Let’s hear from Grayson, who is a personal finance writer and business owner, about how he fought back from over $50,000 in credit card debt.
Can you tell us a little bit about how you got into credit card debt?
Where should I start? My credit card debt was two-fold. I was young, carefree, and wanted to start a business. I was also in college. I signed up for my first card in order to score a free t-shirt. What college student doesn’t want a free t-shirt. I didn’t really care much for the card, but it did give me points to buy electronics from Sony. Since I loved electronics, I thought it would be OK to use the card.
How did you use the card?
I got my first taste by purchasing some food and realized the money didn’t have to come out of my pocket right then. I was hooked. I purchased food, games, gear, clothes, and everything else you can think of. Everything went on my card and I only paid the minimum balance each month.
Near the end of my college career, I decided to start an e-commerce business. In order to fund it, I used my credit card. After I maxed that out, I moved onto another, then another. I did end up building a successful business from scratch, but it took a lot from me. All I was left with was massive credit card debt and no where to turn after I sold parts of my business four years after it started.
How much of it did you have?
When it was all said and done, I had racked up over $50,000 in credit card debt. This was on top of my over $10,000 in car and Jet Ski loans. I really focused on the credit card debt as the interest rate for most of those cards were close to 20%.
What convinced you you needed to get out, and how long did it take?
I was thoroughly convinced I needed to get out of debt when I looked at how much I was paying each month toward my minimum payments. I was paying nearly $1,000 a month on minimum payments. Most of that was going right to the credit card companies. I really got the debt payoff bug when I looked at all of my bills in one place and saw how long it would take me to pay off all the debt. I would have been nearly 80 years old. I needed to make a change, so I did.
It took me right around four years to pay off all of my credit card debt and the other debt as well. It was a long journey, but I learned so much from it.
What methods did you use to pay off your credit cards?
There are a lot of debt payoff methods out there, but I used a combination of two. First, I used the debt avalanche to tackle my debt. This is when you list your debts from highest to lowest interest rate. You pay off the highest, then take that money you were paying each month and add it to the minimum payment of the second highest rate. You go until you are done. It typically saves you a lot of money in interest payments over the payoff. (Jackie’s note: You can see how much in the Pay Off Debt app.)
I also added a little twist to my payoff. I knew I needed to start saving money, so I wanted to incorporate that into my payoff method. I took a page out of retirement investing and created a debt/savings allocation method. This is when you pick your debt payoff method, but when you start paying, you only use a certain percentage to actually pay the debt. The other percentage goes into savings.
For example, if you only have $100 extra to put toward your debt each month, and you want to pay down your debt aggressively, than you would pick an aggressive allocation. If using a 90/10 allocation, you would put $90 toward your debt and $10 into savings. As your debt gets lower and your allocation gets more conservative, you can pay a 60/40 split. You would put $60 toward debt and $40 into savings. This over time creates a savings mentality.
How did you feel once they were paid off?
Surprisingly, I didn’t feel much different when I made the last payment. It wasn’t until a full month went by and I realized I didn’t have to make another credit card payment. That was when it struck me. I was really happy to have paid off the debt, but I was more excited that I had learned how to save, budget, and be a little more frugal with my money. I was then on a mission to grow my wealth.
Paying off the debt has opened more doors for me. It has allowed me to pursue different things and enjoy life a little more. Without the constant worry of when the bills came due, I could focus on other aspects of my life.
What would you tell someone who is in debt right now and struggling to get out?
Most people whom I talk with are just so awe struck with how much debt they have. This pushes them into a panic, yet they typically don’t take any action. They think their debt load is too high and insurmountable. I felt the same way. It took me some time to start making a change because I didn’t know how. My biggest piece of advice is to just start. Start small. Start with something! It doesn’t matter if it is only $5 or $10 a month. Every little bit helps when it comes to debt.
I would also encourage people to look into working on the side. I was able to pay off a lot of money debt with income I worked hard for on the side. While working after a full time job is tiring, it can really help push along the debt payoff. It doesn’t have to be a part-time job, but it could be a simple side hustle that you do when you can. Any extra money should be paid toward your debt.
Want to know more about Grayson and his take on debt? After his four year journey, he decided to start blogging and share his journey. He started Debt Roundup to help others fight their debt. You can follow him on Twitter and Facebook.