I was much like a lot of young women at 22. Young and ambitious in addition to being broke and up to my neck in debt of various kinds. As a fresh college graduate with a sweet new job offer I was ready to finally get out of my family’s house, buy a new ride and do exactly what I had been dreaming of doing for the past as-long-as-I-could-remember — live! Except, I knew better.
After taking the time to learn about the importance of personal finance, I knew I wanted to be different from my peers. I needed to pay down my debt, build up an emergency fund and live below my means if I was going to break the cycle of high debt-to-income ratios, low credit scores and irresponsible spending that I’d seen my family endure. I knew this would be much easier said than done, but I was committed. After reading some personal finance books and doing some reflecting, I knew where and what I had to change. But it wasn’t just checking things off a list — the changes I made required radical shifts in habits, and strong commitment to an end goal.
1. Make a Budget
The first to go was my “I don’t need a budget” mentality. I had to toss that one right out the window. (I seriously thought for years that budgeting was for people with an actual big-girl salary. And since I was barely making over minimum wage at the time, I never thought it was something I had to have.)
So I started tracking my expenses and used the zero-based budget. I listed out all of my expenses and then ranked them by whichever had the highest interest. Each month I was very meticulous about each expense, and knew exactly where to allocate every dollar. At the end of the month, all my savings went to my highest interest debt.
2. Get a Side Hustle
Everyone has a hobby, and I happen to be quite good at baking. (Not trying to brag or anything, but my coconut cream pie is bomb). I had worked in a bakery when I was 14 folding pie boxes, and baking slowly turned into my first real job that I actually got a paycheck for. Fast Forward 5 years and it occurred to me that there was a huge untapped market in my small circle — my friends needed baked goods around the holidays!
I calculated my expenses, set my rates and slowly pitched my way to selling over 150 pies during the holiday season. No, I didn’t get rich, but these sales definitely helped pad my savings account and helped me pay down my debt. The point is that there’s a market for just about everything, and if you see an unmet need there could be some serious earning potential just waiting for someone with the right skill set to cash in with a great side hustle idea.
3. Pursue Scholarships
Any money you can get for free is money worth pursuing. I was in college a total of 5 years, and it took me 4 years to realize you don’t have to be a genius to apply for scholarships, and you don’t have to have a 4.0 to win them. Most colleges offer specialized scholarships created just for their students, specific to individual programs within the college. Thankfully, I ended up securing enough scholarships to finish paying for the remainder of my senior year. While this didn’t necessarily help me pay off debt, it definitely kept me from incurring any additional debt.
4. Get Rid of Unnecessary Expenses
Vehicle expenses have become outrageous. Studies show that people are financing more and financing longer than ever before. I had an epiphany that I was paying way too much for my car, and since I was under 25, I was also paying a lot for car insurance. Within 6 months I was able to sell my like- new car for an efficient, used, and much lower-cost vehicle. It was a joy to finally get out from under the burden of a high note and climb into a vehicle with a third of the payment. With this move, I was able to save over $300 per month.
Yes, most people in America “need” a car. But they could easily get where they’re going in a more affordable and cost effective ride. The bottom line is that if your car is worth more than your annual salary, you’re paying too much and it’s time to downgrade for the sake of your debt.
5. Save on Rent
No, not everyone has the ability to live with family. But I’m here to say that if you’re able to do it, even for a few months or a year, DO IT. This was by far my biggest savings tool. The average cost of living in my area was about $800-$1,300 per month in rent alone. Needless to say, if I was going to put a serious dent in my student loan debt I needed to figure out how to cut out that expense as much as possible.
As painful as it was to give up some of my privacy for a few years, the reward of paying $1,300 per month towards my debt was beyond exhilarating. And I have to say, it wasn’t as bad as people think it might be. I got to pay off more debt in one year than my friends did in 4 years by swallowing my pride and doing what I thought necessary to break the chain of excessive debt.
With that chunk of debt out of the way, I was able to snowball my savings and put away a large chunk of capital for emergencies and my future home purchase.
No, paying off debt is not a quick and easy game, it is a slow and steady crawl to the finish line. Changing your habits is crucial. Making a decision everyday to budget and spend only on necessities can be daunting, but I can speak from experience — it is so, so worth it.
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