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Welcome to the newest installment of “Getting Out Of Debt,” a new series where I realize just how horrible my financial situation is and figure out how in the world I’m going to rectify it. If you missed the last column, read Getting Out Of Debt: Credit Cards.
I’ve come to terms with my finances. At this point, I now know that I’m $122,544.16 in debt, and I need to get out of it ASAP. After a couple of mental breakdowns and consoling myself with individual boxes of wine instead of the bottles I now realize are much more expensive, it’s time I come up with a plan for what exactly I’m going to do about the financial scaries. All I can say is thank goodness all of Taylor Swift’s music is back on the free version of Spotify, because I haven’t been able to stop asking myself “Are we out of the woods yet?” since my latest article was published last week. The answer to the question stuck in my head? Not until I build a budget.
I’ve been putting this off for a long time, mainly following the idea that “what I don’t know can’t hurt me.” Until now, my payment model has been getting money on payday, paying the next 14 days’ worth of bills and minimum payments, and then spending the rest until it runs out. It was totally working – well enough, anyway – until I realized that I needed to actually come up with a plan for my money to get me out of this debt. From all of my forays into Dave Ramsey, Reddit, and a dozen personal finance blogs, everyone seems to be in agreement – creating a budget is the first step to getting out of debt for good.
The theory is simple enough. List your income, deduct your expenses, and use the remainder to pay off your debt. What people don’t tell you is that this process is literally physically painful. It will hurt deep in your chest. Listing every single expense as a line item in Excel and assigning a number to it that will subtract from your hard-earned dollars in your sum total will feel like you got the wind knocked out of you. You mean to tell me that I’m barely scraping by because I’m spending half of my income on minimum payments on accounts I’m not even using anymore? Knowing you’re paying a lot in interest is one thing, but seeing it written in front of you hurts worse than your first high school breakup.
Because I could pay my bills, I assumed my financial situation was fine. Spoiler alert: it’s definitely not; in fact, I’m amazed I’ve been able to survive this far as it is. All this time, I’ve been wondering how everyone I know keeps going on these absurdly lavish vacations, and now I know – either they have way higher credit card limits than I do, or they’re out of debt. I knew that every month I paid the minimums on my credit cards and loans; what I didn’t know until creating a budget was that I’m spending $712.11 every month just paying these minimums and ensuring I never get out of debt.
The driving force behind all of this is the end of my student loan grace period, and if the online repayment calculators are to be believed, I now have less than 6 months to get that $712.11 balance down to around $250 by the time my payments kick in for me to continue paying everything off without major changes to my quality of life. From my outstanding balances, this means I have about $12,000 of debt to pay off, or around $2,000 every month. This means a couple of things – my income is going to have to increase by a lot, and my expenditures are going to have to decrease by a lot to free up some extra cash.
To say that I’m not thrilled about this would probably be the understatement of the century, but I’m committed to the cause. I’ve figured out my plan of action; now, I just actually have to act on it. Luckily for me, this budget has helped me see that even though $2,000 every month seems extreme, things may not be as hopeless as they seem. As a recent graduate, I’m not exactly raking in the dough in my post-grad paid internship, but I do know that as I continue interviewing for a full-time position, my income can only increase. Second, considering that I spend nearly every free dollar at Publix or restaurants, I’m going to start getting creative with my meals, and hey, maybe I’ll even drop a pants size or two as a result.
It’s not going to be fun, but if I can survive the next six months living off of pasta, beans, and Black Box, I just may be able to pay off this debt after all. Now if you’ll excuse me, I just have to casually come up with two grand before next week. According to my brand new budget, this should be a piece of cake. .
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Steph W.
Steph W. is a new Master's degree graduate with an intern's salary and six-figure taste. She realizes her expectations far exceed reality, so she spends her days pinning away Loubs she pretends are in her physical closet instead of her virtual one. Her hobbies include attempting to trapping her boyfriend into marriage before he finds out how insane she is and pretending that Black Box wine tastes as good as the kind she could afford when she was gainfully employed. Send her tips for getting out of student debt at recruitchairtsm@gmail.com
@therecruitchair
I think that you should focus on paying off all your credit cards before you pay a penny above the minimum for your student loans. I assume that the loans have a 7-9% interest rate, while credit cards usually have 20%+ so you want to pay off the highest interest debt first.
Agreed. Also worth noting that student loan interest is an above the line tax deduction while consumer debt is not
Very true, although it is limited to $2,500 a year. But every penny counts.
Agreed. Target the credit cards first and pay those off before going after the student loan debt. Google Dave Ramsey debt snowball plan. Pay off your lowest credit card balance first, then use that extra money to pay off the second lowest credit card balance, and so forth etc.
Oh look, it’s the CPA reminding us he’s a CPA. Instead of piggybacking/condescending towards this author with your version of “helping with financial advice” why don’t you write an article series with this advice so anyone who wants to read it can, instead of offering up unsolicited advice towards the author every time she posts an article, which I’m sure takes a lot of courage.
While I’ve read all this before, I appreciate advice. Doesn’t hurt anyone, helps some people.
So… eat a bag of dicks?
Because I have a job that keeps me pretty busy and it’s a lot easier to post a two sentence comment than to spend hours writing an article.
My apologies, forgot you were a CPA/super busy all the time
Damn dude, who peed in your coffee this morning?
Bill Nye the Accruals Guy?
You’re still bad at trolling.
Oh look, it’s the guy that thinks he needs to comment on everything that ever happens on PGP
Zero shame.
Don’t explain yourself to him, Cube.
I thought you died or were killed. 🙁
I really almost admire how much of a dick head you are. Some people would have to really try hard, but it just comes effortless to you.
As someone who should never hand out financial advice but also just recently paid off 100k+ in student debt I can say this….however you go about paying off your debt, any and all struggles are more than worth it when you finally feel that burden lift off your shoulders.
I wish you all the luck and I thoroughly enjoy this series and your openness.
I think you are on the right track except for the “without any major lifestyle changes” part. You probably need to make some of those
This might be the best advice I’ve seen on here so far
Reading these weekly makes me want to throw up but damn, people in the comments are giving solid advice.
My wife is my hero and hopped on the Dave Ramsey train (well, Dave Ramsey Light… I still finance/drive a very nice vehicle) and it has been awesome. We don’t owe anyone shit except for some minor student loans and the previously mentioned truck (double payments are in our future). Getting out of debt is a bitch but think of it like ripping off a bandaid. Live like a college kid minus the drugs and parties and pay everything towards debt. Rent a fucking room. Live with your parents. Spend less than you make. You’ll be saying “no” a lot. You’ll have to pass when the Dixie Chicks or T Swift come to town.
If it makes you feel any better, my wife’s friend just financed a trip to Europe with a credit card while she’s drowning in debt. People are fucking stupid. Good Luck!!
Who cares about debt when you can get 50 likes on an Instagram picture?
Bingo
Gambling on becoming an Instagram “Influencer?” That shit still blows my mind.
Just think, by the time you figure out that debt, you’ll get it all right back when you decide to buy a house!
I used this program called “You Need A Budget” (that’s the actual title of it, google it!) and it’s helped me a lot with looking at the reality of what I’m making vs. how much I can afford to spend on certain things.
You create your budget and you can set “goals” – like setting aside $25 a month as a gift savings fund so that when December rolls around, you aren’t scrambling and broke trying to buy everyone’s gifts, or $25 a month to cover an inevitably expensive checkup for the dog in six months. These things are super obvious to some, but looking at it this way helped me a lot. I currently have a credit card with 0% interest the first year, and i’m budgeting how to get that paid off by the time the year is up. The program is $50 a year, but free for 30 days… Honestly, it’s stuff you could calculate yourself, but having gone from virtually no money management on my part, using it for at least the trial has really put things into perspective for me.
Have you considered either A) rolling the CC debt to a zero-percent CC, or B) paying the debt off with a 401k loan? B is still debt, but generally at MUCH lower interest than a CC. Paying off high-interest debt is one of the few “good” uses of a 401k loan.
No way she has a balance to support taking a loan from a 401k.
No way she has a 401k.
Typically this would be solid advice, but in the writers case I don’t think she has the financial restraint (yet) to open up another credit card without overspending on it and maxing it out. She needs to cut up all of her credit cards and not open another one until all of the CC debt is paid off, or ever.
“continue paying everything off without major changes to my quality of life.” Look, I don’t want to shame you, but I don’t think you’ve had your full wake-up call about your financial situation yet. Student loan debt sucks, making bad credit card choices when not understanding the implications sucks, and it’s admirable that you’re trying to address it. But you are in a massive load of debt, and you don’t have a full-time job secured. You absolutely need to make changes to your quality of life if you want to make a meaningful dent in your debt.
If you have an Aldi near you, their wine is less than $3 a bottle last time I checked. They’re a little hit or miss for produce/specialty items, but you’ll save a ton on your groceries.