Growing up, Hollywood had me believing that 20’s were going to be the most exciting part of my life. I’d find true love, go on a life-changing trip to Europe and start a successful career all in this magical decade.
But if only life was a movie. By 28, I found myself beaten down by the all-star team of credit card debt, student loans and a monthly car payment. Like millions of Americans, my journey towards a crippling debt started once I moved out of my mother’s house at 21. Being overwhelmed by rent and utilities, failing to manage my personal spendings — I went back to my worst personality trait; running away from the problem.
Things went from bad to worse when I stopped logging into my checking account to see the available balance. With my head now completely buried in the sand, I continued to use my credit card to make up for the money that wasn’t in my account.
The interest rate on my credit card was exceptionally high and the student loan program wasn’t so generous either. This combined with my love for fashion and eating out build up thousands of dollar’s worth of debt in no time.
If things had continued this way, I would be staring down at potential bankruptcy. So I decided to get my act together, make some life adjustment and used a mixture of strategy to achieve a single goal: paying off the debt before turning 30.
1. I started by putting every extra dollar into debt
I’ve earned quite a few bonuses since starting my career. But this money never lasted for long. Since all bonuses are not created equal — some went into a short trip to Miami while others paid for a fancy dinner or two.
Looking back, one of the biggest financial sins was not making the best of these bonuses early on. In the end, every dollar counts. So one of the bigger changes I had to make was dedicate any bonus I would earn towards paying off the debt. This meant no nice vacations for a while but it was a sacrifice I had to make.
Beyond that, I developed a habit of cashing in any gift card I had and using it for paying off the debt. My overall perspective on extra money had now changed. I was living within my means and using all additional amounts for the account that had the highest interest rate; my student loan (however, I would change this strategy later).
2. I gave myself small rewards along the way
Dedicating all extra money towards loan payment made me realize what a big difference $5 can make. I became all but consumed with saving any penny I could and started to live a ridiculously minimalistic lifestyle.
Even something like a one dollar chocolate seemed like a luxury to me. But soon enough, I realized this approach was too radical and unsustainable.
It’s the same with any personal goal. Whether one is trying to lose weight or save money, an extreme change always ends in a disappointment. Giving up spending on everything that makes one happy is never good for your mental health. And one needs all the mental health they have to overcome a heavy debt.
So occasionally I would give myself a treat after making a payment. It ranged from baking for myself to joining friends for night out. I would push them for cheaper activities and join only when they agreed. This allowed me to have a social life without being too careless with my money.
3. I actively looked for discounts before ordering online
It’s a simple trick but sadly most people don’t use it. While shopping online, most of us either wait for the retailer to present a discount at the checkout or we are lured into buying after seeing an advertisement.
But there’s another way to save on your online purchases. Once you find a retailer that has what you need, open Google in another tab search for “coupon”, “promo code” or “discount” with the name of the said retailer.
For instance, before ordering a L’Oréal Paris’ moisturizer, search the query “L’Oréal Paris moisturizer coupon” or “L’Oréal Paris moisturizer promo code”. Most of the time you will be able to find a promo code that will make the purchase somewhat cheaper. Small discounts here can accumulate into a pretty significant amount.
One can save on pretty much anything by actively seeking discounts rather than waiting for a retailer to hand it to you on a platter.
4. I used the snowball method and it worked
The snowball method is perhaps the most popular debt repayment method and for a good reason. At first, I was skeptical how paying the smallest debt first and dedicating minimum payment to other debts will make any difference.
However, once my credit card debt was paid off and I had additional money to pay the car loan —it felt as if the weight of the world had been lifted off my shoulders. Yes. It’s a cliché but it perfectly describes the feeling I had on this fateful day.
The snowballing effect was visible as I moved on from smaller to bigger debts and eventually achieved my dream of being debt-free.
One important thing the snowball method did was set the benchmarks for loan-repayments. Once the car loan was repaid, I knew that payment of other loans was also achievable.
While I may not have saved the money on the interest rate, the motivational factor alone made this method worth it.
My debt-free life
It’s all about developing a healthy relationship with money. There’s a fine line between seeing money-spending as pure evil and spending large amounts as if there’s no tomorrow.
Fortunately, my fight against a mounting debt helped me develop long-term spending habits that help me control my finances to this day. Even though I’ve paid the debt —I still search for discounts, create budgeting goals and save bonuses instead of making a dinner reservation right away.
But this doesn’t mean I don’t occasionally travel to Miami or take my friends out to dinner. After all, what’s the point of life you’re not having a little fun?
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