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Over the last decade or so, I’ve had debt that has just accumulated out of control. What started as $20,000 in student loan debt snowballed into over $100,000 over ten years. I know what you’re thinking: Why didn’t you just get it under control sooner or file bankruptcy? Because like most debt, it’s hard to tackle unless you really devote yourself to it.
On some months, my balance would drop and I’d be close to paying everything off. Then some big expense would come out of nowhere, forcing my net worth further into the red zone. I knew that filing bankruptcy wouldn’t address the underlying issues that got me into debt, and I’d find myself in this situation again. I needed to tackle this thing once and for all. Conquering debt and finally learning how to manage my finances would be the only way to ensure it never happened again.
Well, after an intense year of lows and further lows, I’m happy to report that I have paid off $112,000 in debt. I have never felt lighter or happier in my life. All this time, having this debt piling up and feeling helpless about it had made me feel like I’d never get out of it. But I really buckled down and made it happen.
If you’re in a similar situation, don’t loose hope. If I can finally pay off $100,000 in debt after a decade of struggles, so can you. It’s going to be hard work, but well worth the effort. Before I get into how I paid off my debt, I want to talk about how I ended up in this situation to begin with.
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In this post
First stop on the debt train: Student loans
Like most folks, my financial problems started in college. I got into a top 15 school and couldn’t believe my good fortune – until I got my financial aid package. Tuition at this school cost well over $50,000 per year and financial aid would cover $25,000. Sure, getting a 50% discount was amazing but it was still $25,000. There’s more to college expenses than just tuition and housing.
I went to college in an insanely expensive city, so everything cost more. During college, I did my best to work multiple jobs and pay down my debt as much as possible. But it was hard and I didn’t realize how much my living expenses added up every month.
My senior year in college the economy crashed and a property I owned went into foreclosure. Not only did I lose out on my down payment, but my tenant hadn’t paid rent for months so I was completely in the hole. I ended up filing bankruptcy after charging a year of tuition to a credit card. So I at least reduced my debt down to $25,000 by the time I graduated. But that wasn’t the end of my troubles.
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The impossibility of finding a job that pays the bills (past and present)
Finding a job during the worst recession since 1929 was a challenge. I was unemployed for almost a year and couldn’t for the life of me get a job interview, let alone an offer of employment. Finally, after a year of hustling, I got an entry-level position with good benefits and a terrible salary. At the end of the month, I had around $200 left, which I put straight towards my student loans.
Moving on from that position was hard. When you only have a few years of experience, it’s hard to move up. I tried to acquire more skills through educational programs, but those required more money. We’re talking early 2010’s, when free online learning wasn’t quite as widespread. Eventually, I landed a slightly higher paying position, but then my rent living expenses also increased and I found it hard to keep up.
It took another five years before I was in a financially stable position and earning almost four times what I had as a new graduate. That’s when I accelerated my plans to pay off my debt.
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Balance transfer offers kept me afloat (and in debt)
During this difficult decade, I juggled my debt through various balance transfer offers. I took advantage of these promotions offered to family members, who were kind enough to help me out. While they helped me consolidate my debt and avoid the danger zone (i.e. 25% interest rates), I always struggled to pay those balances off at the end of the period. So I rolled it over to yet another credit card and pay yet another 3% balance transfer fee.
Eventually, what helped me break the vicious cycle was to change the way I spent my money. For starters, I quit using credit cards for my expenses. It wasn’t fun to lose out on cash back rewards, especially after I was finally able to get the bankruptcy off my record and rebuild my credit. But it had to be done.
I put myself on a strict spending fast. No spending money beyond $300 per month on gas, food and essentials. That meant no more trips to Starbucks. Going forward, I made my own cold brew and start cooking my own meals because I simply could not afford those $20 daily meals out that piled up to $600 per month. I got a $300 Visa gift card on sale at Staples (on which I profited about $7) and that’s all I could spend for the month.
I cannot emphasize the importance of cutting out credit card spending when you’re paying off debt. You want your balance to go down as often as possible and that won’t happen if you keep using your card for daily spending.
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Side hustles and spreadsheets for the win
By this time, I had several side hustles in rotation, along with my day job. I would take every paycheck that came through and pay down something. Eventually, I had a spreadsheet of the credit cards I carried a balance with. I included the balance amount, when it was due and when the balance transfer promotional period ended.
I made a plan for paying everything off on time by working backwards. If a $10,000 balance was due in December, I’d have to put $X amount towards it from each paycheck in order to pay it off in time. I decided to dedicate 88% of each paycheck towards debt repayment and stuck with it. Before long, I had mapped out exactly which paycheck would go towards with balance, along with an exact timeline of when it would be paid off.
I put my side hustle income towards my living expenses and whatever was left over would go towards paying down debt. Soon, I relished dropping balances over buying a cute pair of boots or a new handbag – even if it was on sale. I was finally close to freedom after a decade of debilitating debt and I was determined to rush to the finish line.
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Giving myself an income boost
In addition to side hustles, I gave myself an income boost in two ways: First, I sold my car since I began working remotely. I had no use for it and quite frankly, it was too extravagant for my new life in quarantine. Factoring in tax incentives, I broke even and no longer had a costly insurance payment. I figure, if I need a car down the road I’ll gladly get a sensible used hybrid. In the meantime, I was killing it on the debt repayment front.
Around this time I also negotiated a raise at work, since I was taking on more responsibility as my department shrunk. I was on a role and kept this up through the end of the year. The stock market took a huge hit during the pandemic and I took advantage, buying up tech stock. A mere $5,000 investment (one paycheck) quadrupled until I cashed it out and paid off one of my big credit card balances.
Another thing that helped me pay off my debt faster was opting not to pay taxes. Yes, I realize it means I may have a tax bill in April, but I also have a lot of deductions thanks to my side hustles. I figured I’d rather get a tax bill in April and a zero balance credit card bill in December. When I finally paid it all off, I breathed a sign of relief that would have blown down the tress if I’d been outside.
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Lessons learned
Over the last year, I’ve really prioritized financial literacy and growth. I don’t ever want to be $1,000 in debt again, let alone $112,000. Not only did it take me an insanely long time to get a grip on my debt, but I missed out on opportunities to invest and grow my net worth. If I had $112,000 lying around when the stock market tanked and invested it all, I’d have enough money right now to buy a home in cash.
But I don’t dwell on the financial mistakes I made in my past. Instead, I learned some valuable lessons that I’ll internalize forever. All my mistakes helped me get to the enlightened place I’m in today. Never again will I value material things over peace of mind. Or live above my means and make major financial decisions flippantly, reaping long-lasting consequences for years to come.
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I’m wiser, better educated and have felt the intense burden of debt and don’t care to relive that experience. Now that my debt has been paid off, I’m focused on setting aside six months of living expenses in case my job turns out to be less secure than I had imagined. I’m also doubling down on side hustles even though I don’t have to anymore. Now it’s a sport, a fun game of sorts, that helps me towards a secure future. What I earn on side hustles right now goes towards investing in my future. Now that I’m no longer in debt, its looking much brighter.
I hope this story is helpful to those who have experienced the soul-crushing burden of being $100,000 in debt. I hope my experience gives you hope that it can be done. And I hope that some of the tips I’ve given here can give you more ideas for tackling your financial problems and overcoming them in 2021 and beyond.
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(Photo by Towfiqu barbhuiya via Canva)
