I don’t make a lot of money, in fact I’m in the lower-income tax bracket. I’m not a financial expert despite being a wannabe personal finance/lifestyle blogger. I’m just a regular Girl who graduated with over $45,000 in student loan debt and ironically a former shopaholic who decided to put down her credit cards and take control of her finances while blogging about all the ups and downs of debt repayment.
The steps I took to pay off $12,000 of credit card debt in 9 months worked for me but they probably won’t work for everyone. In fact, I know they probably won’t work for most people since I’m kinda a PF rebel who doesn’t budget or have an Emergency Fund so read at your own discretion.
So how did I do it?
1. I consolidated my two credit card debt into one personal loan.
Once I got serious about my debt repayment I realized I had to ask for a lower interest rate on my credit cards in order to get ahead. The interest rate on my Visa was 11.99% and my MasterCard was 12.99%. I tried calling both credit card companies, basically begging for a lower interest rate and they both said NO. I tried calling again a few days later and the answer was still NO. I didn’t let that discourage me so I went to the bank asking if they could give me a personal loan. The best rate they could give me was 11.65% because I didn’t have any liquid assets and was a “high risk”. Their words, not mine. I knew it was probably the best I could hope for since they could see I also had over $45,000 in student loan debt so I begrudgingly accepted the rate.
2. I used the debt snowball method.
I didn’t pick the snowball method. The snowball method picked me since I only had two debts with the smaller personal loan accruing interest and the massive student loan luckily on interest relief so my minimum payments were going towards principal balance. I was able to concentrate all my extra debt repayments on the personal loan. Whichever method you choose, make sure you have a plan!
3. I started to track my spending.
I downloaded this free app for my iPhone to track my spending and it really opened my eyes to see where I was wasting my money. A $5 coffee here and a $10 nail polish there really adds up. I tracked my spending for about 3 months so I could get a good idea of where my money was going so I could cut back in areas that were a concern. I also made an effort to not spend on any “wants”.
4. I didn’t officially budget but I had a system that worked for me.
Lightning might strike me, but this Girl has never used a spreadsheet to make any budget of any kind and I don’t ever plan to. I know how much I make every month and I always set aside enough money to pay my cell phone bill, monthly transit pass, rent and minimum debt payments. I have a certain number in my head that I’m allowed to spend on everything else including food and entertainment and at the end of the month anything left over goes towards debt repayment. I guess this is GMD’s version of zero-based budgeting.
5. I found other ways to increase my income.
I work hard on my blog and for the past nine months I pump out 3-5 new posts a week written by me and some of that hard work has paid off because I have been able to monetize the blog a bit. All extra income from the blog goes towards debt repayment.
6. I avoided debt fatigue by not “depriving” myself too much.
Some people become extremely frugal while they are paying off debt and if I had done that I probably would have been able to pay off my credit card debt faster but I am a big believer in living in the moment and enjoying every single day. So if I feel like buying a Starbucks Pumpkin Spice Latte, I will buy a Starbucks Pumpkin Spice Latte. I won’t drink one every day but once a week isn’t so bad.
7. I didn’t have an Emergency Fund.
This one is probably my most controversial but I’m aggressively paying off my debt right now so building an EF in case something were to happen seemed like money uselessly sitting in a bank account that could be used towards debt repayment. Please keep in mind that I have a very stable 8:30-5 job and I live in Canada so expensive medical emergencies are not a top concern. Sometimes in life, you have to take big chances to do big things so I guess that’s my justifiable excuse. Pay hard or go home!
8. I made sure everyone important in my life knew I was serious about paying off debt.
No one in my real life except for J (and his mom) knows about my alter-ego or this blog but they do know that “Wendy has finally grown up and become serious about paying off her debt.” Writing this blog and being a part of the personal finance community has helped me immensely in staying motivated to pay off debt.
As you can see, paying off debt doesn’t take any secret superpower, you just have to want it and then you just do it!
Good luck to all my friends who are paying off credit card debt! Now wish me luck as I pay off my student loans!