Series Part I: Giving Yourself A Raise

Facing Your Debt

This is the first part in my series Giving Yourself A Raise. You may be like I once was and be waiting for your life circumstances to change, so you can start living your life the way you’ve envisioned it. Weeks turn into months and months turn into years and before you know it you look back and feel like things haven’t really changed much. You’re still going to your 9-to-5 job to pay off your debts and by the time you’ve done that you spend the rest on something self-gratifying because, damn it, you deserve it! Most of us have accumulated debt over our lifetime whether from credit cards, student loans, or medical bills. Debt can weigh us down and mentally block us into thinking we are stuck. The good news is you are not stuck and you actually have some control in the situation. In this series I will be showing you how to start to take control of your finances and start living your life the way you’ve imagined it.

While I’m definitely not a financial guru, I have managed to pay off massive amounts of debt and still enjoy my life along the way. Books by Dave Ramsey is the extent of my financial education, but I have to say, adopting what he calls the snowball method is what increased my momentum and decreased my debt in record time. 

When I started making more money than I really knew what to do with I was, quite frankly, out of control. It seemed like so much money to me at the time, but the truth is you will always spend as much as you make. I was living paycheck to paycheck, blowing money left and right. Because I was commission based I would buy with credit then worry about paying it off the next month when I got paid only to find out I wouldn’t make as much in commission as I’d planned to pay it off. I’d think the next month would be better, so I’d still live my life spending money on dinners, drinks, clothes, or whatever I thought I needed at the time. One day I looked at my balance and it had climbed to $6k! Not to mention the little clothing store credit cards I accumulated with $300 on this card and $200 on another card all adding up to an additional $2k. I had about $40k in student loans at the time, $5k left to pay off my car and $0 in savings. If I were to lose my job at the time I would have been screwed.

Your debt may be worse or better than mine was, but in the end, the same principles apply. Now, mathematically it’s smartest to pay off the highest interest rate first, right? We all know that. But there’s also something to be said for momentum. When you’re giving up a part of your lifestyle to pay off debt it can seem like a drag and depending on how much that is it could be years before it’s all finally paid off. This is where Ramsey’s snowball method comes in. The snowball method is paying off your smallest balances first and then tackling your largest balance at the end. It makes you feel like you’re getting somewhere. You’re decreasing the avenues you have to pay and accumulating multiple minimum payments that you were paying to put towards your largest balance at the end. In my case I would pay off the credit cards with $300 or $500 off first, leaving me with my student loan, big $6k credit card, and car payment. Because of how long I was realizing it was going to take for me to pay off $8k with an annual interest rate of around 20% I started to freak out a bit. I ended up finding a credit card with no interest for a year, so I transferred the $2k to that. Then I reconsolidated my $6k debt into a private loan with SoFi that gave me a lower interest rate of around 12%. While I was at it I found out I could reconsolidate my student loan for an even lower interest rate than I was currently paying. If push came to shove I could everything paid off in 7 years.


Now I had a plan or at least some better interest rates. I cut up all of my credit cards except for one and hid that one in the back of a drawer left only for real emergency situations. While the reality of the amount I would have to put towards my debt each month settled in, I also knew I needed to put back a little extra in savings just in case. Ramsey recommends when you are paying off massive debt to at least save $1k for emergencies in the short-term. Then once you get to a point where you’ve paid off some debt, you can start growing your savings to at least 3-6 months of living expenses. Pay yourself this $1k as quickly as possible, put it in a savings account and don’t touch it!

My Plan of Action

  1. Pay the minimum payment on my 0% credit card to pay off the $2k within 12 months, which was $166.66/month. No exceptions.
  2. My private loan with SoFi already had a payment schedule set-up for a 7 year term, but I didn’t want it to take that long. It did, however, make it more manageable and created less stress knowing that worst-case scenario it would be paid off in 7 years. I think my payment was around $116/month
  3. If I could pay my car off as soon as possible that would give me an extra $250/month to put towards my loan. This is where I focused to pay off the fastest. Any extra money I received I put towards my car and had it paid off within a few months. I then took the $250/month payment I was paying on my car and put it towards my private loan and then began throwing any extra money I had towards my private loan instead.
  4. My largest loan was my student loan, but it was also the lowest interest rate, so it was the least of my worries. I knew that with the payment schedule of paying $480/month it would eventually be paid off faster than I originally thought or worst case scenario 7 years.

Needless to say this experience taught me a very valuable lesson. It ended up taking me about a year and a half of putting any extra money I had towards my loans to get them paid off. My lifestyle drastically changed, but now I work off of a monthly budget. Each pay period I plug in my earnings minus expenses and intentionally allocate money to different buckets like traveling, savings, and paying off whatever debt I’ve accumulated that month. I feel so much more in control of my life and I can invest in experiences instead of wondering where all of my money went.

Now that you understand how you are going to pay off your debt the next step is to alleviate some funds or spending habits to help you do it even faster. The best way to do this is to take an honest look at the way you are spending your money. It’s not easy looking in the mirror sometimes, but you have to get honest with yourself first and become aware of your tendencies and the way you are habitually living your life. What is excess? What can you do without? What do you absolutely need? I will go over all of this in my next post of this series, but before you read the next post, go to this site and connect all of your accounts and take a good hard look at yo’self!

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