Over six years ago, I was in quite a bit of credit card debt. Let’s be honest, it was a lot more than I should have had considering I was living at home and had very little expenses. I had so many clothes and shoes and ate out almost every single day. Sometimes, I even skipped meals so that I could afford a dress or some piece of clothing on my credit card – without going over the credit limit. Because you know…I was stupid but not that stupid!
I had no real expenses back then and when I felt sad or even happy, I would go and shop for a new piece of clothing. It was something I used to do to cope with my feelings and honestly, I still kinda do that, but in a lot less expensive way. If I’m not feeling great, I’ll treat myself to a coffee (I drink almost all my coffee at home). But of course, this doesn’t mean, I still don’t spend frivolously. I do. Sometimes, I’ve made purchases on a whim and almost 90% of the time those purchases weren’t so great. The purchases I sat on and thought about were purchases I almost always like and still use today.
How much debt was I in?
It’s funny how when you’re in debt you want to tell no one. But once you’re out there’s this burden lifted and you want to tell everyone. When I was in quite a lot of debt, I lied and said it was just a couple of grand. The truth was I had well over 10K worth of debt. Just me. AND I was living at home.
So, when I say I was incredibly stupid with my money I really was stupid with my money. Plus, I was also really stingy with money when it came to other people. I didn’t want to spend my money on friends or family. I NEEDED that money for clothes.
Gosh. I sound like an awesome human being. But the great thing is you grow up. You learn from your mistakes.
There’s no secret to paying off debt. It’s simply about living below your pay check. It’s so stupidly simple but it really is hard to start.
First of all, I’m talking about consumer credit card debt. I still have HECs debt. While I could pay off my HECs loan now, I also know my savings are better off in my Super and also in a high-yielding savings account. In Australia, you receive a loan from the Government to study at University. These loans do have an interest rate, however, they are in line with inflation – approximately 1.5%. In theory, this isn’t an “interest rate” but an “adjustment”.
As much as I would like to wipe my slate clean of ALL debt – both consumer and education – I’m following my logic instead and keeping my money in places that currently yields higher rates than inflation.
Please note, this isn’t financial advice! Gosh, I’m probably the worse person to give financial advice. And yet, I’m writing a blog post about financial advice. So hypocritical! But seriously, if you’re having issues with debt, you do need to come up with a plan. Whether you get professional help, read a lot of Dave Ramsey or you design one for yourself.
For me, my first step was actually realising how much money I was spending. This came in the form of a “declutter”. When I was going through my kinda extreme minimalism phase, I realised how much junk I had. It was a crystallising moment. I went into debt for junk, clothes and shoes. (Don’t get me wrong, I’m not perfect. I still buy stuff on a whim).
To really evaluate how I was spending, I started to tracked ALL of my spending. Down to the cent. What did this do?
It gave me a real clear idea of where I was spending my money. There weren’t any assumptions anymore. It was a fact. I was spending it on so much shit.
Understanding where my money was going really helped me realise what I needed to cut back on. I bought too much shit and ate out way too much.
So…that’s what I did. I bought less things and I learnt how to cook. I started meal prepping and because I started meal prepping I was actually becoming healthier too.
It’s CRAZY what little steps can do to your life. But, these “little” steps are incredibly hard to take when you’re first starting out. It’s simple as I said, but hard to get right(ish).
Ultimately, I did four things to help me get rid of my consumer debt:
- Assessed what I had (which resulted in a declutter and me selling a lot of my belongings)
- Tracked all spending for 3 months (I did this for two years actually! But you know, you probably don’t need to do that for that long)
- Evaluated my spending and created a budget according to my spending habits (i.e. what were the three to four areas I spent the most money? How can I reduce them?
- Waiting 2-4 weeks before purchasing an item
I know, this isn’t an exact science or revolutionary. But getting rid of debt and saving does require discipline and understanding your habits. Of course, there are the outliers. Some are in debt and can’t get out due to their circumstances, such as health and social economical background. I’m not naive. I don’t believe these steps to getting rid of debt is for everyone, but hey, if you’re reading this, it might just be for you?