How I Paid Off Over $10,600 of Credit Card Debt in One Year
I got my first credit card in January 2013. It was my first year out of college and I was unemployed. My savings was dwindling dangerously low. I was able to pay off the balance each month for a while but eventually, as the due date approached each month, I worried if I would be able to pay the balance. It snowballed. My parents helped me out once. I transferred my balance to another card with a promotional 0% APR with great intentions of paying it all off before the interest started. But I found myself in the Fall of 2017 staring at a 5-figure number. It was bad. I felt hopeless about ever being able to pay it off and pursue my dreams.
This wild ride of paying off my credit card debt has an external part and an internal part. The money and mindset. The money: the practical bits, and what you’ll read in most articles about getting out of debt. The mindset: the mental, emotional, and spiritual. The real stuff. The hard stuff. The most necessary. I tried to just follow the financial advice from my parents and online articles for years. When that didn’t work, I had to make mindset shifts. That’s when real change happened.
- I evaluated how much I was spending and where I could cut back.
- I worked with a free financial coach. If you’re in Chicago, Next Door Cafe has financial coaches free of charge. If you work 9–5, it’s challenging to get an appointment time with them, but if you can, it is the one of the best things you can do for yourself.
- I created a spreadsheet of my monthly expenses.
- I created a spreadsheet to track all my purchases. It creates awareness on how and where I use my money. I’ve tried apps like Mint, but tracking this on my own created deeper understanding of my spending habits.
I created several accounts to separate my money. Chase Bank allows you to nickname accounts, so I named them something fun, positive, and encouraging.
- Checking account for monthly automatic payments. This account is reserved for monthly purchases that I know are the same each time such as rent, utilities, health insurance, subscriptions (Spotify, Netflix, etc).
- Checking account for flex spending (spending that varies). I allocate $250 a week to this account for purchases like groceries, Uber, eating out, personal care, home care. If it gets down to zero, that’s it. No using the credit card. I could move money over from savings if I’m really in a pinch but I try not to do that. I call this account “Gratitude.”
- Savings account for short-term things like a fun night out, a new pair of shoes, or whatever I might want to buy that’s not included in my budget. I set up automatic transfers to this account. I’ve changed the name of this one “Joy” to “Future Fun” to “I am Trustworthy.”
- Savings account for longer-ish term goals. I’m currently using it to save for travel over the winter. I set up automatic transfers to this account. I call this one “Follow the Sun.”
- Savings account at a different bank for a “safety net.”
I struggled with the decision of savings first or paying off debt first. I did not like the idea of living without a financial cushion/safety net/emergency fund, whatever you want to call it. It caused so much anxiety, which in turn caused me to make unwise financial decisions out of fear. I recognized the importance of peace of mind so I went with the safety net savings account first. I opened an account through Ally Bank, which had the best interest rates at the time. The number that makes you feel safe will be different for everyone. For me, it was $800. I’ve heard others recommend 3 months of living expenses.
I set up automatic transfers to this account with each paycheck. While I was saving and creating this safety net, I was only paying the minimum on my credit cards and allocating the rest of my money to this Ally savings account. The rest of my accounts are at Chase but I purposely chose a different bank for this savings account because it takes several days for money to transfer over so I can’t just make an impulsive buy.
Credit Card Payments
When I reached my Safety Net goal, I started to make payments to the credit cards. But this did not feel good. At all. It felt like my money was evaporating into thin air.
When I was saving, I realized that I enjoy saving money. So I decided to maintain those automatic transfers to the Ally saving account, and once a month, I took a portion of this money to pay my card.
I went on a shopping hiatus for 3 months. My rules were that I could only buy necessities and experiences (yoga workshops and concert tickets). If your debt is from buying experiences, a different type of purchasing hiatus might be for you. I knew that my brain would try to find a loophole so I added another rule: no tangible items or kindle books. I tried to consume what I already had before buying more.
Cultivating awareness is the first and most important step. I had to ask myself, “how did I get into debt?” and “why am I still in debt?” I had to get real and stop bullshitting myself here. Discovering the answers is its own journey.
I was researching shopping addiction for reasons unrelated to myself when I realized, “Oh shit. I do most of these things.” I didn’t think much of it then and kept living my life, making the same poor choices over and over again. My wake-up call was one glorious summer day. I work on State Street in Chicago, one of the biggest shopping districts in the city. I had an appointment after work that was canceled at the last minute, but I still had to be downtown for a while before meeting a friend for dinner. I could have passed the time by sunbathing at the park or journaling, but instead, my anxiety took over and I went to Anthropologie. As I stood in line, I thought to myself “I have no money in my bank account right now. I’m already $8,000 in debt. But I can’t stop myself and I’m going to use my credit card.” I hated myself in that moment of weakness, but it showed me how out of control my shopping compulsion had become.
Why did I shop?
It would still be a few more months before I got serious about getting out of debt but I started to notice the patterns.
- I constantly felt like I was not enough and that this new shiny thing would make my life better.
- It was one way that I bonded with my mom, some of my high school friends, and some of my college friends.
- It was something to do.
- The high from getting something new.
- Fashion is a form of self-expression and I didn’t know how else to tell the world “this is me!”
- I wanted to be prepared for any and every situation and I felt that I had to buy things in order to feel prepared.
- I tried to fix someone else’s depression by buying them gifts.
I have anxiety most of the time and sometimes I get into these obsessive frenzies where the only thing I can think about is how I need a particular item. I’ll research it to no end and it’s as if the only way to pop that bubble of tension is to buy it. Great. Problem solved. For now. Until the next bout comes around. Each thing I bought caused massive amounts of guilt, anxiety about the growing amount of debt, helplessness, and hopelessness about ever getting out of debt. And the vicious cycle continues.
The inability to say NO
Between my people-pleasing tendencies and complete lack of boundaries, I did not know how to say NO. Whenever friends wanted to go out, I would say yes and end up spending money that I did not have. In addition to the people-pleasing and lack of boundaries, I was regularly being guilt-tripped and manipulated in my last relationship. I did not have the awareness, strength, or confidence to say NO so I ended up paying for nearly everything. This is a whole other crazy journey, a story for another day, but it contributed just as much to the debt as the shopping addiction.
Even if it was not your fault, it’s your responsibility to heal from this. Will Smith gives a couple excellent examples in this video: “It’s not somebody’s fault if their father was an abusive alcoholic but it’s for damn sure their responsibility to figure out how they’re going to deal with those traumas and try to make make a life out of it. It’s not your fault if your partner cheated and ruined your marriage but it’s for sure damn sure your responsibility to figure out how to take that pain and overcome that and build a happy life for yourself.”
By accepting full self-responsibility, we step into full self-empowerment.
I gave myself time to grieve, mourn, cry, yell, throw myself a pity party. Then, I stopped blaming (others, myself, the universe) and started taking action.
Heal and Trust
Healing my blocks around money
I had to let go of the belief that money is the root of all evil. I looked to people who are wealthy and are doing amazing things with their money. Examples: Oprah, Ellen DeGeneres, Bill Gates. Money is energy and I get to choose how I use it. I can use it for good. I can trust myself enough to know that money will not make me greedy, or entitled, or any of the other criticisms I’ve heard about people who have money.
Healing my relationship with money
My life-coach, Lelia Christine, asked me to look at money as a person: if money were a person, how am I treating him/her/them? Would he want to be friends with me? Am I treating him nicely or am I pushing him away? Telling him I don’t need/want him?
My relationship with Money was pretty bad. I was scared of him, I pushed him away, I didn’t think I deserved him, I thought I was greedy for wanting him. I had to create a relationship with money that I would want to be in. One that’s loving, safe, supportive, and honest.
Learn how to receive
When someone gave me a compliment, I pushed it away and felt ashamed and guilty of saying “Thank you.” I believed that it made me vain or conceited or egotistical. I was pushing away loving words. I would do the same with gifts. It’s actually a part of etiquette in the Chinese culture to refuse a gift three times before it’s considered polite to accept. But I don’t live in China, nor are any of my friends Chinese. So I’ve been turning away kindness, compliments, gifts, and I used that same mentality to turn away money and abundance. It’s a practice to receive without guilt.
I write down what I am grateful for and remember how much I truly have and how abundant my life already is. I’ve experienced the power of gratitude in occasional doses, but I’m about to embark on a 28-day gratitude challenge where every day, I will write down 10 things I am grateful for and WHY. A practice gratitude on its own has the power to make dramatic changes.
My mind automatically falls into old stories about how I don’t have any money (untrue) and I forget that more is coming in soon. I’m still working on this one. I’m still retraining my mind to believe that abundance is always flowing in.
I work with this mantra. I write it down whenever I’m feeling anxious about money. I breathe and repeat:
Abundance flows freely to me and I am well taken care of by my loved ones and the Universe.
Are you ready to be free?
I don’t regret a single penny that got me into this debt because the life lessons learned and self-inquiry along the way are invaluable.
This journey has not been easy. I’ve worked with a life-coach, a financial coach, and completed online courses to change my mindset around money. I could dive so much deeper into each of these topics that I’ve listed.
This journey is not for the faint of heart. So much shit came up. But I was ready to face it all and by releasing the heavy bondage of debt, victimhood, and shame, I feel light, free, and full of possibilities and hope.
What is your story? What did you find to be helpful? Which topics would you like to read more about? How can I be of service to you on your journey to lightness and freedom?
This story was originally published on my blog.