How I Got Into and Out of Massive Personal Debt

The nation collectively owes $3.9 trillion in consumer debt, with the average household $5,700 in the red. Student loan debt now stands at a record $1.5 trillion, and that’s just in the U.S.

Countless Americans rack up credit card debt with little way of paying it back. Add high-interest rates and student loans to the mix, and it’s extremely difficult—but not impossible—to claw out of that hole.

I’m among those who have been able to come back from crushing debt. How I got saddled with it is a common tale. How I dug myself out required hard work, determination, and a whole lot of sacrifices. Read on to find out how I got into debt, and how I got out of it:

How I Got Into and Out of Massive Personal Debt

How It Started

Credit can be a powerful financial tool, granted you use it correctly. It can help you purchase a home, buy a car, or put a child through college. It can also cover emergencies and medical conditions. But far too many people are exposed to credit cards at an early age without any warning as to the damage it can cause.

I was approved for my first credit card in my late teens, during my freshman year of college. At the time, college campuses across the country were fertile ground for credit card companies hoping to sign kids up at an early age. Credit card issuers would set up shop on campus, enabling students to apply on the spot. Free giveaways were used to entice students. The government has since intervened enacting the Credit Card Accountability, Responsibility, and Disclosure (CARD) Act of 2009, which prohibits credit card companies from marketing on college campuses.

Getting a credit card in college made sense at the time. I may need a credit card to cover a school emergency or for an expensive textbook. But I was far too young to understand the responsibility that comes with a credit card. I had a “charge it now and worry about it later” mindset.

When my shiny piece of plastic came in the mail, I wasted no time buying things I thought I needed. As naïve as it may sound, I simply didn’t understand that the money I was spending needed to be repaid in full, plus interest. I dined out frequently at first, and eventually graduated to picking up the tab for my friends at birthdays and celebrations. I attended every local sporting event and concert and cut no corners when it came to my wardrobe. Of course, I also had to have all of the latest and greatest technology, even though none of it really helped me with my schoolwork.

At the same time that I was charging with abandon, I was racking up student loan debt—a lot of it. And it didn’t’ stop at tuition. I borrowed money for textbooks, food, and anything else I was required to spend money on. Again, I gave little thought to actually paying back all this money, shelving it for a later time to worry about. As my college years progressed, more credit card offers came in the mail, and before I knew it, I had five credit cards in my wallet. I was able to make the minimum payments for a while, but eventually, it all caught up to me, and my financial house of cards came tumbling down.

Some of my credit cards closed because I went over the limit; others were shut down due to non-payment. By the time I graduated college, I was in over my head to the tune of about $20,000 in credit card debt, and $15,000 in college expenses. Over the course of four years, I had racked up $35,000 in debt with little means to pay it back. I felt like I was trapped, with no way out.

When I Hit Rock Bottom

Upon graduation, I moved back in with my parents as I searched for a job and established myself as a working adult. My parents were clueless about the debt I had incurred. But that caught up to me, too. They eventually figured it out and gave me an ultimatum: either I start paying down my credit card balances, and student loan debt or my parents would intervene and take over all of my finances.

As a graduate and a grown man, you can understand how that made me feel. I was a college graduate, yet I couldn’t handle my own finances. I knew then that I had to take control of my situation and assume responsibility. I needed to start acting like the adult I wanted to be. It was hard to come to terms with the debt problem I created but denying it was no longer an option.

How I Got Out of It

To get out of from under my debt, I needed to generate enough income to pay more than just the minimum. I knew it would take me years to pay off the credit cards if I didn’t pay more towards my balances each month. After pounding the pavement for quite some time, I found employment as a restaurant manager for a national chain. My starting salary was $30,000 per year, and with little in the way of living expenses, I was able to pay a sizable amount to my credit card and student loan debt each month.

Eventually, I transferred out of state for my job, which meant I would be living on my own again. I immediately started to panic, worried that I would fall into my old habits of charging up a storm, or worse, not be able to afford to pay rent and pay down my debt. After overcoming my initial anxiety, I got to work creating a budget that included reducing my debt. I vowed to live within my means, which meant renting a modest apartment, spending as little as possible, and continuing to pay back what I owed.

I made sure my budget was as detailed as possible. It included rent, car payment, and utility bills, as well as the amount I spent each day on commuting, meals, memberships and any entertainment. I added my credit card and student loans into the budget, giving them the same priority as the electric bill. I compared that with what I was earning and started to slash my spending from there.

I tracked every single one of my bills and did the best I could to reduce expenses. I used coupons to save on groceries and kept my thermostat set within a cost-saving range. I swore off all clothing upgrades and found cheap or free options for entertainment. Instead of hitting the bars, clubs, or restaurants, I spent many weekend nights playing board games or hanging out with friends at house parties. I worked hard to become eligible for every single bonus dollar I could get my hands on, and put in a ton of overtime hours. The more money I brought in, the more I was able to shave off my debt balance.

Throwing all my excess money to my debt wasn’t easy to do. There were many times I had to fight the urges to splurge and some instances when I fell off track. But I didn’t get discouraged. I picked myself up and continued reducing my debt.

Where I Am Today

It took several years, but I am proud to say that fifteen years after I received my first credit card, I am debt free. Once I paid everything off, I vowed never to go there again, and I haven’t. My student loans are paid in full, I don’t carry a credit card balance, and I even have an emergency fund with around six months of living expenses.

I am more or less on track to reach my retirement savings goal, and I have a college savings program set up for my son. The frugal behaviors and habits I was forced to adopt have stayed with me, becoming a way of life. Today, I would never charge anything on a credit card if I knew I couldn’t pay it back at the end of the month. Sure, I splurge once in a while, but it’s far and few in between.

Final Thoughts

Getting out from under your debt may seem hopeless, but it is not insurmountable. It does require you to take a hard look at how you’re living and to make the necessary changes. Urges to buy purchases ebb and flow depending on the day. If you see something you think you must have, wait a week and see if it’s still a necessity. Chances are that desire will have faded.

It doesn’t matter if you have $5,000 worth of personal debt or $50,000, you’re wasting your hard-earned money when you carry any balances at all. If what you owe seems impossible to shrink, think about your future life free of all debt. One day, you’re going to have extra cash in your checking account each month, enough retirement savings to ensure you’re comfortable in your golden years and peace of mind that you just can’t put a price on. Achieving those goals may require sacrifices and determination, but it is within your reach if you want it bad enough.

Have you paid off debt? How did you do it?

Matt Smith is a freelance personal finance writer and accountant. He has over 10 years of experience writing about personal finance and budgeting for dozens of publications around the world. He lives and writes in Chicago, Illinois.

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