It was May 2001 and as a recent college graduate I was on top of the world.
I finished packing up my belongings and jumped in my car for the 5-hour drive back to my parents’ house. The plan was to move back in for a few months until I got a job and figured out how much I could afford for rent.
The drive home was one of the best. I thought about the job offers that were coming my way.
I thought about the amazing apartment I was going to rent, the home theater system I was going to set up, and all the excitement that was to come.
But none of this happened.
Shortly after I arrived home, the economy went into recession and no one was hiring in the finance industry.
I went from being on top of the world to being down in the dumps
Disappointed and with a lack of motivation, I started to spend my days going out to the mall and other retail stores.
My plan was to just walk around for something to do.
But ever so slowly, I started buying things.
This made me feel good. I started to forget about not having a job.
But as I slowly began to buy things, the good feelings I was getting started to wear off faster.
So I bought more things.
Before I knew it, I was in credit card debt of $2,000.
While buying things on my credit card helped me to forget about not having a job, it opened up other issues, including fear and stress.
I started to fear getting the mail or seeing the mail on my bed.
What if my credit card statement was there?
If it was, I would wait a few days to open it because I didn’t want to see how much I owed.
I was hoping that I would open it up and the balance would be gone.
But it never was. It only kept increasing.
As the months went by, the stress of my debt was increasing, but the good feeling I got from buying things won out.
Failing over and over again
I knew being in credit card debt wasn’t financially smart and now I was one of the many Americans in consumer debt.
And at the time, I thought I simply had a spending problem that I could stop whenever I wanted.
So the next time I got the itch to take control of my finances, I applied for a new credit card that had a zero percent balance transfer offer.
I was approved and I made the transfer. I was excited to get a handle on my debt.
But a funny thing happened.
I started to spend money on my original card again.
This continued for a few months until I again had the idea to take control of my finances.
Not thinking I had a real issue, I applied for and was approved for another credit card that offered a zero percent balance transfer offer.
I told myself I was serious about getting out of debt this time.
Only I wasn’t.
I started spending on my original card all over again. (See “Are balance transfers worth it?” for some more of the pitfalls.)
At this point, I just kept spending and eventually my debt topped at more than $10,000.
My light bulb moment
I remember shopping at the mall and walking into a Gap store. I was looking around, not intending to buy anything when I saw a jacket.
It was a lightly faded navy blue jacket that I was drawn to. The moment I saw it, I wanted it.
I searched for my size and tried it on. When I looked in the mirror, I was expecting to see this great visual of me wearing the jacket.
While I did see it, I wasn’t expecting what happened next.
I had the proverbial light bulb moment.
The thought popped into my head, asking myself why I was buying another jacket. I already had a number of jackets, some of which I never even wore.
So I put the jacket back and walked out the store.
I couldn’t shake the thought I had and kept repeating it in my mind.
Why was I buying all this stuff?
On the drive home, I found my answer.
I admitted to myself that I was depressed. I thought after college I was going to land a great job and get my own apartment, and life would be great.
From there I would meet a girl, get married and enjoy life.
When this didn’t happen, I got depressed.
Buying things allowed me to live my fantasy as if everything was good.
But it wasn’t good.
I was depressed and had a mountain of credit card debt. This debt was causing me stress and feeling even less of myself because I’m supposed to know better.
I felt like a fraud.
Here I was telling friends and family how to be smart with their money and get ahead and I was the one being irresponsible.
The process of becoming debt free
When I got home, I decided to take action.
My first step was to get the things I bought and pile them on my bed and take a picture. The picture was in my wallet as a reminder for all the things I wasted money on.
From there I decided to get professional help.
I knew depression was a serious thing and I wanted help to get better.
Then I started hunting for a job. At this point, I wanted any job so I could start earning an income.
After a few weeks, I found a part-time job. It worked for me since I was still living at home with my parents.
I created a debt pay off plan using the snowball method.
I took out the money I needed to live on and the rest went towards debt.
This worked great at first.
But then it became too much, because I wasn’t allowing myself any fun. I was only focused on paying off my debt.
I quickly began to resent my debt and knew I needed to take action.
So I scaled back my debt pay off a little so I could have some fun money and enjoy life.
After a few more months, I found a full-time job.
I decided to keep the part-time job and use the money to help me pay off my debt.
My days were crazy:
- Wake up at 5:30
- Leave for work at 6:30
- Work 8-5
- Drive to part-time job
- Work from 7 until closing
- Drive home
My part-time job was at a retail store and this was during December so the store stayed open until 11pm.
My manager liked me and trusted me, so he had me close the store. This meant collecting all the cash register drawers and settling the day’s sales.
Many nights I was leaving after midnight. All I did was work.
I put all my earnings from the part-time job towards my debt. I took the money I needed to live on from my full-time salary and put the rest towards my debt as well.
After 6 months, I quit the part-time job as I needed time away from working so much.
About one and a half years of starting to pay off my debt, I became debt free.
The scars that remained behind
Once I paid off my debt, I thought life would be like it was before my debt.
But I didn’t account for the scars that being in debt left behind.
The biggest one was my fear of credit cards.
I was afraid to use them because I thought I would aimlessly start spending and be right back in debt again.
So for a few years afterwards, I only used my debit card. During this time, my card was compromised and $300 was stolen from my bank account.
I was lucky I caught it when I did, as there were additional pending charges, according to the bank.
It took the bank 3 months to complete their investigation and return my $300.
What I learned was when your debit card fraud and credit fraud are treated differently.
When your debit card is compromised and money is taken from your account, the money is gone until the bank completes their investigation.
Once this is complete, you get your money back, assuming they find fraud.
With a credit card, you are never out the money for fraudulent charges. They highlight the charge or charges and you don’t owe them for that charge and it doesn’t accrue interest.
This was one of the reasons I began to use credit cards again
The other reason I started to consider credit cards again was for the rewards.
Being a finance guy, I knew if I paid off my balance in full every month, earning cash back was essentially free money.
So I began to use credit cards again, but did so strategically.
I only used my credit card to buy groceries. By limiting my spending, I knew I could pay off my balance in full each month.
After a few months of that, I then added gasoline purchases as well.
At this point though, I was still nervous about getting back into debt, so I was making a couple of payments a month to ensure I would not end back up in debt.
Where I stand today
Fast forward 15 years and I am still debt free, aside from my mortgage.
I now put the majority of my spending on credit cards which earns me between $1,000 and $1,500 cash back every year,
And I pay my balance in full every month.
I am even on track to retire at 55, which was a goal my wife and I set up when we married 5 years ago.
While financially everything is good, I still carry the scars of my debt with me.
I remember what it was like to be in debt and have the shame and stress of it, so even though I put all my spending on credit cards, I am still mindful of my spending.
And it has helped me too. After failing a number of times to pay off my debt, I push through challenges in life and not give up so quickly.
So while debt is bad, the experience has served me well.
Lessons to remember
The goal of sharing my post is to help others get out and stay out of debt.
While everyone’s debt story is different, there are key lessons that apply to everyone.
#1. Treating the symptom will leave you frustrated
You have to figure out the true reason why you are in debt. For me, I thought I had a spending problem.
But that was just a symptom.
And this is why I failed over and over when trying to get out of debt.
I had to get to the root problem, which was depression. Once I addressed that, then I was able to successfully pay off my debt.
It wasn’t easy, but getting to the root is the only way to get out of debt.
It’s like if you develop a rash and you put hydrocortisone cream on it. The cream helps, but the rash keeps coming back.
It’s not until you dig deeper to realize you are having a mild reaction to a food you are eating.
Once you eliminate that food, the rash goes away for good.
#2. It’s not all or nothing
Like me, you probably want to get out of debt as soon as possible.
While this is a great goal, for many of us, we go overboard.
We try to put every extra dollar we have towards our debt and ignore our everyday lives.
What I mean here is we stop living in hopes of paying off debt faster.
This works over the short term, but over the long term it fails.
You begin to resent your debt and how you cannot treat yourself any longer.
The key is to find a healthy balance between paying off your debt and still enjoying life.
For me, this meant scaling back the amount I was paying on my debt each month.
While it ended up taking me longer to become debt free, it was the only way I was going to succeed.
#3. Create a realistic goal
Related to the point above, you need to create a realistic goal.
You cannot pay off $50,000 worth of debt in 6 months if you have zero savings and make $30,000 a year.
Figure out a payoff date and then do the math to see if that is realistic or not.
If not, then add a few months to it and try again.
The better you are at creating a realistic goal, the more likely you will be to succeed.
#4. Set milestones along the way
No matter your goal, you need to set milestones along the way.
This is because paying off debt is a journey, not a sprint.
While you will be highly motivated at the start, after a few months, your excitement will fall.
This is natural and you need a fail safe to stop you from quitting.
This is where milestones come into play.
These are mini-goals for you to focus on and achieve.
For example, if you have $15,000 worth of debt, your mini goal might be to pay off $1,500.
Or if you have debt on 3 credit cards, you might have a milestone of paying off one credit card.
The reason this works is simple.
By focusing on paying off $1,500 versus $15,000 you will stay motivated. Especially when you are making a monthly payment of $200.
You will see more progress towards a smaller goal than the large one, which keeps you pushing forward.
And once you hit your milestone, have a small celebration where you treat yourself. Just don’t go into debt doing it.
Then focus on the next milestone and celebrate again until you are debt free.
#5. Have a teammate
As I mentioned above, the journey to paying off your debt is long. For most of us, it takes a year or more.
And seeing how we are wired for instant gratification, it is no wonder why people fail at becoming debt free.
The solution here is to have a teammate or accountability partner.
Find someone you trust and tell them about your debt and your goal to be debt free.
I know it sounds scary, but the payoff is priceless.
By having them on your team, they will motivate and inspire you to keep going to reach your goal.
And you will be motivated to tell them your progress too.
For me, this was a life saver.
I would be talking to my friend about random stuff and he would ask about my debt. This little reminder was all I needed to refocus on my debt plan.
And when I hit milestones, it was exciting to call him telling him of my success.
I encourage you to find someone to confide in to walk with you during your journey.
#6. Don’t lose sight of the goal
There are many ways you can pay off your debt.
You can elect the debt snowball method to knock out small balance debt fast.
You can choose the debt avalanche, which may save the most money on interest.
But at the end of the day, don’t lose sight of your ultimate goal, being debt free.
I’ve seen people who focus so much on saving the most in interest that they forget what the end goal is.
While it is great to save the most money in interest charges, it is OK if you end up paying more in interest in order to reach your goal.
This is what worked for me. As a finance person, in my case I knew mathematically the smartest choice was the debt avalanche.
But I knew the motivation from the debt snowball method had the best chance of me reaching my goal of being debt free.
So I picked that option and paid more in interest.
It would have been nice to save some money on interest, but the feeling of being debt free is priceless.
#7. Have fun
At the end of the day, you have to have fun when paying off your debt.
Don’t look at it as a chore. Look at it as a life changer, because that is what it will be.
Once I paid off my debt, the stress and the shame were gone.
And I now had money left over at the end of the month that used to go towards debt payments.
This opened new doors and opportunities in life.
I could save more for my future or anything else I wanted to do or buy.
The bottom line is to find ways to make the process of paying off your debt fun.
This might simply be telling your friends and have celebrations when you hit your goals.
Or it could be envisioning your life debt free or even making it a game to see if you can find an extra few dollars to put towards your every month.
Only you know what excites you and would make it fun for you. Figure this out, and the journey will be much more enjoyable.
Jon Dulin is a personal finance expert helping people improve their finances for over 15 years. You can read more of his work at MoneySmartGuides.com where he helps readers pay off debt and start building wealth so they can achieve their dreams.