Crushing a goal leads to helping others
In this series, NerdWallet sheds light on people’s debt repayment journeys. This month Nerd newcomer Holly Carey looks back on how leaving debt sparked an interest in personal finance and ultimately led her to join NerdWallet.
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Paid: $ 55,630 in 26 months
I haven’t always been cheesy about money. In fact, when I decided to take control of my finances in January 2015, I didn’t even know how much debt I had.
My mom gave me a personal finance book that year for Christmas. I read it in two days and went from not knowing my finances to creating an emergency fund and creating a budget. My ultimate goal was to pay off all my debts, and I gave myself 30 months to do it.
I still remember when I sat down to calculate the numbers. Honestly, I had no idea how much my car, credit cards, personal loans, and student loans were worth. I was shocked when I found out I owed over $ 55,000.
It was especially distressing because I had recently moved to Washington, DC, and I was already nervous about the expensive city that I had just made my home.
Create a budget and reduce expenses
I was fortunate to have a secure job with the government that paid well. At the time, I was working for the Navy as a civilian and served in the Navy Reserve as a public affairs officer. By the time I paid off my debt in March 2017, my total annual salary was around $ 100,000.
i used a zero-based budget, which means that each month my income minus my expenses, debt and savings were zero. It gave me a clear plan to spend and save each month. For example, when the money I had set aside for entertainment ran out, I stopped going out for the rest of the month. I also used cash to pay for certain categories of expenses – like dining out, groceries, and the rare occasions I went shopping – to make sure I didn’t overspend.
Even though I was earning a good income, I still felt exhausted every month from my minimum monthly payments and the high cost of living in Washington. My 600 square foot studio was costing $ 1,800 per month.
After learning how to budget and stick to it, I made a serious decision to cut back on my expenses. I moved in with a roommate, which reduced my rent by $ 600 per month. I rarely ate in restaurants, and when I did, I ordered happy hours. I stopped buying clothes and even canceled my Amazon Prime membership. These changes weren’t easy, especially after moving to a new city and wanting to go out to explore and meet new people, but I knew they weren’t permanent.
Pay off the debt
There are two common methods of paying off debt: snowballing or debt flooding. If you are using the debt snowball, you pay off your debts from the smallest to the largest. You focus all of your extra debt paying money on the smallest debt while paying minimums on the others. When that is paid, you hand that money over to the next one. With the avalanche of debt, you pay off debts in the order of the highest interest rate, again focusing all the extra money on one debt while paying minimums on the others.
I used the debt snowball method, which gave me an early boost in paying off smaller debts. This freed up more money to use when it was time to tackle bigger debt, like my student loans.
Since I had paid off all my debts in such a short time, I was not worried about the interest. If I had expected this to take a long time, I would have thought about how much money I could save by paying off high interest debt first.
Meeting with my husband
A year after starting my debt repayment journey, I met my future husband, Brian.
I remember Brian was taking trips to Las Vegas and the Rio 2016 Summer Olympics, and I was secretly wondering if he was racking up a bunch of debt. I doubted our relationship would work if we had different philosophies about money. I was working so hard to get out of debt and didn’t want to be tempted to give up my new lifestyle.
Once we were serious about dating, I told Brian about my debt and my plan to pay it off. I was relieved to learn that he had no debt. And while he wasn’t averse to debt like I was, he supported me on my journey and celebrated with me when I made my last payment nine months before our wedding. I had paid off all my consumer debt in 26 months.
Life after debt
Our discussions about money prepared us for our engagement, to pay cash for our wedding, to move to a new city, and to buy a house. In June 2019 Brian and I welcomed our daughter into the world. In those early days as new parents, we were fueled by adoration, fear and caffeine while learning to soothe our crying baby, doing endless loads of laundry, and taking sneaky naps while she was sleeping. However, because we had remained debt free and were intentional with our money, we never had to worry about finances with our new baby.
Now, almost four years into our marriage, we remain debt free (except for our mortgage), continue to set financial goals, create a monthly budget, and have great money communication. Our next goal is to pay off the house sooner.
Once I found out about personal finance, I couldn’t help but share it with everyone I knew. I even ran coaching sessions to teach family and friends how to budget and set financial goals. You can imagine my excitement when I saw the job posting for a Editor-in-Chief position at NerdWallet – my dream job!
How to get rid of your own debt
If you feel inspired to tackle your own debt, consider these steps:
- Calculate your debt, whether it’s creating a spreadsheet or just making a list of debts, balances, and interest rates. Having an idea of ââthe amount and types can help you determine a strategy or if you should consider debt relief.
- Create a budget if you don’t already have one. The 50/30/20 budget is a useful approach.
- Choose a debt repayment strategy, like snowballing or debt avalanche.
- Look for opportunities to cut short-term expenses, like canceling monthly subscriptions and eating out less often. Apply the extra money to your debt.
Photo courtesy of Sandra Leigh Photography
The article How I Left Debt: Crushing a Goal to Help Others originally appeared on NerdWallet.