Eliminating my credit card debt!

It took 6 long years but, I am totally credit card debt free!I started this journey in late 2014 after grad school.  Back then, I found myself with a little over than $5k in credit card debt, no job (or savings) and in need of a new apartment – not the best place to be in. Needless to say I’m living proof that you can battle credit card debt while also being broke. I will admit that things did get harder once I was laid off in 2015 from one job and then being furloughed in April from another. However, I still managed to reach my goal. Of course, everyone’s financial situation is different, but, I want to share what helped me get to this point as I know it could prove to be helpful for people dealing with the same issue during this pandemic.

1.) Hide your cards from yourself.

There is a reason why a running gag on tv and movies is the idea of literally freezing credit cards in blocks of ice. If the cards are within reach, you will always be tempted to use them, especially when you see the balance go down;  this will just keep you in a never-ending debt cycle. Keeping some or all of your credit cards “out of sight, and out of mind” definitely helps you reap the benefits later on as you go about mastering self-control.

I ended up having my mother hold on to three of my store cards so  I wouldn’t be tempted to use them. I also hid some  from myself so I could only spend the money I had on hand, be it actual cash and/or funds from my debit card.  And yes, there is always that chance that  an emergency may arise and you just need to use your credit card. (I speak from experience here as my family and I had to deal with a financial emergency last spring (that ended up being 8-months long) which pulled a major strain on the progress I had made up to that point.) In that regard, try to look at how much you can do with the funds you have on hand and only use the credit card as an absolute last resort.  If you do end up using your cards, be sure to “hide” them again once you’re done otherwise you’ll be fighting (and possibly losing to) temptation moving forward.

2.) Prioritize Paying the card with the highest amount

When I initially began tackling my credit card debt, I thought it best to tackle the cards with the lowest balances first because it seemed easier. However, this proved to be the worst thing to do. I have two bank credit cards and one of them has a credit limit of almost $3K. Because of my homelessness situation right after grad school, I ended up having to use this card for ALL of my basic expenses so it was maxed out more than once.

Since I was focused on the cards with smaller balances, I was able to bring the amount down to just under the limit  of that maxed card. I did this by only paying the minimum, which obviously didn’t do much good considering that I would turn around and use it no sooner than when I paid it. This a frustrating cycle that can be hard to escape without a solid plan. Realistically you won’t be able to get everything paid out all at once so  you’ll have to go through each debt, one by one. Once you’ve managed to eliminate that massive debt (like my maxed out card) you move on to the next and so on until you hit zero on all.

3.) Record everything

With paperless statements and online payments being available, you would think that being on-top of bill payments would be easier today than ever before, however, it just leads to a false sense of security and lackluster results. This is mostly due to not following up with a plan as to how to get that balance lower in the next billing cycle. I honestly didn’t see much movement or change in my accounts until I started writing things down. I tracked the balance, how much I paid, and what remained for each month, along with how much I spent on the card if I decided to use it again. This allowed me to come up with budgeting strategies that would get me to pay over the minimum each month. For example, being that I have been working from home due to the pandemic, I took the money that I usually spend on a monthly MetroCard ($127) for my commute to work and put that money towards my debt.

4.) Review your credit report

Credit reports show  your past and present credit history. It is presented in a way that allows you to see how much you owe for each creditor, including student loans. Reviewing your credit report allows you to double check that everything is accurate so you know for sure how much it is exactly that you owe. You can also find any potential problems early on and handle them as necessary. For example, you can see if your identity has been stolen or if a card was closed due to lack of use. A major component of this report is your credit score,  which is essentially a financial tool that assigns a number to a person, indicating to lenders your capacity to repay a loan or line of credit. I used Credit Karma too look up my credit report and I would review it once every other month.  I took my credit score as a personal challenge to keep me motivated, always aiming to bring that number higher, even though I was starting from a pretty good place to begin with.

5.) Create and Maintain new spending habits

I got my first credit card the same year I opened my bank account,  at age 18. Surprisingly, I didn’t go completely crazy with this new found “wealth” at my disposal. Instead, I focused on using the card specifically to build my credit, only using it when I knew I had the funds readily available to pay off the balance soon after. I honestly think that the one thing that kept me in check was the fact that at the time I was in college and unemployed. (I had three scholarships and one fellowship that basically paid me to go to school back then and that was my “income” for those 4 years.) For this reason I would use my credit cards only when I had the funds readily available to at least pay half of the balance immediately. This changed as I got older, as I would use my cards with little to no regard as to how I would be paying the balance off later.

It goes without saying that in order to get out of debt you have to change your spending habits to  keep from getting back into debt. I’m not saying to avoid spending overall because that’s impossible, but just take a look at what you can cut out. Like your morning tea or coffee, make your own instead of purchasing a cup on the way to the office. The same goes for meals; when I was still working from the company office in the city, I replaced ordering breakfast with instant oatmeal that I kept in my desk with a side of fruit brought from home.  By making these kinds of small adjustments, you’ll see immediate results in how much money you end up saving that you can then use to pay over the minimum balance.

The one good thing that comes out of tackling credit card debt is that it forces you to come up with a temporary financial strategy which in the end can guide you towards creating something more long term so that you gain a greater sense of financial stability than before.  Now that I’m credit card debt free, I’ve started to budget my expenses better (this includes my blogging expenses) so that I’ll be able to create an emergency fund, which recent events have shown is very much needed, and hopefully even save for retirement. This is not to say that I won’t “treat myself” sometimes because let’s face it, I totally earned the right to do that, but I will do so responsibly and always within my means.

Turns out 2020 isn’t a complete bust.

Credit card debt isn’t inherently bad but the mismanagement of it definitely can be. Having debt ironically builds your credit for future major purchases, like for a house or even a car, and can even help you score that coveted NYC apartment with great closets should that be a goal of yours (it is one of mine).

It’s nice to finally have one less source of financial stress on my shoulders. It’s a debt reset that allows me to fully turn my attention to the biggest “debt monster” – my graduate school student loans. *Shudder.* But that will be a tale for another day.


Do you have credit card debt? Considering that my whole brand is “style & lifestyle on a budget,” I’ve been meaning to feature my friend who happens to be a financial specialist who could outline how to properly manage finances and/or how to start a budget among other things. Let me know your thoughts in the comments!

 

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