How I Paid Off $15,000 in Credit Card Debt in 2 Years!
We’ve all seen stories of people claiming to pay off large amounts of debt, like $50,000 or more, in record-breaking time. I’ve read my fair share of them.
I don’t doubt their claims, and in fact, I congratulate them on their success! They are stories meant to inspire and empower us to do the same.
Unfortunately for me, I could never really relate to them. I found common themes such as: they had multi-person incomes, access to cash saved up for emergencies or in other accounts, additional properties or real estate to rent or sell…none of which applied to me.
I was a single man, with a single average income, and no available cash flow.
Like many of us (the average credit card debt for balance-carrying households is $9,333), circumstances in life happened, and I found myself sitting on nearly $12,000 of credit card debt. Yes, I know the title says $15,000 but I’ll get to that, as there were some additional set backs costing me a few thousand dollars more.
By making only the minimum monthly payment on my credit cards, it would take me over 12 years to pay it off. I would also end up paying about an extra $7,000 in interest alone.
This was not acceptable to me!
It was the start of a new year, so call it a New Years Resolution. I knew it wouldn’t be possible with my salary to pay off my debt in one year, so I set a goal to be free of credit card debt in two years.
For me to achieve this, I would need to make a payment of $600 every month.
The question now is, where would I find that extra money each month?
This is my journey, step-by-step, on how I went from being stressed out and financially strapped from debt, to doing the happy dance of financial freedom.
Ciao Credit Cards
The most important decision I had to make sounds like a no-brainer. Stop using my credit cards! Simple enough, right?
It is, except credit card use can become a creature of habit. We are ingrained to be a “buy now, pay later” culture, and it’s so convenient to swipe a card, or click through a shopping cart online, and pay the minimum payment when the bill is due.
This needed to change ASAP, so I put my credit cards away, out of sight. I refused to carry them on me, and if I shopped or paid a bill online, I allowed myself to only use my debit card, forcing me to pay for things right then.
Continuing to use my credit cards would at best keep me in the same debt I was in, and at worst, put me even further in debt.
I couldn’t take that chance, so good-bye credit cards!
With my credit card spending taken care of, I then needed to find out what else I spend money on. Sure, I had a generalization, but if I was really serious about reaching my goal, then I had to make every dollar count.
I didn’t have a budgeting app, so I manually went through all my transactions over the last 90 days.
I listed all my take home pay in one column on a spreadsheet, then my necessary monthly expenses (rent, car, utilities, food) in a second column.
The last thing I did was add up everything else I spent money on, then divided it to get my monthly average over the past 90 days.
It wasn’t the most thorough way of planning a budget, but at that point, I really just wanted to see what was the net total between my income and expenses.
My goal was to allocate all of that “extra” money towards paying off my credit cards.
The result? Based on my recent spending habits, I could afford to put $300 a month towards a payment.
- Monthly Payment Goal: $600
- Money available to pay: $300
This was only half of what I would need to successfully be free of credit card debt in 2 years…
I needed to figure out some way to scrounge up that remaining half. I felt like I needed a miracle.
Income Tax Return
Since I decided to do this at the beginning of the year, it was good timing. Why? Tax season!
I printed my tax forms as soon as they were available, and got my copy of TurboTax to get started.
TurboTax walks you through every step of the way, making sure you don’t forget anything, and maximizes your refund by getting you all the deductions and credits you qualify for. The process couldn’t be easier, and I was very happy with the result.
I wanted to set some of my refund aside as an emergency fund, and was still able to make a nice payment of $2,000 on my credit card from my taxes.
After calculating my new balance, that lowered my monthly goal payment by $100!
If you’d like to see how long it will take you to pay off your credit card, or how much you need to pay each month to be debt free by a certain date, click here to use our debt calculator.
- New Monthly Payment Goal: $500
- Money available to pay: $300
Now I was down to only needing an extra $200 a month to hit my target. Thank you TurboTax!
In March, it was time for my annual performance review at my employment.
Thankfully, I was able to walk out of the meeting with a raise. It wasn’t as much as I hoped for, but every little bit helps.
After figuring the amount taken out by taxes, it was about $110 more per month, which I immediately decided would go straight towards my credit cards and nothing else.
- New Monthly Payment Goal: $500
- Money available to pay: $410
I was now only $90 a month short of my goal, so I was starting to feel like I could do it after all!
Living the Frugal Life
Up to this point, I hadn’t made any lifestyle changes, so it was time to dig deeper into my budget plan and identify areas I could improve.
I asked myself these questions: What was I spending money on that I didn’t need? Can I make any of my current bills cheaper?
After making a detailed list of all my non-essential expenses, some things immediately stood out.
Here are some of the actions I took to save money:
- I canceled my cable tv service, using only Netflix and Amazon Prime Video to replace it. Monthly savings: $100
- I switched my cell phone plan to Google Fi, and stayed connected to wi-fi wherever I went so I didn’t use any data. Monthly Savings: $35
- I bundled my mortgage and car insurance policies with the same company. Monthly savings: $42
- I went from dining out three times a week to only once per week. Monthly savings: $60
- I made my own coffee at home and kept it in a thermos instead of buying coffee at the store each day. Monthly savings: $25
With just those changes alone, that is over $250 a month extra I could apply towards my credit card payment. I didn’t even have to sacrifice quality of life.
This was well over the $90 a month I needed to find, so now it was time to play catch-up for the months I wasn’t able to able to pay enough.
At least, that was the plan, but you know how life goes…
Right when I felt like I was finally conquering my credit card debt, I got hit with some large unexpected expenses.
My cat that I rescued as a stray kitten was diagnosed with stomach cancer. I had to make a choice. Do I try and save my cat, or do I try and save my money?
I tried to save my cat, of course, which meant I had visits to the vet, tests, medication and surgery to pay for.
Then my car had a catastrophic failure which resulted in a $1,500 mechanic bill.
I didn’t have enough money in my emergency fund for all this, so my only option was to charge the credit cards I had stashed away, which I promised not to use.
This set me back a few thousand dollars, and wiped out the progress I made towards paying off my debt. *sad face*
Not only that, but if I wanted to reach my original goal of paying it off in 2 years, I had to make even bigger payments and find MORE money to somehow save!
- New Monthly Payment Goal: $750
Work from Home
Towards the end of the year, my employer was offering flex work from home, so I immediately put my name in for consideration.
Would I miss the social interaction and the overall workplace environment? Yes. But at the same time, my work office was a 60 mile commute one-way, so the savings in gas mileage alone would be significant. Plus, I wouldn’t be buying my lunch at the cafeteria anymore.
My employer agreed to allow me to work from home, and within a few weeks, I was settled in to my new home office.
Savings: $200+ a month
Home Efficiency Upgrades
Natural gas was a new service to my area, and the potential savings over my old oil furnace was too good to pass up.
I scheduled a home energy audit, and contacted all the heating companies in my area to find the best quote on a natural gas furnace.
I contracted through this company, who not only had the best quote, but also handled the federal and state rebates for me up front. This meant I was able to get air sealing, a new furnace, and even a new hot water heater, and my total out of pocket cost was about $400.
Yes, it was money I had to pay now, but winter was here, and my estimated monthly savings would be $100 to $200.
Within a couple months, the upgrade paid for itself, so I was able to have more money available towards my credit cards that would have otherwise gone to extra heating costs.
I also started doing other small things around the house to reduce my utility bills.
- I replaced my light bulbs (which were blowing out every month) with long lasting energy efficient bulbs.
- The only lights I kept on in the house are the ones in the room I was currently in.
- I unplugged appliances when not in use
- I took quicker showers
- I did my dishes after eating so I didn’t need a sink full of water.
The beginning of the new year meant two things:
- Tax season is here again (yay!)
- I had one year left to reach my debt payoff goal
Because I had been so consistent over the last year making big payments, and have a lower credit utilization ratio, my credit score had gone up!
Now I was in a position to apply for a lower interest personal loan, and transfer that debt over.
This debt transfer saved me over $1,000 in future interest payments, and lowered my monthly payment amount. What a relief.
Apply now for a lower interest loan and get out of debt faster!
I had set myself up for success and could see the end goal in sight.
The final piece of the puzzle was setting up my “side hustle.”
I’ve played guitar for over 20 years, and through word of mouth, I was approached by someone whose son was eager to learn.
I started giving weekly lessons to bring in some extra income and crush my remaining credit card debt.
So that’s it. That’s my journey. My successes and failures, climbing a mountain of debt until I ascended to the top, debt free.
Here’s the thing. You can do it too!
There’s no secret or recipe for success. It didn’t take a day to get into debt, so it won’t take just a day to get back out of debt. It takes a plan, dedication, being consistent, staying motivated and never giving up.
Hopefully this helps you, gives you some ideas, and starts you on your own journey.
In a nutshell:
- Set a goal
- Stop using your cards
- Make a detailed budget plan
- Look for as many ways to save as you can
- Try to generate additional income
- Apply every cent you can towards your debt
- Smile and Dance to Your Success!