Getting Out of Debt: Your Personal Finance Stories

photo: lemonjenny

Last week, we announced a five-week long giveaway of Hot (broke) Messes, a financial how-to book for young adults written by Nancy Trejos, the personal finance columnist at the Washington Post. To enter the giveaway, we asked you — our readers — to share your own “getting out of debt” stories. Each week, five of you will win a copy of the book and we will publish some of the best stories on MintLife. Here is what some of you told us this week.

Deferred Student Loans to Focus on Credit Card Debt

Emily Holden of Brighton, Mass., wrote:

I’m pretty lucky: I don’t have too much debt for a 25-year old. School loans and my credit cards are the only things weighing on me. Currently my student loans are deferred, so I am using all my extra income to bring down those credit cards!

Recently, I joined Mint.com to help keep my budget in check. I am trying to use cash only, except for a few purchases here and there (like my gym membership).

I have sworn off buying clothes for the remainder of the month, but when I do, I try to stick to inexpensive, thrift-store clothes.

I never let my checking account get below $1,000 and I check my balances every day. I am planning my meals and outings before I go out, with the idea that I can’t spend more money than I have in my pocket. Soon, the credit cards won’t leave the house. Once I have the cards paid off, I can start paying my loans down. I also have a savings account that has around $10,000 in it, and I try not to touch that, except for my rent.

The key is: always know where your money is going.

Created a “Debt Management” Budget to Keep Spending In Check

Pamela A., Atlanta, GA:

When I graduated from college just a year and a half ago, I thought I was made–financially that is! With a degree in engineering, I had many offers that set me at a higher-than-average salary than most recent grads.

I settled in my new apartment in a city where I didn’t know anyone. I began splurging on numerous nights out in an effort to build my social network. I rationalized many wants into needs: new clothes, shoes, and makeup that I needed for work. I was spinning out of control, and decided enough was enough.

I used Mint.com to make a new, working budget for myself. The most significant changes I made were to budget for Debt Management. I made a budget category for paying my monthly finance charges. I also made a line item for money that serves no other purpose than to pay off the debt I have. These are both crucial items to set aside money for, but I had somehow missed putting them into my budget in the past.

I called my credit card company to ask if they could reduce my APR. It turns out, they had defaulted me to the highest rate because my account went over the credit limit when my credit card was stolen. My APR decreased by 10 percentage points!

The last step I will take to get debt-free will be to stick with my limited budget. The money I have been putting toward finance charges and debt repayment will go to an emergency savings fund or the Roth IRA I started this year.

At first it was scary to admit I had a problem, but now that I have it out in the air and a plan of action, I feel so much better.

Debt-Free for 1.5 Years – But Still a Ways to Go

Cathi C., Chattanooga, TN

I graduated college with only one small student loan, packed up the car and headed to the big city. Even though I was making the big bucks now (ok, not really, but compared to the salary of a part-time college student, I was rolling in the dough), I tried to stay conservative with my purchases. A few years later, the company I worked for closed and I had the grand idea of working for myself.

I’d like to think I’ve been fairly successful (I’m still doing it nine years later), but slowly the debt accumulated. In hindsight, perhaps I should have taken out a small business loan… but I didn’t, so after four to five years, I had amassed upwards of $15,000 on my cards. I tried bouncing things around with 0% APR cards with little success. I was scared. Embarrassed. Then collectors started calling. Yikes!

I got reconnected with a friend that was knowledgeable in the ways of finance and debt reduction. I can’t remember what exactly he said, or the precise steps I took. But whatever it was, it worked. I know I stopped using credit cards and went on a cash existence for everything. I trimmed out luxuries like vacations and eating out. Little by little, the numbers became smaller. It took some time and a lot of diligence, but about two years later, all my credit cards were zeroed out. Another year later, both my car and student loans were paid off as well. 

I have been living a debt-free life for a year and a half now and LOVING life! I am careful about my spending and have somehow managed to actually start a savings account as well as a retirement account. I still have a ways to go though – somehow I’ve gotten thru this without having a solid budget in place or a rainy day plan. I’ve never spoken with a financial advisor and haven’t figured out how to invest my money properly for the future. But, I am thankful I am now in the position to do these things (instead of hide under a rock from collectors!)

Do you have a get-out-of-debt story that you’d like to share?  Email us at bookgiveaway@mint.com, and you could win a free copy of Hot (broke) Messes by Nancy Trejos!