It’s been a year since I wrote this post and vowed to start getting my finances in order by aggressively paying off my debt and growing my Emergency Fund. When I originally set this goal, I had $28,000 in debt and wanted to have it all paid off by the time I turn 30 in May 2015. A year later, I am nowhere near accomplishing this goal. While I am still in debt and won’t be getting out of it for at least another year, I did manage to learn a lot these last 12 months about both the debt-repayment process and myself:
PAYING OFF DEBT IS A LOT HARDER THAN IT SEEMS
I think the reason I set the ambitious goal of trying to pay off $28,000 in 17 months is because I thought it would be easy. “I’ll just put a minimum of $1,500 toward my debt every month!” I said in the beginning. Well, I didn’t take into consideration that I was unemployed when I set this goal with very little money to my name. I needed to find a job first, and when I did find a job, I realized I would need to find a second job to help me reach my financial goals. I didn’t take into consideration that I’d be saving money while paying off my debt. I also didn’t really understand my personal spending habits or take into account any financial setbacks that would come up, which brings me to my next lessons learned…
FINANCIAL SETBACKS WILL COME UP
Owing taxes. Car maintenence. Medical costs. A slow month at work. A month with lots of weddings or birthdays. When you’re in the process of paying off debt, something is going to come up every few months that will prevent you from putting a big chunk of money toward your debt, and there’s nothing you can really do but suck it up and hope that next month is better.
I’M NOT THE KIND OF PERSON WHO CAN LIVE WITH LITTLE
I read a lot of personal finance blogs. One PF blogger whose discipline I admire is Melanie from Deat Debt. She is agressively paying offer her student loans and saving by living a very simple lifestyle: she lives in a studio apartment with her boyfriend, she doesn’t own a car, and she currently doesn’t travel. She also works multiple side hustles to bring in extra income. I can’t do that. I like my spacious two-bedroom apartment. I like having mobile freedom. I LOVE to travel and refuse to give that up, even if it’s for a little while. I also value my free time and have no desire to trade that in for 60-70 hour work weeks. Even though I want to pay off my debt, I still want to enjoy my life the way I want to enjoy it, and if it means taking longer to pay off my debt, then so be it.
WHEN I WANT TO BUY SOMETHING, I WANT IT NOW
This is where owning credit cards gets me in trouble. You know, that whole “buy now, pay later” mentality. I’m not a patient person, and when I get my mind set on something, I usually want to do it/buy it ASAP. This is something I’m working on. For instance, in November I decided I wanted to buy a DSLR camera. Well, instead of using my credit card to buy it right away, I saved throughout the month while I waited for Black Friday so I could get a good deal on a camera at Best Buy. At the end of the month, I was able to get the camera I wanted on sale and I was able to pay for it with my debit card. I was pretty proud of the fact that I was able to save for that big purchase instead of giving into the temptation and convenience of my credit card.
This last year has been a huge eye-opener when it comes to paying back debt and I’ve learned a lot. Now for some of the things I’ve accomplished:
- I paid off $4,000 of debt this last year, leaving me with $24,300. I’m hoping to get my debt down to $20,000 by my 30th birthday.
- I have almost $2,000 saved between my emergency fund and my travel savings account combined. I’m hoping to have almost $3,000 saved by my 30th birthday.
- I’ve developed some good money habits this year: I put 10% of each paycheck into my emergency fund, 5% of each paycheck into my travel savings account, I collect all of my spare change for savings, I track all of my puchases in my phone daily, and I record them into an Excel spreadsheet weekly so I can see see how much I’m spending each month. I also track how much I make each month since I work in a restaurant and my income from that job fluctuates often.
- I opened up a 401K through my restauarant job. Yay for saving for retirement!
- I refinanced my auto loan so now both my interest rate and my monthly payments are lower.
- I raised my credit score. A year ago it was in the low 600’s; now it’s in the low 700’s.
- I’m living comfortably for the first time since I moved home from Korea in 2012. I’m not financially supporting Chris and he’s not financially supporting me. I’m not living paycheck to paycheck, but rather getting all of my bills paid every month with enough leftover to save and pay off my debt.
If you’ve been following my debt journey this last year, you might be wondering, “What’s next?” Well, I plan to continue working towards paying off my debt and saving money simultaneously by using the good money habits I’ve developed these last 12 months. I also want to work on developing more good money habits, like not eating out so much and being more patient when it comes to buying the things I want. As for documenting my progress here, I’ve decided I’m not going to write monthly debt repayment updates anymore; I still plan to write about personal finance from time to time, but instead, I’m going to write about big milestones (like the day I pay off my student loans) or things I’m trying (like a spending freeze). I plan to really focus on my student loans this year, because unlike my credit cards, student loan debt is not something I can accrue again unless I actually go back to school (which I don’t plan on doing anytime soon). Finally, I’m going to keep in mind that even though I have $24,000 in debt, things could be worse. A co-worker recently told me that by the time she’s done with grad school she’ll have almost $100,000 in student loan debt! Hearing that really put things into perspective for me. Yes, I’m in debt and it sucks, but at least I have it under control and I’m working to pay it off.
What’s something you’ve learned while paying off debt? What are your financial goals for 2015?