I Paid Off $7,000 in Credit Card Debt in 40 days
At some point in our lives, well in adulthood (usually if you’re from a lower socioeconomic background), we hopefully gain some financial literacy. Then, we hope to achieve financial freedom. A lot of us are still recovering from our parents putting our names on bills (luckily this a curse I escaped), agreeing to a credit card and the wrong one too early, using credit as an emergency fund, living beyond our means, or some combination thereof. Because I have so many financial responsibilities, my credit card was my saving grace and my servitude. There was something euphoric, endorphin-releasing when I swiped my credit card to reward myself after taking care of my responsibilities. But, I had enough of being a slave to my credit card debt. And I’ve said this before, but this time was different. Credit card debt was cyclical for me. I never paid them off completely, just down to like 30% utilization or as low as $500 which is essentially paid off (I told myself) and ran it back up. I had to deal with the emotions connected to swiping to make sure this time, I paid them off completely, was done with carrying balances! I felt like I was solely working to pay debt and bills. This wasn’t living and I was beginning to realize all the bags and shoes didn’t ‘fix’ anything, only caused more anxiety so they really weren’t worth it. So, what did I do? I began working through my emotional ties to spending, shifted my mindset, repositioned my life, created a plan to address it, and executed the plan to FIX IT!
It’s Something Deeper
Acknowledge there is an emotional component to spending. A major source of my anxiety was my finances. Not having money gave my anxiety. Having money and not spending it gave me anxiety. Shopping caused guilt because I had a mountain of credit card debt. Being financial support for my family and wanting to be there for everyone caused more anxiety. I had no problem going into debt for the people I love. Mind was warped baby!
Find support to address it. First, I talked to my therapist to identify the emotional connection to my spending and debt. I gained a deeper understanding of my spending habits and changed the way I saw money. I had to develop strategies to deal with my emotions instead of swiping my credit card. Secondly, I started listening to The Clever Girls Know podcast. Listening to others’ experiences with their debts and how they worked through it mentally prepared me for my journey. Then, I joined the BrokeBlackGirl group on Facebook for support and encouragement.
Prioritize eliminating debt over saving. For the longest time, I was trying to do both. It doesn’t work, well at least not for me. My plan was to cap my savings and put a hold on deposits until the debt was paid. This was motivation too because I like to see money in my account!
Positioning and Planning
Increase your income. In 2019, I wrote on my vision board to make 90-100K by the 2021. I knew it was necessary to achieve financial freedom and enjoy the fruits of my labor without depending on credit. By Q4 of 2020, in the midst of a pandemic, I secured my promotion exceeding my goal in time and quantity. This was key in positioning myself to eliminate debt.
Leverage your skills and start a side hustle. In 2020, I started a business generating additional income. Little did I know a pandemic was on the horizon and it was the perfect timing to start a business. During the pandemic, I took a reduction in pay and this supplemented my loss. I didn’t know it would be enough to erase my debt as well.
Write out all your debts. I took an assessment of all I owed (in credit—I’m still holding out for student loan forgiveness lol ). Now my total debt is greater than this $7K but one major debt at a time. But because I am aware, I can strategically plan to eliminate it. It is super important to visit your finances often. I do a major review of all my finances every Monday. This keeps every thing at the forefront of my brain and I’m hyperaware of my spending habits and financial goals.
Decide on your method. Avalanche, Snowball, or a hybrid? Can I work on two cards at once? How much can I afford? What areas can I tighten in my budget? Why do I need to do this? Of all these, reminding myself of my why is what makes it bearable lol! I chose the most annoying card to go first. It’s the one I know I can pay off but I always carry a balance. Then avalanche for the remaining ones.
Execution
After adjusting my budget and determining how much of my income I could devote to debt per month, I added it to a calendar with a deadline to pay off the debt, one card at a time. Based off my calculations, it would take 5 months to pay off 7K. Each month I would pay a set amount from my full-time employment earnings, in addition to the minimum payment.
I didn’t actually consider my business income. After I did, I decided to actually market my business to see what would happen. The return was worth the marketing. For the first year, everything I made went back into the business. However, in year 2, I am able to pay myself a salary. After securing several jobs from my marketing, I was able to pay myself and use some of my business income to pay down my debt!
Don’t forget unexpected income: bonuses, gifts, tax refunds, stimulus funds from 2020. I didn’t consider any unexpected income. Remember I said I started a business in 2020? With a business, especially start-up and the expenses, comes a tax write-offs. Who knew? For once, I didn’t owe taxes, I got a refund!
These last two steps were how I went from 150 days to 40 days!
Key takeaways:
Position yourself to make more: a raise, a new job, new certification, a bonus
Plan with the guaranteed income.
Utilize your gifts and maximize your return i.e. side hustle. Sometimes, self-ingenuity is all you need!
When additional money comes, no matter the source, put it towards your debt instead of buying new shoes.
Now, on to credit card #2. 8K in 30 days? and hiring a financial advisor…Let us pray!
Share your journey with me too, useful tips, and recommendations for a financial advisor below👇🏾