How I Paid Off $80,000 Debts On My Own Being A Newbie Graduate
We all live our lives with some type of opinion on finances. This shapes how we choose to manage debt and budgets. Although some stories are terrible, others have promising outcomes. At Finance Free Life we like to show other’s stories. Please take a minute to read Sophia’s story below through her guest post.
Before describing my debt payoff success story, I should explain the reason for falling into $80,000 of debt. I was a reckless spender during my college days. I used my credit cards randomly through shopping branded clothes, eating out, and planning getaways with friends. To fund the expenses, I have used my 5 credit cards randomly. As a result, I fell into credit card debt. The worst part was, I didn’t realize the significance of falling into debt, I simply ignored the credit card statements.
When I just passed out, I started getting creditors calls. I got scared and asked my parents about the solution. They rebuked me at first. But later, they guided me about the pros and cons of using a credit card. My parents paid off the first credit card of $25,000, but asked me to pay off the remaining balance on my own so that I can understand what is a debt and how to get out of it. They also guided me about debt repayment options. They asked me to join a job and save money. I have followed their instructions. Soon, I joined a school as a Montessori teacher. I started earning money and saving.
My parents also asked me to stay with them so that I can save money on other expenses. I knew that I couldn’t afford to repay the biggest debt of $30,000. So, I decided to settle it. In addition to this, my parents asked me to repay the other 3 debts on my own by following the debt snowball method. They asked me to pay a larger amount to the lowest amount debt ($6000) while making the minimum to the other 2 debts ($10,000 and $9,000). Soon, I had paid off the lowest debt and started making a larger payment to the second lowest debt ($9,000). By following this method, I had paid off all 3 debts within 2 years. Also, I had settled the biggest debt in a reduced amount and paid a certain tax amount for that. It took 2.5 years to become debt free.
Here’s how I have managed to make debt repayment
I cut down all the unnecessary expenses
I had to cut down expenses as I was in debt blue. I had stopped eating out and shopping unnecessarily. Also, I didn’t plan for a single trip so that I can save as much as possible. I restricted going out with friends for dinner and stopped visiting shopping malls even for window shopping. Instead, I started browsing through the internet and newspapers to collect discount coupons that I used to buy necessary items.
I had planned a budget
The most important thing I did was to plan a budget to save as much as I could. I planned a budget and allocated a definite amount to each and every monthly expense while setting aside money for debt payments.
I have negotiated with the creditor to whom I owe the biggest amount
As I didn’t have much savings, it was impossible to pay off the $30,000 debt in full. Therefore, I fixed a meeting with my creditor and explained my financial situation and requested for a reduced payoff amount. At first, the creditor didn’t agree to reduce the outstanding balances. But after I explained that I didn’t even have sufficient savings to pay off the debt and I am a newbie earner, the creditor understood my situation. Finally, my outstanding balance amount got reduced.
I stayed with my parents
I have left my apartment and started living with my parents to cut down utility costs and rent. I had to use my savings to make debt payments during that period. However, after getting my job, I promised myself to not spend money on useless things. It helped me to save more. And I have successfully managed the debt snowball method to repay the 3 debts.
I sold my car
My parents gifted me a car. Since I couldn’t afford the fuel cost, I sold it and got the amount that was required for the debt settlement. I was told by the creditor to make the lump sum for settling the debt. I did the same and paid off that debt.
I have started saving
After following the budget and saving as much as I could, I was able to save half of my monthly. When I started following the debt snowball method I started saving even more. In this way, I went on saving the required amount and started paying back one creditor after the other and I was able to get out of debt in 2.5 years.
Lastly, my job wasn’t a well paid one. Thus, It took a long time to repay all the debts on my own, but I decided to repay all the debts on my own as my parents have already helped me to repay 1 out of 5 debts. They also helped me to learn about the debt snowball method. It helped me to become debt free on my own.
One more thing I should mention that, after I got out of debt, I promised myself to manage my personal finances in a better way. Now, I use credit cards responsibly and pay the bills in full and within time. A few days ago, I have consulted a financial adviser to know how to improve credit score. Also, I have started writing financial articles to spread financial insights to other people. Also, I want to establish myself as a writer. Thus, I have started blogging. I hope, in the near future, blogging will help me to establish financially.