How I Got Out of Debt

May 9th, 2008 | By Wise Snob | Category: Sustainable Living

Rating 3.00 out of 5

If I can find the strength to pay off my loans and credit card debts in less than half a year, so can anybody. Here is how.

In January 2008 I looked at my school loans and credit cards: I had a debt of about $21,000. After I stopped freaking out, I decided to set a plan to be debt-free ASAP. I had a full-time position that paid well, and I had a lot of beautiful things that I never wore and decided to sell. It was imperative that I look at myself closely and figure out how I got myself into this situation and how I can get myself out. If I kept buying everything my heart desired, I would not only be in major financial trouble, but I would not be able to truly value everything I had. Self-restraint is the most powerful human act. It’s easy to indulge, but true strength comes from discipline.

Budget I created a budget on Excel that listed all the things I spent money on and tracked it every day, week and month. I created a program similar to Pear Budget’s, and I calculated my rent, utilities, phone, groceries, and medical payments to be a set amount each month. Going out to eat, theater tickets, Christian Louboutins, and expensive facials were not necessary, so I limited those activities. I did not starve myself of these things, however. I still allowed myself a set amount to spend, but no more. I cannot just buy a $100 top frivolously. No. Now I really thought about what I wanted. And I stuck to it diligently. By March, I was so used to frugal living that I stopped budgeting.

Educate Self I started to read a ton of financial books. From Orman to Kiyosaki, I found out about savings, investments, and smart shopping. Of course, I went to the library. I learned about good credit, bad credit, and soaked in a ton of information about how to be financially savvy for the future. This is not just about saving enough money to retire while working until I’m age 65. Hell no. This is about learning to manage my finances and invest smartly so I am financially free any time of my life.

Clean Up I went through (my rather huge) two closets and put a lot of things into piles and piles. I listed accessories and clothes I did not want on ebay and took my clothes to resellers such as Buffalo Exchange or Crossroads, and within the first week, I made $500. I sent some purses to a luxury reseller, and snagged $4,000 in a few months from Luxury Shops.

So in about four and a half months, I paid off my debt. I still contributed to my 401K to the maximum match my company offered, and I contributed a fair amount to my Roth IRA. I even had a $1,000 emergency fund in my checkings while contributing a measly extra $50 a month into savings. And in these four months, I still had monthly massages, some new makeup, and a few really beautiful articles of clothing. But instead of buying everything I wanted, I purchased consciously.

Not everyone has the luxury of having a well-paid job and a lot of beautiful things to sell. However, anyone is able to incorporate everything I have mentioned above regarding smart planning and self-restraint to reduce their debt and create a fiscally fabulous future.

Image credit: www.freeimages.co.uk

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