Being in debt has been normalized for many of us. Mention that you’re swimming in it and the response is always “who isn’t?”. We have been conditioned to believe that having debt is something we will always live with. I am here to tell you that debt is NOT normal and that no matter how much money you owe, there is ALWAYS a solution. But in a world of instant gratification, how can we control swiping our credit cards left and right?
Although common, debt is a serious problem that not only affects our wallets, but also our mental health. I believe financial stress can cause social stress. You want to participate in every event, but feel frustration when looking at your statement. How are we supposed to truly differentiate wants vs needs when guidance was rarely provided?
I started developing bad credit habits at the ripe old age of 18 with a seemingly innocent store credit card. My burden began not through necessity but lack of knowledge. I spent above my means, never planning or saving for the things I wanted. I thought paying for college classes, fun trips, bridesmaid expenses and shopping were all necessary; and therefore ended up charging more than I could ever make to pay back IN FULL every month.
Fast forward 8 years and I was the lucky owner of around $25,000 in credit card debt and $10,000 in student loans. I had become a walking statistic, joining the ranks of many who felt constantly overwhelmed by financial stress. Like many of you, I was ashamed of how much money I owed. This shame kept me silent and prevented me from asking for help. Doing very little research, I attempted to solve my problem on my own.
Many mistakes later, here are my five DON’Ts when paying off debt:
- Keep charging your cards that AREN’T maxed out
Basically play a game of Russian roulette with your non-maxed out cards for emergencies… spoiler alert, you just renamed unnecessary spending with emergencies because you are a spending junkie.
- Put $0 money towards savings
Why would you save? You need that income for Target trips…. and of course to pay off those balances as soon as possible!
- Pay the minimum monthly payment on all your cards
No research means you have no idea what your APR is and don’t know how much you’re paying in interest every month. You assume rounding up the minimum payment and only paying once a month is sufficient.
- I kinda, sorta, not really know my budget
You have started spending less and don’t go shopping as much. You feel like you have cut back. Reality is you’re spending less on things you still don’t need.
- RSVP ‘Yes’ to everything
“There’s no way I can miss that baby shower, this wedding, and tomorrow’s brunch!” You can’t help it that you’re popular!
I was doing all the above for about 3 years. I suddenly found myself at 27, still owing thousands, seeing zero improvement with no timeline of when my credit cards would be paid off. I could not see the light at the end of the debt-free tunnel.
So, after my 87th panic attack and 356th quarter life crisis, I contacted my financial savvy friends (who also run this blog) and set up a plan.
These are my five ways to SUCCEED with your finances:
- Track your spending.
Write down every transaction you make. I went old-school with pen and paper, color coding all my expenses. I had ceased retail shopping for a few months and felt proud that I had minimized on spending. However, I discovered I was spending over $400 on food! This did not include groceries, only social outings and getting takeout. Tracking helped me see where I could cut back and where my money was being spent unnecessarily.
- Begin saving, even if you have debt.
If you never put away money or plan for future events, you never have a cushion to fall back on. So whenever you need to spend on anything outside of necessities, don’t rely on credit cards and save as much as possible.
- Pay your credit cards twice a month.
Pick the credit card with the highest APR and focus on that one. Once a month, I pay as much as I can over the minimum payment to all my credit cards, and make one big payment to that chosen credit card. With my second paycheck of the month I make another huge payment to that same credit card.
- Budget, Frugally!
We are in crisis mode and will have to temporarily give up ALL luxuries. Basically, add up all necessities like bills, gas, groceries, and money you will dedicate to savings. Now give yourself $100 for the month to go towards social events, and use the rest for paying off credit cards and loans.
*Bonus points if you don’t use your “fun” money.
- Say no!!
It is OK to say no! Explain to your friends that you are focusing on paying off your debt quickly and cannot afford to go out as much. More often than not, your friends will understand and will offer to do something that is low cost or free. Plus, they will appreciate money saving activities as well!
After a few years in a debt standstill, I have been able to turn things around by educating myself and implementing these 5 steps. I now work to keep a substantial amount in my checking accounts by not using the money I budget for luxuries, put away 10%-20% into my savings, and have paid off three credit cards. I am on my way towards paying off the remaining four by November 2018!
I know it’s hard, but with a few sacrifices and focus, the reward is so much greater. Take it from someone that had given up hope: if I can do it then so can you! Believe in yourself, you’ve got this!