I received my loan statement yesterday and my debt, which was at a hair-raising $20,000, has shriveled to a more demure $5,400. I can almost feel languorous freedom again – it’s sooo close! But my debt-free journey is far from over.
Here are some simple tidbits which helped me enormously this past year.
- I stopped digging. This piece of advice (“For the love of God, stop digging!!!”) helped so much in emerging safely out of a burning financial hole. I stopped digging myself into trouble and ardently refused to take on further debt, no matter what.
Even when a sales associate plucked Crème de la Mer from the counter and enticingly waved it in my face, I politely declined. My skin may have cried in anguish and my MasterCard moped for weeks after but my piggy bank cheered the triumph.
I know it’s really none of my business but I cringe when I overhear friends breezily using credit cards as savings accounts. This may have worked in the past but rules for credit companies are rapidly changing and I fear they’ll get caught in a dangerous situation.
In fact, I’ve been a loyal customer of WaMu for over two years and never carried a balance from month to month on their card. Last week I received a letter from WaMu’s new owners JPMorgan and Chase, stating how my new rates are getting jacked up to 30% (!!!!) <- What, are they nuts??
My rule is firmly, a line of credit is not a personal piggy bank. If someone is in a bind and using credit to help close the gap, they’re compounding a previous problem with a whole passel of other complications – ie, going into even more debt. Credit companies are just waiting for you to slip up so please proceed with extreme caution here.
Which is why it’s critical to …
- Build up an emergency savings as quickly as possible. Let’s face it, unexpected expenses always crop up at inconvenient times, which is why it’s crucial to automatically set aside a certain amount to help zap these nasties.
When I started my financial journey with over $20,000 debt and zero savings, it felt absolutely suffocating. I would play with or quickly spend additional money and if anything came up, I was screwed.
One night I finally had some sense beat into me and swore from that moment forward, 20% of any amount of money I received would immediately be stashed away into savings (10% for short term stuff – like food or a night out with the girls and 10% for long term savings not to be touched. The remaining 80% went strictly towards my debt.)
I held myself accountable to the promise and soon that svelte percentage of savings blossomed into a respectable amount. This also brought an immense peace of mind with it.
The beauty of this is, I can still strategically plan for and afford everything I want. But now I’m saving first as opposed to being devoured by the ravenous debt monster over it. Instead of thinking, “I can’t afford to!” my new mantra has become, “How can I afford to.. ?”
- Manage money well. Being stretched too thin was a surprisingly beneficial lesson because it helped me value each dollar more. I became an extremely resourceful chica and nimbly learned how to use available ‘stuff’ more wisely.
If you’re forced to crack into your savings by the way, don’t beat yourself up too harshly over it. But do try to build the amount back up as quickly as possible. I’ve done some really stupid maneuvers where I’ve been forced to dip into some of my long term savings. But take comfort in the fact that feeling stressed or guilty over unexpected expenses defeats the entire purpose of having an emergency savings in place to begin with.
Although it has been a financially challenging year, I’m so grateful for the lessons I’ve absorbed. I was caught in a damaging cycle of inaction and denial until I became angry enough to take back control of my finances. I finally had the courage to ask myself, whose life is it anyway?