How I Paid Off $50,000 of Debt in One Year
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I was the ultimate consumer. I loved material things! I learned this from my parents who actually believed the best things in life are the most expensive. I’m not blaming. I’m just explaining. But, what I didn’t learn from them was how to pay for it all.
I bought everything and charged it all. At one point, my credit card balances were as high as $50,000! That, plus the $100,000 in student loans, had me drowning in debt so deep that I tried to console myself with even more spending. “What’s the point in trying?” I rationalized. “I might as well have a good time!”
I secretly hoped that things would magically work themselves out and told myself that, if worse comes to worst, I could always declare bankruptcy. It wasn’t until I decided to help my then boyfriend pay down his debts—which were puny compared to mine—that I realized how exciting and fulfilling it can be to pay down one’s debts. (In those days, it was easier for me to help others with their problems than to look squarely at my own.) After I successfully helped him pay off all his debts, I was ready to tackle my own. It was like trying to climb Mount Everest after hiking the Half Dome, but I had no choice. I finally did some research about bankruptcies and realized it was not a very good option for me.
Instead, I used the five-step method to set and achieve goals to eventually pay off $50,000 in one year. I did it in stages, by weaning myself off of the easiest things to cut out of my spending habits first and leaving the hardest for last. By gradually becoming more and more frugal, I managed to pay down a huge chunk of my debt in a surprisingly short time. Now, I know it’s not glamorous to be frugal. Believe me, I—who used to spend way too much for everything—can fully appreciate that. But, some people think it’s un-American to be frugal! Most Americans make fun of it. You’ll never hear anyone tell you you spend too much money. Yet, try to be frugal, and suddenly you’ll hear “tightwad,” “miser,” “cheapskate,” or “Scrooge.”
What’s going on here? It’s not stealing, for goodness sakes! Why such a strong reaction to self-restraint when it comes to spending money—especially money that you don’t have? One hilarious reader dismissed the advice in my “Millionaires v. Billionaires” article to be “frugal, frugal, frugal” with the single word: “Cheapo- illionaire!” I love that! It still cracks me up! I’d like to use it for the title of a book someday. Clearly, he equates frugal with cheap. Lucky for me, I don’t. I equate it with intelligence and, frankly, the only sane way to survive in this insanely overspending society. Anyway, I’m almost out of debt now. Here’s how I did it.
STEP-BY-STEP ELIMIATION OF EXCESS SPENDING HABITS
Your deadwood spending habits are probably a lot different from mine. The point is to start with the least painful thing to cut down on—or completely cut out of—your spending habits altogether and go from there. It may take you longer or less time than it took me to get rid of all of them. Be patient and kind to yourself as you go through these important changes. But, also, be firm, focused, and determined.
1. Manicures and Pedicures ($50/mo.): As an attorney, I thought I had to look the part as well as act the part. So, I tried to keep my fingernails and toenails picture perfect all the time. They weren’t long Florence Griffith-Joyner artworks—just short with French tips for my fingers and Million Dollar Red for my toes. Once in a while, I opted for Chanel’s Vamp on all ten extremities. Yeah, I really liked them. Sometimes, I still miss them. But, the surprising thing is no one else did when I stopped getting them done every week. No more pampered hands and feet unless I do it. But, I paid off $600 more of my debts that first year, and every year since, and look forward to saving it when I’m finally out of the hole!
2. Car Payments and Extra Insurance ($500/mo.): I borrowed money from a friend to pay off my car loan so I could, not only stop the monthly car payments, but also drop all the extra insurance the bank needed and kept only the minimum required by law. Now, you might be able to get such a loan from a friend. Or, you might not want to risk dropping your car insurance to the bare minimum. But, if you do, you can save a bundle. I saved $500 a month or $6,000 a year.
3. Roommate ($1,000/mo.): This item isn’t exactly quitting an excessive spending habit—but in a way it is! I used to live alone, which meant I had to pay all of the rent and utilities by myself. That was excessive when I had so much debt plus extra room to sublet. I dreaded the thought of sharing my living space with someone else because I love both my privacy and personal space; but, debt is debt—and it’s not going away by itself. So, I bit the bullet, got a roommate, and threw another $1,000 a month, or $12,000 a year, at my debts.
4. Shopping Sprees ($1,000/mo.): I’m ashamed to admit it, but I was a hardcore shopaholic. Of course, I rationalized my fixes like all addicts do—that it was for my professional career—or to treat myself for long hours at the office. But, also, like all addicts, the fixes always left me in worse shape than before—more addicted and more unhappy. Finally, I went cold turkey and forced myself to stay away from all malls, department stores, and even discount stores. I realized I could get by quite nicely by rotating just a few suits each week and pretty much the same casual clothes in the evenings and on the weekends. Suddenly, my drycleaning bills and laundry expenses went way down, too. And, getting dressed in the morning was a breeze! Also see “How to Organize Your Closet in 5 Simple Steps.”
But, what really cured me of shopaholism for good was trying to resell or consign most of my high-end designer clothes one weekend, after realizing I no longer needed such an extensive wardrobe that required such costly dry cleaning to maintain. To my shock, my mint condition designer clothes that I paid tens of thousands of dollars to acquire were not even worth a few hundred bucks for the whole lot! It hit me like a ton of bricks that clothes depreciate faster and more completely than automobiles. Note to self: Clothes are not investments!
5. Drycleaning ($200/mo.): When I saw how much money I saved from wearing less clothes that required drycleaning, I had to ask myself if I ever really needed to wear any clothes that needed drycleaning. Suits don’t need to be drycleaned but two to three times a season—and, that’s only if you wear them a lot! Now, I try to avoid wearing high-maintenance clothes whenever I can. If I buy another piece of clothing again—which I might not have to do till the next decade (seriously!)—it won’t be something I have to dryclean every time I wear it. Hence, I saved $200 a month on drycleaning and threw another $2,400 a year at my debts.
6. Car Washes ($20/mo.): I used to scoff when people said little costs add up quickly. To me, any expense less than $20 was never going to make much difference in my budgeting efforts, so I let them slide. Now, I know better. Washing it myself saves me $240 a year, which helps pay down my debts that much faster.
7. Haircuts ($240/yr.): I believe in paying for quality hair cuts and tipping accordingly. A trip to my stylist usually sets me back about $120. But, I switched to a style that grows out nicely without the need for any trimming for a whole year! It’s a longer cut with fewer layers that I can also style easily into a high ponytail. Another $240 a year suddenly available to pay down my debts!
8. Cell Phones ($100/mo.): I got Skype, which, if you don’t know what it is, you really should. If you and the person on the other line are both using it, it’s totally free! But, even if the other person does not have it and just you use it for the call, the cost to you is only $0.02 per minute! I heard they’re even coming out with cell phones. But, until they do, I still have to use my cell phone. Nevertheless, I was able to cut down drastically on my cell phone minutes for those emergency calls on the road. Another $1,200 a year freed up for my debts!
9. Cable TV ($120/mo.): I was a total Food Network buff and a diehard “Celebrity Apprentice” and “Biggest Loser” fan, so this one was almost as hard as stopping my shopping sprees. For a while, I limped by with DVD rentals and movie theaters to get my video plus audio entertainment fix. But, eventually, I got used to the lack of TV. I also learned that certain websites “air” entire episodes of “Celebrity Apprentice” and at least recaps episodes of “The Biggest Loser,” all for free.
10. Restaurants, Bars, and Take-Out ($1,500/mo.): Yikes! Even more devastating than my shopping spree habit was my love of fine dining and expensive drinks. At least with my clothes, I could enjoy them for longer than one sitting. I rationalized this bad habit, too, with excuses about needing to treat myself after long days at the office, yadda, yadda, yadda. This was a tricky one. I really had to do it gradually while learning how to prepare enough tasty yet healthy meals at home that wouldn’t leave me craving my favorite meals and drinks about town. But, it was well worth it! Now, I could devote another $18,000 a year to help make my debts disappear forever! And, I’ve become a pretty decent cook, to boot!
11. Movie Theaters and DVD Rentals ($100/mo.): The last bastion of my former, paid-for-fun lifestyle. Deciding to stop indulging in these was like saying “see you later” to an old friend. Growing up, movies were my special teachers that helped me learn so many things. But, I’m sure I’ll return to enjoying at least some of all of the above activities when all my debts are finally paid off—though, hopefully, never with the same reckless abandon again. At $100 a month, this sacrifice contributed another $1,200 a year to pay off my debts.
CONCLUSION
Tally all that up, and it adds up to more that $55,000 a year! If you adjust for the few extra hundred dollars a month I used for additional groceries to enjoy meals at home instead of at restaurants, then the $50,000 figure is right on the money.
Imagine the possibilities for all the cash you’d have if you used some of these frugal methods to pay down your debts, too! I’m not talking about any short-sighted, short-term shopping sprees, either. What did I do with my money after I paid down most of my debts? I quit my office job to pursue my dual passions of teaching and writing at home, starting with this website. Now, that’s worth all the sacrifice!
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April 23rd, 2008 at 11:13 am
So this is the plan - not the result. Right?
April 23rd, 2008 at 11:26 am
Nope. That was the result. It’s a plan that worked for me.
May 29th, 2008 at 1:02 pm
Good for you Shanel, I’ve got another 10K more to go myself. You know what I noticed is that the more you earn the more you spend. Now I have a rainy day mentality. like my economic stimulus check when to a certain bill. Thanks for the info!!!
May 29th, 2008 at 4:57 pm
Definitely true about spending more as you earn more. Peer pressure is intense to spend, and everything adds up quickly! Good deal with the stimulus check! Great work on your debt reduction, too! I’m sure you’ll make it and be on your way to your riches soon. You sound like you know what you’re doing. A couple of great websites that help me are The Simple Dollar and Millionaire Mommy Next Door. It’s possible to get rid of even very large debt and amass wealth if you follow the step by step instructions of those who are generous enough to show us how. It’s wonderful that you’ve adopted the habit of saving for a rainy day because I fear the U.S. is headed for the worst economic downturn since the Great Depression. At the very least, it’s bound to get worse before it gets better. Best of luck to you!
June 23rd, 2008 at 7:48 pm
Good for you. Then again, I looked at your numbers and just reeled. I just don’t have that much money flowing in and out of my accounts — not even close. The Ramsey approach seems equally applicable to everyone, not just people with a heck of a lot of assets flowing all over. By the way, I’m a Ph.D. student. I make $25K a year, juggle about $4,500 in credit card debt and paying down a $20K student loan debt.
June 23rd, 2008 at 8:02 pm
Hi Dee - Thanks for your comment! I know! Whenever I reread this post, I’m shocked all over again by the numbers, too. But that was then, and this is now. I make nothing near that amount and of course spend hardly anything beyond the bare necessities. You’re absolutely right that debt is debt, and the only way to pay it off is basically the same formula no matter how much of it we have. Still, I believe that hearing other people’s success stories helps motivate us by giving us faith that we can do it, too. Wishing you the best on your goal to be debt-free!
June 24th, 2008 at 1:03 pm
Great post! We had to break ourselves of some spending habits too, but now it comes easy. I often play the game of seeing whether I can go in a store or mall and come out with NO purchases - of course, that doesn’t work well if you really need to get something…
For the DVD/book habit, check out your local library. We live in a big enough town that our library has a bus that comes once a week to the school 4 blocks from our house. We walk down there and pick up DVDs (yes, and books!) for no charge at all. Sometimes we have to wait for the new titles, but you can sign up ahead of time and they will bring them when they’re available. I think that the savings on not renting them is well worth the wait.
I hope to dive into some of your other posts for more great ideas!!
June 24th, 2008 at 1:14 pm
Hi, Anne! Welcome and thanks for your comment! It sound like you have a great thing going with the library bus situation. I’m jealous! But, I really shouldn’t be because there’s a local library within walking distance of where I live. I’ve been meaning to go check it out; and, now, that you’ve reminded me, I’ve marked it down on my to-do list for this weekend.
Congratulations on the progress you guys have made on breaking some of your spending habits! I still pretty much avoid malls for the most part. No need to tempt myself. ; ) Please do come back, and I hope to see more of your comments, too!
July 16th, 2008 at 2:07 am
Dear Yang,
I am quite satisfied with the plans which you implemented to pay off your debts. You are abosutely right, only the cost cuttings can keep away us from loan and debts. Let the people say whatever they say. I will also learn a lession from you and execute it definitely. Thanks for your views and sharing your plans.
July 16th, 2008 at 7:07 am
Hi Sushil! Thank you for your comment! I’m very excited for you and your plan to cut your costs! Best of luck and never give up. Even two steps forward and one step back is still progress. So, every step in the right direction gets you that much closer to your destination! I hope you’ll let us know how you’re doing in the future.
August 1st, 2008 at 2:32 am
Well done! While the amount you paid off may be more than a lot of people earn, it looks like you also had proportionaly higher debts/expenses too! The principles that you used will help anyone get out of debt, no matter what their income is. What a fantastic effort!
Best of luck with your new careers!
August 1st, 2008 at 8:06 am
Hi Melinda! Thanks so much for your comment, feedback, and encouragement! : )
August 13th, 2008 at 3:34 pm
This is a very helpful and informative article Shanel! Thank you so much for posting it and sharing your journey. I have credit card debt that I’ve carried around for 12 years now so this is encouraging to me.
With gratitude,
Sheryl
August 13th, 2008 at 4:12 pm
Hi Sheryl! Thank you for your comment and positive feedback. Thanks also for sharing about your own debt. Two great blogs that might be helpful are “The Simple Dollar” and “Get Rich Slowly.” There’s tons of useful information there about how to get rid of all kinds of debt and how to save/invest whatever cash we do have!
September 7th, 2008 at 1:06 pm
Congratulations on giving up all those fancy and expensive habits.
I love your blog and all the good advice that you give.
I found you by way of a comment that you made on Millionaire Mommy.
Maria
September 7th, 2008 at 2:40 pm
Hi Maria! Thank you for your comment and very kind words of encouragement! Great to have you as a new reader! Hope to hear more from you in the future. : )
September 10th, 2008 at 4:46 am
Hi Shanel, Glad to hear that you got your life going in the direction that you wanted! As an aspiring classical musician just out of college I understand how hard it is to follow your dreams in this tough market. But I think Americans country-wide would be surprised at how little you need to spend in order to live a comfortable life. “Moderation in everything” and “Slow but steady” are my two main mottos, and they haven’t led me astray yet.
I am a new blogger (literally, this morning), so I hope to make my blog public in a month or two.
I wish you the best of luck with everything!
Mike N.
September 10th, 2008 at 6:35 am
Hi Mike! Congratulations on becoming a new blogger! I can’t wait to see your new blog! Do let us know all about it as soon as you’re ready. Thank you for your comment, encouragement, and excellent words of wisdom. Best of luck to you, too!
September 12th, 2008 at 8:18 am
Very inspiring article! Congratulations on getting your debt paid off. It seems like being frugal and living within your means is becoming more fashionable all the time. I’m working on getting rid of my debt, too and I’m sure I will be able to use some of your suggestions. I used to think my debt was under control, because I was still making the minimum payments every month, and I didn’t have collection agents calling me up demanding repayment, so I must be doing okay, right? But I finally got tired of not being able to do the things I want to do because so much of my income every month was going to credit card payments. So I’m finally making progress, and will hopefully soon be debt free! I also enjoy reading the Everyday Cheapskate column over at creators.com. She has great advice on living frugally and proudly bears the label of “cheapskate”.
September 12th, 2008 at 9:48 am
Hi Leslie! Thanks for your comment and cheerful encouragement! It’s amazing how many of us got used to credit card debt as if it was as normal as paying for utilities every month. I’m excited for you going after your debt! I’m sure you’ll be debt-free soon with your great new attitude! Thanks also for the tip about Everyday Cheapskate! It sounds worth checking out. Good luck with all of your goals! : )
September 19th, 2008 at 12:16 am
Hi Shanel,
First of all , congratulation to you. You are out of all your debt now. Well I like your stretegy to handle the situation. Also It sounds that you never lose your confidence and keep patience in worst situation.
Congratulation again.
Gaurav Bhatnagar
September 19th, 2008 at 10:17 am
Hi Gaurav! I have lost both my confidence and patience many times in my life, and I’ll probably do that again many more times to come. That’s all part of being human, so I accept it. What’s important is to constantly learn from them. I can tell you that I try very hard not to repeat the same mistakes; and, eventually, I grow into a stronger person along the way. It’s always a two-steps-forward-one-step- backward process. I find it strangely comforting to know that mistakes are inevitable, and even desirable, as long as I keep going and growing. And, that’s easy for everyone! Even babies do it when they are learning to walk. They never give up till they can first stand, then walk, then run. I wonder if anyone ever counted how many times they fall along the way. It must be in the thousands!
I can’t honestly say that, as an adult, I’ve ever tried and failed at anything that many times without giving up. Well, maybe with my writing I’m getting close. Every day, I keep trying, failing, and trying again, to achieve more clear communication to teach what I feel is so important for everyone to know. Am I succeeding? Yes, but I could do better. I want to reach millions of people out there who could benefit from these lessons. So, I’m “failing” in that sense and need to keep trying till I succeed. But “failing” like this is just more motivation for me to keep trying.
Am I confident that I’ll succeed? Yes! Am I patient for it to happen? Yes and no. I know it’ll take time, but I want to do all I can to make it happen sooner rather than later. And, that’s not a bad thing—as long as I don’t get discouraged and give up!
September 22nd, 2008 at 11:25 am
Congratulations on being debt free, I too went thru a similar phase couple of years ago. I paid of about 40000 USD in one year. One thing that I learned during that time, is that debt puts your life on hold. Everything else in life takes a back seat when you are under debt, family life, retirement planning, career planning, college funds, emergency funds, hobbies.
At the same time, I also consider myself extremely fortunate and blessed like you to have a good steady source of income at that time to make all this happen.
September 22nd, 2008 at 1:34 pm
Hi Matthew! Thanks for your comment and kind words! It’s so true that debt — especially a very large debt — makes it impossible to focus on anything positive or constructive because there’s always that dark cloud hanging over your head. But, I also firmly believe that, since getting out of debt is one of the hardest things in life to do, it is also one of the most useful ways to learn many important lessons that will always stand you in good stead for the rest of your life (e.g., frugality, budgeting, and other money management skills, as well as goal setting, time management, and perseverance). I’m so happy for you that you got yourself out of debt, too! Congratulations to you! I’m sure neither one of us will do that again! : )