. Then I read a book by Dave Ramsey, called The Total Money Makeover. Actually, I didn’t read the entire thing, I got to page 71. But that was far enough for me to know that I had to make some decisions on how I was going to reach this goal. I didn’t agree with everything Mr. Ramsey said, but you take what you like and you leave the rest.
The path I chose, is simply the path I chose. I do not believe it was the easiest. I do not believe it was the fastest but it worked for me.
1. I came to the decision that I didn’t want to be paying these credit cards anymore. Without those payments (AND THE INTEREST OH MY GOD) following me around, I’d have an extra $6000 every year. That’s a trip to Europe. And India. That’s a nice new wardrobe. That’s a lot of brunches with my friends.
2. I started to read the book and learn about how money and interest rates work. In my mind, 14% was low, it meant you failed. You got an F. It’s a low score. In the interest world, it’s high. Really high. You’re paying out the nose. Educate yourself on interests rates. If you have a question, message me!
3. I learned to treat the problem, not the symptom. Buying things that I couldn’t afford put me into debt and made me unhappy. My car, a plane ticket, makeup school…I didn’t have the money for any of it. So I stopped putting things on my credit cards. I put the cards away and only used my debit card. If I couldn’t afford it, I didn’t “buy” it.
4. I set up an account on Mint. Mint helped me to see all my financials in one place and then set goals. It told me when I went over budget, how much income I was bringing in and the progress on my goals. I still have Mint and I use it to organize my expenditures every year for tax season. It’s free. I highly recommend it.
5. Lastly, and perhaps most important in me building my confidence and getting out of debt, I set up automatic transfers from my checking account into my savings account. At first it was $100, twice a month. Then I increased it to $150, $250 and finally $300. Today, I put $600 into my savings account every month. It is done automatically, and I’ve found if I “don’t have the money” in my checking account to buy something, I don’t. But if I leave it all on the table, I’m going to spend it. It’s my way of tricking myself into keeping a stronger budget and a larger savings account. Don’t be upset if you can’t do $100. Start with $15 twice a month. That’s $360 at the end of the year and that’s more than you would have had if you didn’t start a savings plan.
THIS IS IMPORTANT. You have to crawl before you can walk before you can run. START SMALL and CONSISTENT. Don’t try to dump hundreds of dollars into your savings right away. There’s a reason for this. Starting small makes it less scary, it makes the idea of it easy. And it also sets up the HABIT. I want it to become second nature for you to transfer $15 into your savings every two weeks. I’d rather you do that than put $100 in the first week and run out of steam in the middle of the second week when you get a parking ticket.
Having that money will make you proud and it will give you the confidence to realize you can save a bit more and watch that number grow. It feels good to have money in the bank and to be financially responsible. It does not feel good to be broke.
I know it’s frightening for some people to look at all of their debt, but ignoring the problem does not make it go away. Energetically, you are carrying a 13,000 pound or 50,000 pound or a 100,000 pound problem all over the world. Everywhere you go, you feel that weight, pulling you down, slowing you down. For me it was a reminder of all the “poor” decisions I made and I knew I wanted to free that energy up for “wealthy” life decisions. I wanted $13,000 IN the bank, not owed to someone else.
"I know it’s frightening for some people to look at all of their debt, but ignoring the problem does not make it go away."
So I lived small.
Because of a self-worth issue I knew I wasn’t going to increase my income, so I had to change the way I spent money. For five years I stopped going shopping, unless it was something I really needed, I didn’t go to nice restaurants and have lavish dinners. I drove my Mini Cooper until the wheels fell off. I wore my old clothes for five years and if I did buy something, it was secondhand. I didn’t go on vacations, and I set up an automatic transfer from my checking into my savings. I also started believing in a Higher Power. This helped me to learn that I am not God, I cannot have complete control over my life and that my prayers are heard. I lived like no one else (in a garage converted to a studio) so I could live like no one else (debt free). The picture you see with this post is my garage studio. I stayed in that cute little place for two years and I know of two other women, Jen Sincero and Danika Brysha who have done the same and gone on to be successful business owners.
It was not easy, my dating life was…not strong. I didn’t get a ton of visitors and my place wasn’t even big enough for a couch. But 19 months after I moved into that garage, I called the credit card company and made a $2,000 payment. The last of my debt. By November, exactly two years after I moved into the garage I had more than $5,000 in the bank and still no debt. It has been six years since I made a goal and a plan to be debt free and I now have a healthy 5-figure savings account. Coincidentally my income has increased since my financial confidence has increased.
I know that’s a lot of personal information and we have so many issues around talking about money but I don’t. I love to talk to people about money. What they make, how they save, how they spend, what their goals are, how much they are paying for their apartment, car, home, investments, retirement, everything. I don’t talk about money in order to compare, I talk about it openly because I want everyone to be as financially happy as they can possibly be. Money is energy. What does your debt feel like? How do you feel when you think about that debt? Now take that exact number and imagine that is what you have in your savings account, and you’re debt-free. How does that number feel now?
If you have questions shoot me an email, I’d love to help.
I’m not a financial planner and I don’t pretend to be one, but I have been able to get to the place where I could actually use a financial planner. I have money to invest, if I choose to do that. And that is the start of a beautiful financial relationship.