A couple people have asked how I managed to get rid of 43k of cc debt in under a year, so here it is.
How did I accumulate so much debt?
Simply put - I lived beyond my means from ages 19-29. I deluded myself into thinking I was entitled to a lifestyle beyond which I could afford.
- Living in HCOL (SF, LA, Philly) added to my self-delusion.
- Being in relationships with people who had wealthier lifestyles warped by sense of reality and added to my self-delusion.
- Being friends with other self-delusional people allowed me to continue my own lie (LA is full of people with inflated lifestyles and around 2000 SF was full of people with inflated lifestyles, I knew dozens of 'millionaires on paper').
If you are wondering what exactly I spent $43k on? Travel, shopping (I seriously bought 10k in handbags), eating out, moving across the country 3 times and within cities every year, gifts, medical expenses and day to day living expenses. I spent so much money, and felt broke the entire time. Living paycheck to paycheck! By October of 2007 I was paying $1100/month to service my debt. I had a close call over a few months and knew I was one emergency away from being in serious trouble. Also, I felt frustrated with myself that I made a good living, but couldnt help older family members that could use help.
breakdown of debt in October 2007
boa1 $4149.39 @ 32.24
boa2 $12659.56 @ 18.24 (952 @ 24.24)
chase1 $5510.45 @ 29.99
chase2 $10485.15 @ 29.99
chase3 $9582.95 @ 28.74
capone $833.74 @ 14.4
How did I pay it off?
I decided I wanted to start my 30s on a path toward wealth. So, I started. I thought it would take years! I live in SF, made just over 90k/yr when I started.
- I took personal responsibility, and stopped feeling entitled or making excuses.
- I focused mentally on feeling wealthy, and creating wealth in my life
- I went on a cash diet.
- I made a budget.
- I created monthly goals that were hard, but achievable.
- I stopped buying anything and everything (no more handbags, shoes, etc).
- Started eating in.
- Switched to a new job and negotiated 25% pay increase
- Took zero time off in between jobs, took the 80 hours of accrued vacation time paid out in cash and paid off debt.
- I made about 3k from startup options on company I left.
- Negotiated for new work to buy me a cell and pay the montly bill.
- No cable, no home internet.
- Utilized medical savings for pre-tax savings on expenses I knew Id have to pay.
- Worked really hard at the job and 6 months later negotiated a quarterly bonus plan.
- Reduced rent by 30%.
- Sold anything I could (Louis Vuitton bag, I dont need you!).
- I stopped all travel, except for 2 family emergencies (death and surgery).
- Paid off highest interest ccs first (about half were at 30%!!).
- Immersed myself in the world of pfblogs, this msg board, economics and finance books to stay motivated and focused.