(I’m in the US for context…) Four years ago, I was a twenty seven year old woman with a decent career. I had graduated college early, at age 19, and immediately found a job in my field. Even though I had been working a secure, well paying job for eight years, I was in financial dire straights.
I didn’t have debt from student loans, but I had several very high interest (25%) credit cards totaling about $10k and I owed around $3k on my car which I was paying 14% interest on. I was making about $50k a year, but somehow, I was living paycheck to paycheck. I moved in with roommates to try to save money and even when I cut my rent in half, my situation did not improve whatsoever. I had no money in the bank and my credit was abysmal.
I needed a new laptop and I couldn’t afford one. I took a trip with some girlfriends and one of them had to pay for me and allow me to pay her back in installments. It was embarrassing to say the least. But no one had ever taught me how to manage my money. I began to think that some people just “aren’t good with money” and that was it for me. Well really, to be honest, I just tried not to think about it. If I had money in the bank, I spent it. Instead of trying to fix that situation, I worked harder. I got a second job and put in more hours. I was working myself to the bone and I was burning out before turning 30.
It was around that time that I met my current SO. He could see how burnt out I was with my job and encouraged me to quit and pursue something that I really wanted to. I explained that, in my financial situation, there was no possible way that I could afford to make any less money. He started to inquire about my finances and, of course, was surprised to see what a mess I was in. However, being the personification of r/frugal and r/personalfinance, he assured me that my debt was certainly not insurmountable and vowed to start me on a path to financial stability.
Now, a couple of years later, I work in a different field doing something that I really love. I make a little less money, but I work a lot less and I am happy to say that my life is virtually stress-free. Last year, I actually took a hiatus from work to travel abroad. Even on a reduced income, I have $10k in the bank, a new car and a credit score well above 700. Getting control of my finances changed my life significantly because it allowed me the freedom to live how I want to without the constant pressure of working to pay my bills.
I am certainly not rich, nor am I a financial guru, but I would like to share a couple of things that I have learned throughout the course of this journey.
First, you can’t ignore your situation. I was the queen of ignoring. If I thought my bank account balance was getting low, I wouldn’t look at it. If I missed a credit card payment, I didn’t want to see the late fee. I would forget about it. I didn’t look at my credit report because I didn’t want to see all of that red. And in the beginning, when my SO was trying to set me straight, it was hard. There were a lot of fights because I refused to look the issue in the face. I’d do literally anything else before I would sit down and call my credit card company. Admitting that I had been stupid with my money and committing to actively change was difficult for me, but obviously extremely necessary.
Second, consolidate and stay organized. One reason things got so bad in the first place was that, in my early twenties, I couldn’t keep up with my credit cards. I couldn’t remember which ones I had paid or when the promotional rates expired. Once I missed a payment and the interest shot up to 25%, I felt helpless and didn’t want to look at the statements anymore. The very first thing that we did was consolidate the debt so that it was easier to manage. I paid off my car since there was not much left on the loan by that time. Then, we went to a local credit union and took out a consolidation loan using the car as collateral. The interest rate was high, but for the first time, all of my debt was in one place. I set my payments to auto-pay and put it on the back burner.
Third, pay attention to those offers in the mail. After I had consolidated my credit card debt and had been making regular payments for a while, my credit started to improve and I started getting credit card offers in the mail. Eventually, I was getting offers for a 0% balance transfer. I picked a card with no annual fee, a low transfer fee and 0% for 18 months. By this time, I had a spreadsheet with all of my bill pay and credit card information so I made sure to make a note of when my promotional rate expired. I was able to move my remaining debt to a card with 0% interest and just before that rate expired, I moved it again, so that I had several years to pay of the balance without paying any interest.
Finally, and for me, this was most important, pay attention to your spending. I used to HATE looking at my bank statement. Mostly because I knew I would feel bad or guilty about the low, sometimes negative balance. Once my situation became more stable and I started saving money, the opposite happened. I felt proud and I wanted to look at my account and see a growing savings. In turn, this made me more frugal and I started to become very aware of how much money I was really throwing away. Clothes were my weakness. My closet was overflowing with cheap “retail therapy” items. Now, rather than buy cheap clothes every time I go to Target, I allow myself to buy one luxury clothing item from a high end store every couple of months. My clothes are nicer and more expensive, but overall, my spending has been reduced. We also live very frugally, in general. Most of the furniture in our house was purchased second-hand and we rarely go out to eat or make large purchases, since we prefer to spend our money on travel. r/frugal has lots of good tips, as well.
Overall, admitting that I had a problem with overspending, learning to budget and committing to taking control of my finances drastically changed my life for the better. Now, I am able to live very comfortably on a pretty low income and still manage to save money for my future and for things that I love. With a little deliberate planning and patience, it IS possible.
Edit: a word
Submitted April 02, 2017 at 01:34PM by Nica-sauce-rex http://ift.tt/2nLukjt
