I've talked in passing about paying off my credit card debt a few years back, but now it's time to get to the nitty-gritty, to spill the details on how I said sayonara to debt once and for all. Let's talk numbers:
- Number of credit cards = 3
- Total amount of debt = Php150,000 more or less
- Total amount paid = Php200,000 more or less
- Time it took = 5-6 months
I wrote about the reason why I got into debt here so I will no longer dwell on it, but let's just say that while other people sigh and swoon over weddings, I cringe at the expense it took to mount that production.
Here's what we faced after getting married:
- Wedding related debt
- I was accepted at my current job a few weeks after we were married but it took about 1-2 months before I received my first paycheck.
- My husband had collectibles from an MNC which were already months delayed
We were so broke that I had to borrow Php5,000 from my parents to pay for the required medical exams for my job application and I eventually had to borrow Php20,000 from my cousin just to get by.
However, we weren't totally without cash because I still had my writing gig, but that just about covered our rent and car payment. Everything else that could be charged to my credit card were bought on credit, leading to more credit card debt. Talk about a slippery slope.
To fully pay off my credit card debt I:
- Said YES to every legitimate money making opportunity that came my way. God really does work in mysterious ways because almost a week after we were married, when I was seriously stressing out over money, an online job offer came my way. Whereas before I would have wavered over whether or not to accept, this time, I didn't have that luxury so I pounced on it and forced myself to learn the skills needed for the job as I went along.
- Used the snowball method. I paid 2-3x the minimum of the statement with the biggest balance and paid the minimum for the other two credit card bills. When I fully paid off one credit card bill, I moved on to the next bill with the bigger balance, paying more than the minimum until it was also fully paid off and did the same with the third credit card.
- Made a money plan and stuck to it. My money plan was essentially a ledger where I would write down my projected income vis-a-vis all our expenses. By running the numbers and tweaking them over and over whenever I would receive a windfall at work, I saw that I could pay off all my credit card debt in less than six months.
- Brought my own lunch. This was around the time when I realized that little expenses added up and that by simply bringing my own lunch, I could save at least Php2,000 monthly and funnel that amount towards credit card payments.
- Cut up one credit card after it was fully paid. I did away with my Mango-RCBC card because instead of a yearly fee, it had a monthly fee which RCBC refused to waive. I actually only need one credit card, but my supplementary card has a Php180,000 credit limit, perfect for charging international tickets with if the need arises. Nonetheless, the moment my principal card reaches a credit limit of Php100,000, it's goodbye to my supplementary card as well.
Looking back now, I could have minimized the financial charges I incurred if I called my bank and requested for a loan restructuring. But my masochistic streak showed its ugly head and I forced myself to swallow every peso of the finance charges to drive the lesson home. And what a lesson it was. I've been debt free for almost three years now but I still remember how desolate I felt during those days and how exhilarating it was to pay off my last credit card bill.
Furthermore, I carried the frugal ways I developed during those debt payment days to my post-debt life. When I was in debt, I stayed home with my hubby and surfed a lot to read everything I could about personal finance, including tips on getting out of debt. Knowing that there were other people out there similarly situated and who successfully got out of debt really inspired me. Their simple lifestyles also resonated well with me and I started paring down my belongings and giving away the swag I would receive because of my beauty blog.
I still read up on all things personal finance, but now instead of debt reduction, I keep myself informed on the different ways to grow my money and read up on stories of those who achieved early retirement (by 40!!) to inspire myself.
Forget all the glamorous images pushed by credit card companies, credit card debt is the worst kind of debt, the type that just keeps on growing unabated. Better to live a non-aspirational life than a Pinterest worthy one funded by debt.