We can all agree that credit card debt is a pesky debt. It is so easy to get into credit card debt, whether it’s from over spending to an emergency.
I am so happy that my friend Jodi is sharing how she paid off her credit card debt in just three months. She is sharing eleven super helpful tips that helped her pay off her credit card.
This is such an inspiring story!
I’ll never forget the exact moment when I saw the credit card bill – $4875 – on a clear sunny morning.
I finally had time to take a look at my finances and spent the morning examining my bank statements, bills, and other financial commitments.
I had just finished my MBA program and was emotionally and physically tired after almost two years of a busy, grueling period of learning, adrenaline, and excitement.
Despite this achievement, I was deep in credit card debt and needed a strategy to pay down this debt as soon as possible. This was necessary because I wanted to be financially free to pursue my post-graduation goals and get on with my career after being in school full-time for 18 months.
In this blog post, I will walk you through the strategies I employed to pay off almost $5000 in credit card debt in three months, and hopefully, these tips can help you if you are in a similar situation.
I Stopped Using My Credit Card To Avoid More Credit Card Debt
After seeing that amount and realizing that I had no plan to pay off this debt, I made the hard decision to stop using my credit card and chose to use cash or my debit card for all purchases and bills.
This required some behavior change and I had to be extra mindful of how I went about this. I took practical steps like leaving my credit card at home and deliberately avoiding online retail sites.
Once I refrained from using the card, this enabled me to spend all my focus on paying down the card instead of accruing more debt.
I also set up automatic payments to the card every month just to ensure that I was not missing any payments and to ensure that my credit score was not negatively affected while I paid down the debt.
I Set Up a Budget to Track My Expenses
When I examined my credit card statement and looked at my expenses, I knew that I had to get a system in place to track how I was spending my money.
I set up a very simple budget, one that included a sheet of paper and pen, and made two columns.
In the first column, I listed all my expenses and in the second column, I listed my income.
Then I subtracted my total expenses from my income to determine how much was left which is my net income.
In this case, I had a few hundred dollars left and decided to put this extra money toward my debt.
This simple act of setting up a budget helped me so much.
I wanted to see where my money was going.
This gave me a snapshot of how much I needed to cut back on certain categories.
It also helped me to realize that I may need extra income to pay off my debt much faster.
The budget helped me to control my expenses every month as I gave every dollar an assignment.
Now, I have moved on to advanced systems (excel spreadsheets).
Pen and paper are no longer used in my budgeting, but this has become a very powerful tool for me as I keep track of my personal finances.
I Stopped Dining Out and Planned My Meals
Looking through my expenses, I found that a huge chunk of my disposable income was being spent on eating out and meeting up with friends.
A huge part of the MBA involved networking sessions and going out to eat but it had affected my budget.
I decided to put a hold on dining out at restaurants and getting take-out and started to plan my meals.
This was a game-changer, I was able to find exciting dishes and free meal plans which were both fun and creative ways to experiment in the kitchen.
The meal plan also allowed me to work within my budget and helped me to control my spending at the grocery store as I used grocery lists based on the ingredients I needed.
I also started buying mostly private branded items at the grocery store instead of national brands as they were far more affordable and had great flavors as well.
I Had a Few Side Hustles
In order to pay off this debt fast, I know I needed to make extra income.
I looked at different side hustles and chose to teach English online with a company based in Asia.
This side hustle worked perfectly with my schedule and allowed me to work from home early in the mornings before work and sometimes in the evenings after work.
I also enjoyed teaching and it gave me an opportunity to build relationships with my students and improve their English skills.
With this extra gig, I was able to earn a few hundred dollars per month which I put toward my credit card payments.
Along with teaching on the side, I also became a mystery shopper. With this side hustle, I got a chance to eat at amazing restaurants and get compensated for doing a review of my experience.
This was another fun job that came with lots of perks and enabled me to pay down my debt faster.
Side hustles continue to be one of the best and quickest ways to pay off debt and one of my personal favorites!
I Canceled My Subscriptions
At the time, I had a few subscriptions that had become a big expense every month. I took a look at my overall consumption patterns and made the decision to cancel all my subscriptions.
This was a tough choice but I needed to streamline my finances and become more disciplined in finding ways to pay off my credit cards.
I canceled three subscriptions and ended up saving around $80 per month which went towards my credit card bills.
I Set Up a Weekly Tracker to Track My Payments
When I made the conscious choice to pay off my credit cards, I knew I needed a system to track my progress.
I built a simple spreadsheet that laid out how much money I was putting towards my debt every month.
This gave me both a sense of accomplishment but also motivation to keep me going as I made each payment.
The tracker helped me to get organized and be aware of how I was doing along the journey.
I Reduced My Savings Rate
Since I wanted to pay off debt very quickly, I opted to reduce my savings rate. I cut this in half and put that extra money toward my credit cards.
This one was particularly tough to do because I believe that one should try to save as much as possible.
However, I was on a mission. I decided to make this trade-off over the course of the debt repayment time frame.
This act helped me to pay off the debt much faster and reach my goal in three months.
Once the debt was cleared, I put all extra income toward my savings. This was so I could catch up on the months I had reduced my savings.
I Found Free Entertainment Activities to Reduce My Entertainment Budget
Entertainment was a line item in my budget that I was overspending on each month.
Between going out to the movies, concerts, and other activities, I knew I needed to be more aware of my spending and get creative.
I started looking at local blogs for free entertainment in my city. I found many amazing free activities that were fun and exciting.
These activities included free nights at the art gallery in my downtown district and free Zumba classes at the park and a Christmas village at the shopping mall.
I also tapped into the resources available at my local library such as DVDs, books, lectures, and book clubs. This was also a great way to meet people and learn new ideas on a wide range of topics.
I also discovered the magic of going for long walks in the park while enjoying nature without spending a dime.
I Cut My Apparel Expenses and Stopped Buying Clothes Over the 3 Months
I’ve always loved shopping and enjoyed some occasional retail therapy. Over the course of the three months, I put a hold on buying any new clothing.
I also deliberately stayed away from shopping malls and department stores. This was hard as I love to shop, but I had to remain focused on my goal.
This part of the process became quite enjoyable. I basically learned to shop from my closet, mixing and matching clothes that were not being worn.
As a result, I have now become more conscious of my shopping habits. I now only go shopping for my family and friends and only when I need something.
I Put a System in Place for My Credit Cards
As I paid down my credit card debt, I had to take a closer look at how I was using my credit cards.
I did a deep dive into my credit card consumption and these were some of my key takeaways:
- I used my credit cards for almost every purchase which surpassed my income every month
- My credit card’s interest rate was extremely high at 21% . If I did not get a grip on my card usage, I would always be in debt
After facing those truths, I made a promise to myself to always work to keep my credit card spending under control.
Now I only use my credit cards for specific purchases such as flights, online shopping, and utility bills.
I Educated Myself on Personal Finance
When I made that last payment and saw $0 on my credit card statement, I felt a sense of pride and empowerment.
With hard work, dedication, focus, and sacrifice, I was able to pay off almost $5000 in exactly three months.
During this debt repayment experience, I invested in books, free courses, and other resources to educate myself on all things personal finance.
I also spent time building a personal cash flow statement, budget, and net worth tracker to get a full picture of my personal finances and set up myself for financial success.
I’ve learned so much in this process about personal finance and quickly realized a new passion.
I decided to start a personal finance blog called Abundance of Jo. I cover topics such as budgeting, debt, investing, and basic money management.
On my blog, I leverage my finance skills from business school and this debt repayment experience to help people to pay down debt, save and make money and build wealth.
I wanted to share my knowledge and expertise with as many people as possible so that they can be empowered to make real changes in their personal finances and build wealth along the way.
How Jodi Paid Off Almost $5,000 in Credit Card Debt in 3 Months
Paying off debt is an exercise in patience and sacrifice. I believe that it is possible if you put your mind to it and believe in yourself.
I hope my story will help you if you are in a similar situation and I encourage you to keep going, be brave and know you can do it too.
Jodi Smith is a Personal Finance Coach and Blogger and founder of Abundance of Jo, a personal finance blog that teaches people to save money, make money, and build wealth in an easy, digestible way.
She has built a career in finance, eCommerce management, and communications which she leverages in her business and with her community.
Jodi is an avid reader and enjoys spending time in nature and watching historical documentaries. She holds a Master of Business Administration from the University of British Columbia and currently lives in the beautiful country of Canada.