It’s been almost a year since I became debt free. After I finally paid everything off, I felt a huge weight lifted off of my soul. Debt is so crippling and depressing, it will overwhelm you if you let it. I don’t have all the answers, I wouldn’t even advise anybody to do what I did unless they absolutely had to. My journey to the debt free life was not easy AT ALL. I had to move over 2K miles away from home to do it. I missed out on a lot of fun shit, and I did shit that I didn’t want to all so I could get to the point where I am now. Debt free and financially stable.
I’m not an expert, but I will give what few tips I can because I’m all for people getting to the coin and living their best life!
I also acknowledge my privilege. I lived with my mother for 3 years, which gave me the opportunity to save money so that I could move across country and start a job that eventually led to me becoming debt free and financially stable. So, while I may be giving tips, please understand that this is coming from a woman who lived with her middle class mother, and had access to financial resources, education, and the like.
Please do not confuse my tips with me being ignorant to the realities that some people face. I’m well aware.
Do Your Research
This is an ever-present trend on my blog because I am the research QUEEN! I look up EVERYTHING! We are living in the information age, if you have a question or concern LOOK. IT. UP.
I had so much damn debt by the age of 23 I thought I’d have to fake my own death to get rid of it. After doing some research I came to the conclusion that bankruptcy would be my best option. I was young, I could bounce back, I just wanted to get rid of this debt! Little did I know, you gotta pay for bankruptcy…
So that was a NO. There are other options though, debt consolidation, working with creditors to get a payment plan, but I wanted a quick fix, so I got a loan instead. I added up how much I was paying every month in bills, and decided it would be cheaper to get a loan and pay everything off then pay on the loan. So I took out an $8K loan, paid off everything except my car, which was about $20K, then another $7K credit card, which put my debt just over $35K. Disastrous. It is really expensive to be poor.
Take the time to do your research, learn the laws in your state, talk with your creditors and your bank. Don’t be like me. I was living paycheck to paycheck, with over $35K in debt, at a dead end job. The American dream! AM I RIGHT?!
Hell no! I had to get to the fucking money!
You Gotta Make Money
This is where my privilege comes into play. Bear with me here. If you feel that I am berating or disparaging your reality please know that is not my intent.
At this point, I had paid everything off except one credit card and my car, plus I had this high interest rate loan that I had to pay on, so I was looking at over $1K in bills every month. I wasn’t making enough money to pay that or save to improve my quality of life (move out of my mom’s house, be financially stable, pay shit off, etc.). So I decided it was time to get a new job. I started applying for every job I could find in Memphis, but the pay was trash. There were no jobs (in my field) in Memphis that would offer me what I needed. So I looked elsewhere, Washington, New York, California, Texas, everywhere. Finally job offers started coming in from Washington, unfortunately, my broke ass lived in Memphis and I didn’t have the funds to get to Seattle for the interviews. I seriously considered declining the interviews, because I didn’t want to fall behind on my bills and watch my credit score tank.
I knew if I declined and stayed in Memphis I would never be able to make enough money to move out of my mama’s house, pay off my debt, and improve my quality of life. I also knew if I fell behind on my bills I’d end up paying more than I already was.
But life is a marathon, not a sprint.
So I stopped paying everything except my car note. I saved up my money and brought my black ass to Seattle and got the damn job.
Save Before You Pay
I started my new job April 2016 (one year before I became debt free), I was in a new state I had a new job, and I hadn’t paid shit since September 2015. I was ready to start paying bills off, but the difference between the cost of living in Washington and Tennessee was not something I was prepared for. Gas was higher, groceries were higher, my commute was longer, I had to pay rent, I had to pay for my electric. Bitch, I had bills.
I was also up here by myself. I didn’t have my mama, I didn’t have my friends (not that I would ever ask them for shit anyway) but still! I was alone. I had to make sure that I could take care of myself in case anything happened to me.
So once I was eligible for overtime, I worked all the overtime they had and I saved it all. Every dime. I didn’t make one payment on my debt until I had saved $5K ($1K in cash and $4K in the bank). The last thing you want to do is give your last to bills, that’s why I moved to Seattle in the first place. I needed an emergency fund first. My credit was shot. So, I didn’t have the option to rely on a credit card. I had to have some money!
Don’t Settle Your Debt
Creditors don’t give a shit about anything but closing the account, they will do whatever it takes to get a payment out of you. I soon realized that their favorite thing to do was to threaten litigation in order to scare people into paying a smaller portion and resolve the debt. Don’t do it!
It’s a quick fix. You get rid of the debt, stop the calls, but it has consequences. Settling a debt looks bad on your credit report. It’s a sign that you borrowed money you knew you could never pay back and may signal to lenders not to loan your ass shit in the future. You may suffer some tax penalties too. You don’t want that.
Once I got the total amount of the debt, along with their fees I would not make a payment unless it was $1K or the full amount. Everybody doesn’t have that ability, I understand that, so you have to pay what you can, but if you can help it, try not to settle. Go ahead and pay what you owe.
Pay the Smallest Amount First
Once I started making money and I saved up $5K, I was able to start making payments again. I thought the easiest thing would be to go back to my normal routine. Paying everybody every month until it’s paid off, but I was already behind! I’d already defaulted on my loan, my credit cards were sent to collections. I figured it would be easier and quicker to tackle that shit one at a time. So that’s what I did. My salary allowed me to spend $700 a month ($350 every 2 weeks) on debt. I also kept working a lot of overtime. & 90% of that went towards my debt as well. I had several credit cards that I used to help me move from Memphis to Seattle, none of them were over $1K, so I paid those off first, then I moved on to my other credit card, then my loan, and finished with my car.
Spend Your Money
This may sound crazy, but hear me out.
I’d never been financially stable before I moved to Seattle. As a young single woman with no kids, making the money I was making, I didn’t want to see all my money go towards bills. I worked hard as hell to learn my job and get promoted, I deserved nice shit, and so do you.
Spend. Your. Fucking. Money.
If you pay something off or make an extra payment, reward yourself! Buy the shoes, buy the lipstick, take yourself out to dinner, to a movie. Something! Spend your fucking money! I was working 2-3 weeks straight with no time off sometimes. So you damn right I wanted to spend that money. I took trips, bought everything I saw, went out to eat, I did what the fuck I wanted to with MY money.
It also made it easier for me to work towards paying my shit off, because I kept thinking about how much more money I’d have once I got this debt paid off.
Let Your Credit Sit
Once you pay all your shit off, leave your credit alone.
If you have any open accounts then it’s ok to use them to keep the account open, but for the most part, you shouldn’t be opening new accounts, maxing shit out, or anything like that. After I paid my car off I noticed a slight drop in my credit, but it bounced back within a couple of months. I still keep my favorite store accounts open, Neiman Marcus, Nordstrom, and JC Penny (for Sephora, lol). I use them every now and then but I don’t spend over $1K because that’s what I can afford to pay off in one month without dipping into my savings or compromising my way of life (going out to eat, nail/hair appointments, shopping).
I have not opened a new line of credit since August 2015 and I won’t until I’m in my late 30s, or whenever I buy my Benz lol. Whichever comes first.
Credit Karma – If you need a free resource to help you track your money and give you a snapshot of your credit, I would highly suggest Credit Karma. This website helped me develop a budget, track my spending habits, keep up with my bills, monitor my credit, suggest credit cards, loans, or any other options that would work for me. It is the best thing since sliced bread. And it’s free!
Make a budget – I made a budget of how much I could afford to put towards debt each month, but I didn’t calculate my overtime, because that money fluctuates, it’s not consistent. I’m going to say this again, DO NOT CALCULATE OVERTIME INTO YOUR BUDGET! Your budget should be reflective of your base salary NOT overtime money or any extra money for that matter. If you’re serious about getting out of debt you have to be honest about your money situation. Overtime ain’t ya paycheck. It’s extra. Don’t include it.
Get somebody to repair your credit – I wish I had done this, but I didn’t because I’m cheap, lol. I would suggest this after you pay everything off and let your credit sit for awhile. I think it’s less of a headache to pay the fee and allow them to send letters to creditors and collection agencies to remove those entries from your report. It can be done, but trust me it is a headache. You have to know the state laws what to write in the letters. You have to dispute shit with the credit agencies. It’s too much! Give it to a professional.
Go to your bank – A lot of banks offer free resources to help you get your finances together, a lot of them will also monitor your credit for you and allow you to monitor your credit score for free. Take advantage of all of it. Everything. Whatever resources they have your ass needs to be first in line…just like I was.
Get serious about your financial health – Like I said, life is a marathon. The worst thing you can do is go through all this shit, pay off everything, and then make the same mistakes over again. You have to continue to be aware of your finances and your overall financial health. I stick to my budget, I save my money, I opened retirement accounts, purchased CD’s, tax annuities, I’ve also invested my money, not because I want to be rich, but I want to be stable. I don’t want to go through what I went through again if I can help it. I’m trying to retire one day.
As I said in the beginning, these are tips that worked for me. It took a lot of planning, going without, work, and MONEY for me to become debt free. If you’re feeling overwhelmed with debt, I feel you. Try not to compare your situation with anyone else’s, not even mine, do what YOU have to do, do what suits YOUR needs, budget, and ability.
Either way, I’m rooting for you!