Confession: I’ve been in debt nearly 20 years. I went into debt the week of my 18th birthday, and next year I turn 38.
I have spent more of my life in debt than not in debt.
My net worth has never been positive.
Yikes. I’m not going to get into why or how this happened now (essay coming soon, I hope). Instead, I want to focus on how I’m going to deal with it. I’m motivated to pay it off quickly. But first, why am I posting about this, making personal information that I feel ashamed of public?
- To get rid of shame and change our culture of silence around money. For years, I’ve used credit instead of saying, “I can’t afford to go out to eat with you this month,” “I can’t afford to exchange Christmas gifts this year,” “I can’t afford to make a donation,” etc. because I didn’t want to feel the shame that would’ve come with saying those things. Also, looking back over my career, I can clearly see specific instances in which I was underpaid. If I and others had talked openly about salary, I would’ve recognized a need to negotiate a higher salary or move to a job that paid better. Moving forward, I want to be as open about money as possible, for the benefit of me and the people around me.
- To hold myself accountable. I plan on posting a “debt update” every three months, on January 1st, April 1st, July 1st, and October 1st. I am extremely internally motivated to pay down my debt, but I’ve also been motivated in the past, and failed. My hope is that regularly posting about my debt will add another layer of motivation. I will likely also post about various financial and savings strategies I come across and try out. Please feel welcome to comment about your own experiences.
Okay, so, what am I going to do about this debt? Essentially, follow the Dave Ramsey snowball technique. I made the above table with his debt payoff method in mind, which is why my debts are listed from smallest to largest. Basically, the technique is to pay the minimum payment on all debts except for the smallest debt, then pay as much as possible each month toward that debt until it’s gone. Once it’s gone, you then add the amount you were paying that creditor toward the new smallest debt, and the snowball of debt payoff grows.
The Ramsey technique is simple and straight-forward. I heard of it at least ten years ago, and used it for a short while in my 20s. I remember it being helpful, and I don’t know why I stopped using it. This time, I’m going to stick with it. I’ve already started–the debt to my parents used to be $1,800.
I will make one modification, however–I won’t pay in the exact order of smallest to largest debt amounts. Once I pay off my Spirit credit card, I will jump to my Citi credit card. The interest is so high, and the shame I feel over credit debt is so high that it’s worth it for me to pay off my credit cards before moving on to loans or the IRS. Plus, the IRS figure will jump down each year when my tax refund is applied, so I don’t feel concerned about being trapped with that debt in perpetuity. The Citi loan will be paid off mid-2020 if I pay the minimum payment only, so I don’t feel too concerned about that one, either. It’s the credit debt that doesn’t have accountability and a payoff system built in.
In the meantime, I plan on calling my credit cards and trying to negotiate lower interest rates. Creating this table was an eye-opening exercise! Those credit cards must’ve had promotional interest rates when I opened them because these interest rate numbers were a shock. I might not be a money whiz, but I know not to open a card with 24.99% interest.
Dave Ramsey strongly recommends bringing in extra income during this process and taking drastic measures to cut costs. Much of my money has gone to medical bills, and there are more medical tests awaiting me. I know that is one area where I could easily cut costs. I feel like the results of these upcoming tests will likely be negative, but I don’t know that I should skip the tests to save money, just in case they do find something.
Also, I’d love to bring in extra income, but I wouldn’t want to take on a “regular” part-time job because of the fluctuations in my current workload (grading changes from week to week) and fluctuations in my health and energy levels. Also, I’m trying to build a career and don’t want to sacrifice my writing and submitting time in pursuit of money. I will have to think creatively about how to cut costs and bring in additional income without sacrificing my health or career.