My Debt Free Journey

Let’s talk about debt, shall we?

Toward the end of summer, I decided to get serious about paying off a chunk of debt I’ve had laying around for a while. I’m not sure what sparked my determination. It might have been when I started researching what it would take to buy a rental property—one of my big five-year goals—and I quickly realized that the longer I let debt linger around, the longer it would take to realize that dream.

After months of paying only the minimum on my credit card bills, I did a no-spend month in August to see how much of a dent I could make if I got my spending in check. After seeing the results, I’m in full-blown throw-cash-at-the-credit-cards mode.

How Much Debt Are We Talking About?

So far I’ve avoided talking about the specific amount of debt I have. It’s uncomfortable! What feels like a massive amount to some people might be a drop in the bucket to others, and then there’s that whole judgement thing that comes along with talking about how you spend your money.

But honestly, I’m over caring. Since I started talking more openly about paying off my debt on Instagram stories, I’ve received so many messages from others who are in the same boat and looking to put an end to it. So I know I’m far from the only one in this position. Maybe the more we talk about money and paying off debt, the better we’ll all get at managing it.

$2,000 Down, $9,400 More To Go

When I took a hard look at my finances in July, I had around $11,500 in debt. At this moment, that number is down to $9,444. Here’s how it breaks down.

$4,738 of it is a credit card balance that I racked up at the vet before saying goodbye to my cat Rick last fall. I’ve shared this privately with a few friends who were also dealing with sick pets and found that going into debt over vet bills is a common occurrence. It’s heartbreaking, but that’s another topic for another post because I could go on and on about what a messed up situation it is. If you’re in a similar position and want to chat about it, I’m all ears.

$3,448 of it is an unpaid medical bill that went to collections. Several years ago when I first started freelancing, I had shitty insurance and wound up needing surgery. I paid for a lot of it out of pocket, but one bill didn’t find its way to me until years later when I was simultaneously moving to a new city and planning a wedding. I didn’t have the cash on hand to pay it. While I was in the process of going through appeals with my insurance, the hospital sent it to a debt collector.

$1,258 of it is on a credit card from good old fashioned overspending.

So there you have it. Those are the hard, uncomfortable numbers. I have to admit, it feels good to get it out there and makes me even more motivated to make big moves to pay it off.

This Debt Is Not Accruing Interest. Here’s Why

One reason I’ve let this debt sit around so long is because it’s not accruing interest. This is not the case with most debt, which is why it can become such a never-ending problem.

Here’s how I’ve finagled it so that I’m not paying interest. For the medical debt, I got on the phone with the debt agency as soon as I found out it had gone to collections. I did a little research before calling so I knew what my rights were. Believe it or not, you actually have a lot of power as a consumer when you’re dealing with a bill collector, as long as you’re making a good faith effort to pay. If you do have some money on hand, you can negotiate a pretty sweet deal with a collections agency, like paying only 50% of what you owe if you pay right away in cash.

I explained to them that I wanted to pay it off but would need to do it over time. I worked out a deal to pay $40/month with no interest for two years. At the end of the two years, I’ll have the option to pay off the balance or work out another deal. In the meantime, they wrote a letter to the credit reporting bureaus saying this item should be taken off my credit report. Aside from the bill itself, your credit report is a huge thing to take care of if you’re dealing with a bill in collections. You do not want that black mark sitting on your credit report hurting your credit score! Usually once you’re on a payment plan, you can get them to agree to remove it from your credit report.

For my other two balances, which are on credit cards, I moved them to cards with an interest-free introductory period. This is another sweet deal if you stay on top of your money and don’t let the promotional phase expire before you either pay off the balance or move your money again.

I have the bigger of the two balances on the Citi Double Cash card, which has no interest on balance transfers for 18 months. The smaller balance is on the American Express Blue Cash Everyday card, which has no interest on balance transfers for 15 months. I’m keeping track of these in a spreadsheet and when it gets close to that promo period expiring, I’ll (hopefully) have them paid off or move them to a new card with another promotional offer.

It’s worth noting that doing a balance transfer comes with a fee, but in most cases it’s a small percentage of the amount you’re transferring. This shakes out to far less than what you’d pay in interest if you kept the debt on a high-interest credit card. Plus, you don’t pay the fee up front. It’s tacked onto your balance and you pay it off along with the rest of the debt, which makes it pretty painless.

If you have a lot of credit card debt and you’re committed to paying it off systematically, using no-interest credit cards can be a feasible way to do it without paying a ton more in interest.

Snowball vs. Avalanche Method

So far I’m using what people in the financial world call the “snowball method” for paying off debt, which is where you pay off your smallest balance first, then put that money toward the next biggest balance, and so on. It’s like rolling a snowball that gets bigger and bigger with time—GET IT?! I like this method because paying off my smallest credit card balance feels very much within reach, and that victory will push me to want to keep going strong on the next one.

There’s also the “avalanche method” (whoever came up with these terms loved a theme) where you pay off the debt with the highest interest rate first, then move your money to the next largest interest rate, and so on. If you have a card with a crazy high interest rate, this method makes sense because you don’t want to pay that high interest for a day longer than you have to.

You could also just go freestyle and pay equal amounts to all of your cards, but I think the idea with these methods is that you have sequential victories of paying off balances, which help you stay motivated, rather than all of your balances going down little by little. It honestly doesn’t matter which method you do as long as you stick with it.

How I’m Budgeting To Pay It Off

I mentioned that I’ve paid off about $2,000 since July. This is big progress for me. I’ve made this progress by getting very honest about where my money is going and thinking carefully about where I really want it to go.

I’ve made a major shift in my mindset about what purchases are ‘essential.’ Doing a no-spend month was a great way to dive straight into the deep end on this. If you’re wanting to get rid of debt but don’t know where to start, I highly recommend it. I have a whole post on what I did here.

Since the end of July, I’ve made the bare minimum apparel and beauty purchases. The one big purchase I did make was a nice coat, which I consider an investment for the New York winter. While not essential, I can definitely justify it because it will get a lot of use these next few months. It’s also easier for me to not spend on this stuff because I work from home and don’t have to have my hair, makeup and nails looking perfect every day.

I’ve also put a hold on big household projects—at least for now. While DIYing is a hobby I enjoy, most of the fixes I want to do at this point are cosmetic and therefore not essential. I’ll probably hold off on doing anything big around our house until the new year.

But the biggest thing I’ve shifted my mindset on are spur-of-the-moment purchases—those little things like grabbing lunch while out and about or throwing a new product in the cart just to try it. They’re such mundane purchases that they’re hard to even name—you make them without thinking twice because the price tag is a seemingly insignificant $5 or $10. But there are so many of these things that pop up now that I’m looking for them, and just making them an automatic ‘no’ has given me a cushion in my budget that I didn’t used to have.

This isn’t to say “I’ll never buy another Dunkin Donuts coffee!” That would be lunacy. Instead, it’s been about changing my thought process to “do I really want this coffee, or would I rather put that money elsewhere?” I still have slip-ups. Over the weekend I went to Target and spent more than I meant to, as one does. But at least now I recognize it and can correct course quickly.

In addition to cutting my spending, I’m also working on increasing my income. One great thing about freelancing is being able to scale your work up or down if you need to, so I’ve been in a season of working a lot. The time of year is on my side, since clients always seem to have plenty of work to go around during the busy holiday season. A good friend of mine who’s in a similar line of work recently encouraged me to raise my hourly rate, which I’m planning on doing for new clients to further increase my income.

You Still Have To Live A Little

Does all of this sound like a total fun-suck? I promise it’s not all deprivation and acting like Scrooge. You can still pay off debt while spending money on things that are important to you. You just have to get clear about your definition of ‘important.’

Personally, I’ll always spend money on experiences, like enjoying dinner out with my husband, traveling and trying new things. Even in the midst of this thrifty phase, I’m planning a big trip for my husband’s birthday in December and I’ll probably go skiing a few times this winter. I’ll spend money on gifts for people I love during the holidays and flying home to see my family. Keeping these actually-important things at the top of my mind makes it even easier to say no to non-essential purchases. I will also pay for them directly out of my checking account rather than putting them on a card like I have in the past.

Where Do Other Financial Goals Fit In?

This is a big question, and one I haven’t found a great answer to yet. In addition to paying off debt, I have other financial goals, like saving more aggressively for retirement, planning to start a family and saving for a down payment on a rental property. How do you balance them all?

For the time being, I’ve cut down my retirement contributions in favor of saying sayonara to my debt. I used to think this wasn’t advisable, but I listened to a podcast that talked about the psychological burden of debt and how its sheer existence can get in the way of your financial progress. It made the case that a short-term lapse in retirement savings is worth it if it means you can free yourself of that mental debt burden, which can change your entire mindset about money. It hit home for me.  So, I’m being the most aggressive about paying off debt with the conviction that I’ll come back even stronger on my retirement savings once the debt is gone, which I hope will be within a year.

So that’s the true story about my debt and an honest look at where I’m at in paying it off. What are your thoughts? Do you have questions? Are you in a similar boat? I would LOVE to hear your comments. I would also love to connect on Instagram, where I’m sharing more frequent progress updates on my stories. Let’s get rid of our debt for good.

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