Michelle Barber

Below $10K

I hit another milestone today: my total debt is under $10,000!  I’m heading toward a seven-year low mark and I’m just doing full-on battle with the beast.

Since studying abroad in college, I’ve carried credit card debt.  It ballooned, ironically, when my income increased, a typical example of lifestyle inflation.  Two years after graduating from college, I bought a brand new car and my student loans came due, all within the same summer.  See that big spike in the chart below?  Yeah, I’ve been recovering from that since 2005.

The high point was $40,000 and, as of a payment I made today, I’m now officially below $10,000.  I paid my car off a few years ago and my credit card will be paid off in a month or so.  Then, next up: the student loans.

How have I done this, you may ask?  Well, you can see that it’s been a bit of a roller coaster for me.  I made good progress into 2008, but then relied on my credit cards when I started my consulting company.  The spikes in 2009 were pretty inexcusable, in that I can’t even remember what that money/credit was spent on.

But, overall, I’ve used the snowball method of paying off my debt: I’ve paid off either my smallest debt (the car) or the highest interest debt (the credit card) at various points and, when one debt was paid off, I put that extra monthly money into the next debt.  I’ve also had the underlying belief that debt = wage-slavery of some sort.  As long as I have debt, I have to work that much extra to just make the minimum payments.

I highly recommend the book Your Money or Your Life.  That book turned me into an informed debt-fighter.  Realizing that I was mostly working to pay monthly minimums on my debt led me to move to a less expensive apartment, saving $200+/month.  It gave me the courage to negotiate higher starting salaries at two jobs.  It also led me to set realistic – and enjoyable – budgets for my discretionary spending.  I haven’t lacked in fun since fighting debt, which I believe is key to setting a budget you can live with.

So my next immediate goal is to pay off the rest of my credit card debt, which I hope to do in January.  I’ve had a long love-hate relationship with credit, so this should be interesting!

Do you track your finances or does the thought of it scare you?  Do you have goals around your debt or spending for 2013?