How To Get Debt-Free While Living Paycheck To Paycheck After College
I don’t remember the exact moment that YOLO began to define my most tragic purchases. Maybe it was the time I bought that $400 game system for my brother that he stopped using after a month. Or the shopping spree I went on every other week because I “needed” new interview clothes, concert clothes, traveling clothes, brushing my teeth clothes and everything in between clothes. Every time I headed to pay for these things a ball of guilt formed in my throat. I knew I shouldn’t have been spending money. Hell, I JUST paid my card minimum to get my credit back to $32. But nevertheless, I shrugged my shoulders, yelled YOLO and dug myself deeper into the debt pit of hell.
Living paycheck to paycheck sucks but this was a reality I had accepted after getting my first real job after college. Claiming I had no money, I still managed to travel, eat out, shop, enjoy concerts and get my nails done regularly.
But one day I decided enough was enough.
The habits that I was forming were setting me up for a life of struggle. Besides, there was no way I could leave a legacy with a trail of debt following behind it. Something had to change.
The Day It All Clicked For Me
I had an awful relationship with money. The only people I ever saw with money were the celebrities on BET, not regular folks like me. Seeing the struggles and impact that money had on my family left me completely in denial that financial freedom could be a thing.
Everybody has debt they said. Enjoy your life they said. TREAT YOURSELF THEY SAID.
But after a major breakdown in my car about watching my paycheck go to nothing, my best friend (hey Brittany girl!) ordered Dave Ramsey’s Total Money Makeover for me. My edges were not only snatched but disappeared.
For the first time, I had a vision.
I wasn’t creating a budget because it was responsible or fun (although it was eventually), but I was choosing to change a pattern in my family. I wanted to be free of dodging bill collectors, forbearing student loan payments and throwing away my check to four maxed out credit cards. I wanted to know what it was like to go into Forever 21 without frantically checking my bank statement to see if I had enough.
I wanted to stop the cycle. I wanted freedom.
After 7 months, a VERY small paycheck and some big sacrifices, I was able to pay off $7,250 in credit card debt. Most of this debt is what I’ve had since a freshman in college. (EIGHT FREAKIN YEARS)
My next goal is to conquer my $80K (yes, you read that right. EIGHTY THOUSAND DOLLARS) student loan bill in four years. That will be right before my 30th birthday (Lord help. I don’t wanna be old *cries*) .
It’s possible. I never thought I could pay down my debt with the salary I made but I’m whacking at it and I want you to kill that ish too.
Why You Need To Be Debt-Free
In the Bible it states that “The rich rule over the poor and the borrower is slave to the lender” and that couldn’t be more true. Debt keeps us bound to jobs we hate because we have to pay the bills. Debt causes our families to carry our burdens when we are gone.
You have to find your why for doing this.
The Facts About Debt After College
Before I go into the methods, I want to hit you with some hard facts to put things in perspective:
- Debt usually starts in our 20’s when we aren’t earning a lot. This allows us to enjoy experiences and toys without letting our salaries hold us back. Basically, you a fake baller but not a shot-caller.
- 1 in 5 Americans will die with debt. An average of 62K to be exact.
- According to Edmunds.com, an average car payment is about $479 a month and most Americans trade in new cars every few years. If you continued to have a car payment by upgrading, in over 20 years you would have spent about $114,960.
- According to TIME, the average interest rate on a credit card is 15%. If you had a credit card debt that cost $4,717 and only paid the minimum payment, it would take you about 10 years to pay off. Ending total? $22, 869.
- We spend more money on restaurants than groceries, eating out an average of 3 times a week. That’s an extra $1,500 a year.
The bottom line is that debt is playing us. We are trading short-term happiness for long-term payouts and if you are sick and tired like I was, then get ready to break this once and for all. Just imagine – all that money can go toward your dreams. How dope would that be.
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Step One: See Where Your Money Is Going
Before I started the Total Money Makeover with Dave Ramsey, I sat down and saw what I had been spending most of my money on. The site I used was Credit Karma, which tracked all my credit, loans and payouts. Can you guess where most of my money was actually going? After credit card bills, it was fast food and shopping.
This brought me to the reality that “paycheck to paycheck” was a choice that I was making because I somehow found coins for other expenses. Examine your habits whether through this method or checking your bank statements.
Step Two: Can You Pay Your Bills? *Destiny’s Child Voice*
Before you do ANYTHING, get your bills current. List out every bill that you have in a notebook with their balances and highlight the ones that are behind. Your next mission is to do whatever you can to get them current.
TIP: Cut up your credit cards. I cut up all my credit cards but two and it helped me get serious about not using them.
Step Three: Get You a Savings, Homie
If a $500 disaster happened at this very second, could you pay for it without stress?
The truth is 63% of us don’t have a savings. When crisis come up (and believe me they will), we run to credit cards and loans.
In Dave Ramsey’s method he suggests that before you even think about getting at your debt you need at least $1000 in savings.
Sell clothes, cut out your Starbucks runs but do whatever you have to do to get that $1000 quickly. It’s honestly not as hard as you think once you see how much you spend on other things.
So, WAIT. What if you have more than $1000 in your savings? I knew you would ask…
Step Four: Create The Snowball
After I got my savings good, I listed my debt from smallest to largest. My smallest was a $750 Discover Card bill and my largest was a $19,000 student loan. Paying down my Discover first, I would take that payment and put it on top of my next payment. Like this:
Attacking your smallest debt first is great because it gives you momentum. Once I saw the Discover card go, it became a game and I wanted to get to the next debt-slashing level. If you have extra money after you save $1,000, throw it at your debts. I know it’s going to hurt. But the longer you’re in debt the more money you will be paying anyway. So if you have $5,000 in savings, use $4,000 and knock out a payment quickly.
This requires a WRITTEN BUDGET that you have to stick to each paycheck. That means no last minute basketball bets or trips to Sephora. Everything had to be planned.
TIP: Get a small notebook for your budget and carry it around with you. EVERYWHERE.
Step Four and Three Quarters: The Envelop System
To stay on my task, I used Dave Ramsey’s envelop system. Based off my budget, I wrote envelopes for expenses I knew I would have like gas, food, unexpected and even fun money (this allowed me to go to that birthday dinner or movie with a friend without guilt). I would take out the money and allocate them to each envelope. This forced me to only carry physical cash and once it was gone, it was gone.
Step Six: Write The Vision, Do The Math
You have to know where you want to go when attacking this. For example, say you wanted to pay your $2,500 Wells Fargo bill in 5 months. If I divided $2,500 by 20 weeks (5 months), that would be at least $125 a week that you needed to put toward that loan to pay it off.
Makes sense? It’s all in the math. Give your debts a time limit and go to work.
Step Six: Get Crazy
When living paycheck to paycheck, it’s hard to feel like there’s wiggle room to attack our debt. Out of desperation to get out of this mess, I’ve made some huge sacrifices that go beyond just spending.
- I was fortunate enough to have family in Vegas. Putting my pride to the side I asked to move in with them. This literally eliminated my $845 rent payment which allowed me to throw all my money into the loans. If you don’t have family that you could stay with or rent from, see if you can downsize your apartment or get a roommate. It may be uncomfortable but once you’re debt-free you don’t have to stress about that.
- Get some side hustles. I now have many that include freelance writing and working a second job. The side hustles are what is going to allow me to pay off my 80K in such a short time. Yes, you will sacrifice brunch but the results will be worth it.
- I’m officially too broke for luxuries. Nails? Painted them. Hair? Learned to do it myself. I learned to find alternatives to the things I enjoyed.
Last Step? PRAYER. Because Lord knows you are going to need it haha.
In conclusion, becoming debt-free is a mindset and it isn’t for everybody. But with a budget, a vision and some sacrifice you will be well on your way to creating a new life of rain drops and drop tops. You got this, we got this.
I created a Debt-Free Jump-start sheet that has ALL the things that keep me encouraged on this journey. Download it below!
What are some other creative ways to save?