Update: The following post was written late in 2011, but first published as-is in April 2013. At that time, I was down to 3k in credit card debt, which I was on track to have paid off within two months!
So I’m finally doing it… dealing with my addiction to debt, that is. For too many years I spent money above what I brought in thinking it would be no big deal, and I’d pay it off “someday”. That someday has come, and it’s tough, let me tell you. It’s tough to tell my fiancee why I can’t take her out to a nice dinner, or send her off to her favorite salon to get her hair done, or why money is always so tight. But it’s all true.
I’m 30 years old and I have $27,000+ in credit card debt. Pile on top of that $7500 left in student loans, a $17,000 truck loan, and a $154,500 mortgage loan on a townhouse that’s 40% underwater and it’s a depressing thought. But, it’s not about to defeat me. I may have got myself into this mess, but I’m going to get myself out of it too, and it’s slowly working.
Step One: Awareness
The first step was to realize I was spending way too much money. I would pay huge sums of money towards my credit cards, only to have nothing left and have to use the credit card all month long, just to rack it right back up where it was. Add to that, I just really wasn’t aware of my how much money I was spending.
Step Two: Reduce Spending
My fiancee and I realized we had to reduce our spending, and so we took stock of where our money was going. Eating out, entertainment, various memberships and monthly type accounts we weren’t even using. We cancelled everything we didn’t need/use, and severely cut down on our eating out. Now, when we do eat out, it’s at places like Jimmy John’s where we can both grab a sandwich for under $12, and we consider that a nice date/treat. We subscribed to the paper for 38 cents per week, and have saved much more in return by clipping coupons. For entertainment, we found some shows on tv we both like, and record them, and spend evenings watching them together with some home popped popcorn.
A deal for a $300 vehicle fell into my lap. The car looks like crap, but it runs pretty good, and gets 25 mpg whereas our next efficient vehicle only gets 18. This car has turned out to be my best investment, after tires and a new starter, we’ve already saved over $2000 in gas alone, in just a year!
A Setback or Invesment in the Future?
My fiancee and I decided it was best for her to go back and finish school, that’s what was best for our long term goals and success, not to mention happiness of doing what you enjoy as a career. This is definitely NOT a setback, but an investment in our future – though sometimes it feels like a setback financially. With the loss of her income so she could concentrate on school full time, it caused us to tighten our belts even more, and take an even harder look at our spending and finances. In a way, this alone might be a real blessing in disguise as it served as a catalyst for throwing the reality of the severity of our debt in our faces.
Step Three: Recover from Credit Card Addiction
We were determined to stop using our credit cards, so instead of paying so much towards them, I paid the minimums on most, and a little bit extra on one – setting up the snowball effect as we slowly get the debt paid down. I’m proud to say it’s been 3 months now since we’ve swiped my credit cards at the register. It feels great. We live pretty simply compared to what we used to, but we do so knowing that our future will be much better for getting this situation under control and behind us.
Instead of using credit cards, we make a monthly budget at the beginning of the month, and set aside “disposable income” into envelopes to be used for such extras as date night, home improvement, “staycations”, our future wedding, and a few other envelopes we’d like to save for. We try our best not to deviate from the money we’ve set aside n these envelopes and have done really, really well. We’ve been able to save a few hundred dollars for various things we probably otherwise would have wasted.
Step Four: Leverage the Snowball Method
I know many financial gurus have talked about this, including Dave Ramsey, but this is essentially paying the minimums on most of your debt accounts, and X number of dollars more towards one of them. When that debt gets paid off, take your original payment on that card, plus that X amount, and add it to the minimum payment of the next debt scheduled to die. As you pay debts off, you keep applying the same dollar figure to the next debts and they snowball in a sense, getting paid down faster and faster as you go.
So How’s it Working?
So far, so good. It’s only really been 6 months or so since we’ve started to get serious about our debt, but so far so good. We’ve adjusted to our severely reduced levels of spending when compared to our previous habits, we don’t use plastic anymore, and we still find ways to enjoy simple dates and time with each other, which I know mean so much to us both. The debt is slowly going down, but we know at the end of the tunnel awaits a much happier place, and a place where we vow not to get into this mess again. In a down economy, where so many people are in dire straits, we’ve managed to pay all of our bills on time, while decreasing our overall debt, all on one income. That’s a huge win already.
So What’s Next?
Now, we continue doing what we’re doing. I’m also looking at ways to increase my income in the near future, which will also be used to pay down debt even quicker and perhaps get us back to the gym to improve our health as well. A few years from now Jenn will be finished with school and we’ll have two incomes again, though I hope by that time to have the majority of the debt behind us, which just means we’ll be that much more ahead then.
Life is good. I have my fiancee, our health, a happy family, and a bright, bright future and many years ahead of us. Debt may have gotten me down, and may have seemed to win, but it will lose this battle, and that attitude above anything else is a the biggest key into dealing with your debt!
Update: So what happened between 2013 and 2017? Well, in 2012 I had gotten married and the truth was we weren’t happy almost from the start, and I spent the next several years depressed and dealing with that. Making good financial decisions is really hard to when you’re in an unhappy relationship and my finances suffered for it. By February 2016 I was divorced and began the healing process and financial recovery process. In September 2016, I met a wonderful woman who is now my fiance and life is good. As of December 2nd, 2017 I do still have some debt but I am a lot closer to being in a great position.