As many of us do, I raked up credit card debt during my college years and didn’t know how to become debt free. Even though I was making good money right out of college, for years I didn’t find the funds in my paycheck to pay off the debt – or so I thought. Every time I would think about making additional payments, I would feel a sense of fear that I may need the money for a rainy day. But that was my excuse. I made it my goal to get out of debt, and get out fast.
Once I realized that, with the help of a friend, I started to budget my payments into my monthly expenses. I was lucky enough to have debt in the 4 figures, so I put a deadline on myself to clear that up in 6 months. Here are a few things to consider so that you can get control over your finances and become debt free!
1. Budget
I first budgeted my current expenses like rent, car payments, utilities, food, and also entertainment. Once I made an excel spreadsheet of all of that, I had a clear understanding of how much I need versus how much I earned. Once that was identified, I realized that I had more money remaining in my disposable income. Other than the necessary expenses like a roof over my head and food on my plate, I had to make adjustments everywhere else my money was being spent.
One of the hardest truths about earning money and having no one tell you “no”, is that no one is telling yourself “no”. You have to learn to control yourself. Having money in your bank account does not mean you need to spend it. If anything, having consistent money is key to clearing debt without feeling the pinch.
Click here to pick a money budgeting app to get your finances in order with a few clicks on your phone!
2. Credit Cards
Credit cards are one of the evils of today. However, when you get control over them, versus them having control over you, you start to master the art of credit carding. And in a country like the U.S (unlike other countries in this world), you need good credit history for future purchases and loans. However, you shouldn’t have too many cards if you cant keep track of payments, interest rates, etc. They all overwhelm and you WILL lose control.
Once I understood this, I consolidated my credit cards by calling each one and making the best balance transfer to one new credit card that was offering a year of zero interest. I only needed 6 months of principal payments to be debt free, so every penny counted.how to pay off debt.
Use this credit card evaluation by lendingtree.com to evaluate the best card for you.
3. Become a Temporary Home Body
For those six months, I committed to staying in, eating in, and lowering my travel to anywhere but work. This helped saving on gas unless absolutely necessary. Eating in meant spending about half the amount of money I’d spend on eating out. This may seem a little intense for some people who do not cook and eat out with friends every day. If you don’t cook, you can still get ready-made food products from the store (a lot of healthy options these days, too) and stock up.
And if you scroll back up, I did portion out some money for entertainment. The difference however is that I cut that part of the budget down by more than 50%. That was definitely necessary since I was eating out, going to the movies, hanging out at Happy Hours after work. I reduced this significantly, and that helped other areas of my budget too.
4. Cut out the Fluff
I used to have a subscription to US Weekly. Yes, yes, judge me. But I knew everything about who dated who and everything in-between about the Hollywood stars. I chose to cut that subscription and every other monthly subscription that was not truly helping me. My gym membership was the first to go because I probably went less than 5 times in the entire year. Back then we didn’t have Hulu and Netflix and all these amazing streams and shows, but if we did – I would have cut out cable.
I was however sharing an apartment with a friend and we split that. In today’s world – I’d cut out whatever I could since there are many other options for media entertainment than regular expensive cable. On average, I paid approximately $120 for cable so that is $1440 for a year that could be saved.
5. Spend vs. Save vs. Pay Off Debt
There is a balance you need to achieve between these three avenues. You need to spend on necessary things. And try to account for and understand what is truly necessary for your life. If you are honest with yourself, you will find a few things that you could truly live without – if only for a short time.
Saving is the ultimate goal. Okay maybe investing is the ultimate goal, but lets leave that out for now. As we grow older, our responsibilities increase, our health starts acting up, and we have more needs. You should always want to build up a piggy bank that may be needed in the future. The balance is in saving versus paying off debt. Read how you can start saving money today.
It is much more apt to pay off debt. Not only will you be reducing the amount of interest you will be paying if you continued minimum payments, but it will totally and completely give you peace of mind. When you do have that peace of mind, you will be more likely to purchase things that truly make you happy, and also help you spend less in the future.
In Conclusion
Ultimately, I realized I could make additional monthly payments on my credit card and I was ultimately debt free in four months. And while I may have had a smaller debt to pay off, the goal here is to budget your life, dedicate to becoming debt free, and do not torture yourself. As I mentioned above, I didn’t cut out the fun stuff completely. If I did, I would have probably felt self-tortured, and stopped the process altogether. Once you commit, you will be debt free and on your way to eventually putting all that money in your piggy bank for that rainy day.
What actions are you going to take to clear of debt and loans? Comment below!
Featured photo courtesy of pixabay.com
Last updated on February 4, 2021.
