How I Eliminated My Debt

Moment of truth: I have not made the best financial decisions. Like many, I was not equipped with the knowledge to set myself up for a win, financially-speaking. There were many times that I thought I was making the best financial decisions and even times when I knew I was not making the best choice, but it felt good in the moment. Before I knew it, I was over $15,000 in debt. I had to eliminate my debt.

As of 2018, the average debt for millennials (ages 25-34) is $42,000. So, I am fully aware that my debt was not outrageous. But for me, I hated the feeling of owing someone money. It lingered over me and took over my thoughts. I was ready to change that and in 2019, I did.

Here’s a loose breakdown of my debts (transparency for the win):
Car – $8,000
Credit Card – $5,000
Student Loans – $5,000
PayPal Credit – $1,000
OneMain Financial Loan – $1,000

At the start of 2018, I wrote down the goal of being debt free by 2019. In January 2019, that goal was accomplished. I’m going to share with you how I did it and I hope that you are able to grab something from my experience. I know that everyone’s circumstance is different and the opportunities that I was able to take advantage of may not be available to you. I am certain that after reading this, you will find something that you can take away and apply to your situation. Let’s get started.






Moved Back In My Parents

I quickly realized that to pay off my debt, I had to take a few steps back in order to take a larger leap forward. Moving back in with my parents, was one of those retractive steps. I know that this may not be ideal or even an option for some, but I was able to take advantage of this opportunity. While living on my own taught me a great lesson on responsibility and adulting, I realized that I could eliminate the expenses associated with living in an apartment and put that money towards my debt. So, I decided to move back home. This left me with a significant amount of money that could be used to tackle my debt head on. I had no excuse.

Career Change

I had a revelation while living on my own: I needed to level up. Yes, I was able to furnish my apartment and pay rent every month (with the help of a roommate), but paying off my debt was at a stand still. I was paying the minimum payments on all of my accounts. I noticed two things: I needed to tighten up and stick to a budget and to increase my income. A higher income would not only raise my standard of living, but also allow me to tackle my debt more aggressively. It was not easy, but when I make up my mind to do something – I do what I have to do and figure it out. So, I secured a much larger bag and was able to pay off all my debt within six months!

I can expand a little more on my career change later.

Sacrifice

I do consider myself to be frugal, but the one thing I love to do is travel. Do not tempt me, because I will spend the money to book a flight…every time. But once I set my mind on tackling my debt, taking trips was a no. Ironically, during the time that I paid off most of my debt I was working extremely long days. So, the ability to go on vacation was non-existent. In retrospect, I guess that worked out for me. Aside from traveling, I had to sacrifice other things like eating out. On several occasions I had to, ‘we got food at the house’ myself. I took account of what I was unnecessarily spending money and had to pull back. This involved a great deal of self-discipline and parenting myself.

Devise a Plan and See it Through

Undoubtedly the most important step. I realized that if I wanted to be debt-fee, I had to do things differently. I researched ways to eliminate my debt and ultimately decided to use Dave Ramsey’s ‘Snowball Method.’ This method involves four steps:

Step 1: List your debts from smallest to largest regardless of interest rate.
Step 2: Make minimum payments on all your debts except the smallest.
Step 3: Pay as much as possible on your smallest debt.
Step 4: Repeat until each debt is paid in full.

It may be best for those with a limited income or very limited amount of money to dedicate to paying off debts. Recently, I came across another method, the ‘Avalanche Method.’ With this method, you:

Step 1: List your debts from smallest to largest regardless of interest rate.
Step 2: Make minimum payments on all your debts except the largest.
Step 3: Pay as much as possible on your largest debt.
Step 4: Repeat until each debt is paid in full.

If you pay off accounts with the highest interest rates first, you will end up saving money due to interest and will pay off your accounts quicker. This seems more logical to me and it aligns with my frugal side.

Yes, I am debt free and it feels great now, but it didn’t always feel good. The thought of seeing thousands of dollars leave my account at once, made me sick to my stomach. It was crippling and there were several times that I would just put off making a payment because I did not want to see the money leave my account. But let me tell you, seeing my debt decrease and disappear made it all worth it. I’m learning that gaining financial freedom is, single-handedly, one of the most important things I can do for my future.

So, I’m debt free. Now what?

Here are my next steps:
1. Increase my income by monetizing on the skills I already possess.
2. Contribute the yearly maximum to my Roth IRA.
3. Purchase an investment property.
4. Get back to traveling.

I’ll leave you with this: Condition your mind to know that becoming debt free is not a far-fetched goal. It is possible. Not necessarily easy, but it is possible! If you have any questions or want me to go into detail about anything, just let me know.

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