Budget Divas

5 Steps We Took To Pay Off 41k Of Debt In One Year

October 01, 2022 Jenn Trinidad Season 1 Episode 40
Budget Divas
5 Steps We Took To Pay Off 41k Of Debt In One Year
Show Notes Transcript

Ep #40 In this episode, I wanted to talk about our debt free journey. It was seven years ago, officially that we started our debt free journey. 

In 2016 when I had changed jobs, I was just done with being sick and tired of being sick and tired. And so my husband and I were really determined to stick to the plan, and we went hard. We decided we were gonna do a "rice in beans, beans and rice: diet, if you're familiar with that term.

We didn't go on vacations. We hardly ever ate out. We basically just lived under a rock. We love Dave Ramsey and his Financial Peace University. His plan works for most people, but the way that we did it was we did it really, really hard. We did it in a way that we sacrificed so much that we were just not having fun anymore, even to the point where our friends and our family were asking us if we were okay. 

I really had to change my mindset about money and also my habits. My husband and I sat down together and we decided we were going to find creative ways to have a life and still get out of a lot of debt. In 2019, we were able to pay off $41,000 in 12 months, and that's what today's podcast is all about. 

It's all about the mindset shifts that we have to go through, the habits that we had to change. And so I'm so happy that you're here today because this podcast is going to get real. It's going to be raw, and I'll tell you the five main things we did to pay off $41,000 in one year.

Interested in making money as a mystery shopper? Get access to the FREE training here: https://www.budgetdivas.com/mysterytraining 

Interested in making money as a mystery shopper? Get access to the FREE training here: https://www.budgetdivas.com/mysterytraining

Welcome to another episode of the Budget Divas podcast. In this episode, I wanted to talk about our debt free journey. It was seven years ago, officially that we started our debt free journey. I remember in October of 2016 was when I had changed jobs. I went from a base plus commission managerial job to a corporate job that just had a flat base pay and it was going to be a pay cut.

The reason why I had changed jobs was to have the flexibility to spend more time with my family, and it was in this time that I really had my sick and tired of being sick and tired moment. We had learned about Dave Ramsey years ago and tried his program, but we weren't serious about it. I remember I used to listen to him on the radio back in 2012, and I would always hear people saying I'm debt free, which was super awesome, super encouraging.

But I still wasn't ready to be on the plan yet. And so in 2016 when I had changed jobs, I was just done with being sick and tired of being sick and tired. And so my husband and I were really determined to stick to the plan and we went hard. We decided we were going to do a "rice in beans, beans and rice diet", if you're familiar with that term.

We didn't go on vacations. We hardly ever ate out. We basically just lived under a rock. I want to say that we loved Dave Ramsey. We love his financial piece, University. His plan works for most people, but the way that we did it was we did it really, really hard. We did it in a way that we sacrificed so much that we were just not having fun anymore, even to the point where our friends and our family were asking us.

Are you guys okay? Do you guys have marriage problems? Because we just never saw them and it was really hard for us to say no. When they would tell us, Let's go out on vacations together. Let's go out to eat. Let's do that. We made every excuse in the world so that. We could say no and tell them that, you know, and we really didn't want to tell them the truth, that we just didn't have any extra disposable income to go on vacation with them.

But it was at the end of 2018 in October that I was just feeling miserable. Two years into our debt free journey, I was determined to have my cake and eat it too. I was determined to find a way to not live under a rock and stop feeling guilty every time I spent money knowing that it should go to the debt I remember.

Even going out to eat for special occasions, for birthdays, Christmas anniversaries, I would feel so guilty spending that money, knowing that that money should go to my credit card so that I would actually be making a dent in that credit card payment, not just paying the interest month after. But I wanted to have fun while on this debt free journey, too.

I knew that it was going to be at least a couple years, maybe more, that we were going to get.

I also wanted to have fun while we were on this debt free journey. I knew that it was going to be a little while longer until we were out of debt, and I didn't want the moments to pass us by knowing that we only have a short time on this earth. We're not promised tomorrow, and I wanted to make every moment count.

And so what I really had to do was I really had to change my mindset about money and also my habits. My husband and I sat down together and we decided we were going to find creative ways to have a life and still get out of a lot of debt. In 2019, we were able to pay off $41,000 in 12 months, and that's what today's podcast is really all about.

It's all about the mindset shifts that we have to go through, the habits that we had to change. And so I'm so happy that you're here today because this podcast is going to be real, It's going to be raw, and I'm going to tell you the five main things we did to pay off $41,000 in one year.

And so the first thing that we had to do was we had to be brutally honest with ourselves. Now, this is two years into our debt free journey, but I still struggled with coming to terms that I had no one to blame but myself. The things that I had spent on in the past was all on me. No one forced me to go to college and take out student loans.

No one forced me to treat myself to expensive, lavish dinners. Buying expensive items in college that till this day, I probably don't own anymore, and I probably can't even tell you what that expensive item is. Even offering to pay the entire dinner bill with friends, just to impress them and act like I had all of this money.

No, all of this was on me and I really had to take a deep breath and take a deep look at myself and actually just forgive myself just to. Give myself grace and tell myself that what I did in the past was in the past and I could move forward, or I keep, I could keep blaming myself for all the things that happened, and everyone who you know, for lack of better word, screwed me over.

Like the credit card companies, I was blaming the credit card companies for their high interest rates for the student loan companies, for allowing me to take out so much student loans, even more than I needed for school. Or even the IRS for taking out so much taxes in my paycheck that even though I made a good income, I still felt like it wasn't enough coming into my paycheck every single month.

So I really had to reflect. What was going on with me. And so I had looked through all of these bank statements, credit card statements, bank statements that happened in college, and I really looked through like what was I spending on, And I had to reflect of what was happening in my life during that time that made me want to spend money.

Maybe it was a breakup. Maybe it was meeting new friends that had money and wanted to impress them. Or even just treating myself to expensive lunches because I. Had a hard exam, or I just felt like I deserved it, that I was working two, three jobs in college and I deserved to have something nice.

And so as I was going through those credit card and bank statements and really reflecting on what was going on, it gave me a better sense of how to move forward and not to make those mistakes anymore.

This was probably the hardest thing for me to do to reflect on those bad memories that I had suppressed. Into my gut that I didn't want to relive anymore, and that was affecting my money habits, that was affecting my bank account. I remember there were times when I would go to the grocery store and I would pray like, Please God, please let this transaction go through.

Please let the cashier tell me that it went through or not say  that my card was declined. It was a scary time to think back when reflecting on those bank statements, but after I had a good cry and I really acknowledged what I went through, forgiving myself for giving myself grace on, You know, these were mistakes that I made in the past, but I can always change it moving forward.

It was only then after I had released all of those emotions that we really started to see. Our debt go down. And so I know this kind of sounds a little woo woo, but it really is true. Like if you have your bank statements from years ago, I want you to take that out and kind of like look for it. I know everything is online now, but if you are able to get copies of it somehow to see what was going on during that time, even if you're just starting.

With your debt free journey, now you could see what happened a year ago even what happened six months ago to make your credit card statements. Where was the highest time? When was the highest time that you had your credit card or bank statements increase?

It's really important to understand these habits so that you can just release it and then you'll know exactly what to do moving forward.

I remember that as I was going through these bank statements and highlighting certain items that, um, I had spent $400 on bedding, you know, was spending a thousand dollars on handbags and shoes. I was thinking that I was better off than I actually was. Yes, I know that it was because the people that I were, that I was hanging out with made a lot more money than I did.

But I didn't wanna come to terms that I wasn't there yet. I hadn't arrived where they were. I remember, I just felt nauseous. I just felt like I didn't deserve this money. And I just remember that I just felt so nauseous, like looking at the money that we had brought in every month only to spend all of it, plus more going into credit card debt and then now paying it off every single month, $500, $600 going only to the interest.

Not even going to the principal yet was really a hard time in my life. But once the shock wore off, that's when we decided it was time to put on our big boy and big girl pants and finally get on a plan. 

So when I'm saying we, it was because my husband and I weren't on the same page. He was spending money on things. I was spending money on things, and we really had to come to an agreement that if we were going to get out of debt together, we needed to conquer it together during those first two years from 2016 to 2018, we really weren't making a lot of headway because we weren't sticking to the plan. Yes, every single penny that we had left over was going to the debt. But then at the same time, we were also spending, So if we were making payments on the debt, then we were spending money as well to comfort ourselves and we really weren't being honest with our finances.

That is the key part of this first step is to just realize that all the mistakes that were made in the past are in the past. You can't change it. All you can do is move forward and all you can do is make a plan to get yourself out of debt so that you can build wealth. 

The second thing that we did was we put an importance on savings. Now, we were still paying off our debt, but we decided that instead of going Gazelle intent on the debt, we needed to have some kind of savings. If you are familiar with Dave Ramsey's Financial Peace University, he recommends at least a thousand dollars emergency fund so that you have at least some money in case of a need of emergency. Because if you don't have that money, it's going to go back onto your credit card if you need to change a tire.

If you need some kind of medical bill to pay at least start off with a thousand dollars. And that was really something that had screwed up my budget in the past, not budgeting for those irregular, expensive, or even those emergencies. The mindset that I had was that I would just deal with it when the time came.

If I had to repair my car. If I had to change the tire or I had an unexpected medical bill come up, I would just deal with it at that time. But when you're dealing with it, you're so gung ho on getting debt free and then this unexpected bill comps, it really stops you in your tracks. And so when the time came, it was a huge setback to take that money out of my account and just made me feel like I was going backwards. That's when we realized that we really needed to have thinking funds together. We needed to plan for those irregular expenses. Car registrations, we all know when. That time of year comes so we could set aside that amount of money divided by 12, so that when the next year came to pay that bill, we would already have it in savings August and September.

This is a time when you need to buy school supplies or have registration fees for school activities. Christmas. We all know that Christmas comes in December. All of these things can be put into a sinking fund, and one of the all of these things can be put into a sinking fund so that when the time comes, we are ready, have that money set aside and all we need to do is just pull it out of our savings.

So great way to do this is to divide the amount by 12 and save that amount every single month. So for example, if you know that your car registration is $400, divide that by 12 and put that amount of money into a separate bank account every single month.

Two of my favorite companies that I love is Capital 1 360 or Ally Bank. They are two. Online bank accounts that is secured by the F D I C, and you can safely put your money into this account. Once you need to retrieve the money, you can just take it out either by an ATM or debit card, or you can just transfer it back to your main account.

This is a great way to make sure that you're not having it attached to your regular account, because what happens when you have the money attached to your regular account is you're more likely to spend it. So if you have it in a separate place, that's not easy to get to. More than likely you will spend it.

Then when you check your accounts, you know that it's safely there. And the great part about it is I check my accounts maybe once a month just to make sure that the transactions went through and nothing funky is going on. It's a great feeling to know that you, that I have that money there, and to see that money grow every single month.

This is also not a hard thing to do. We are so used to having our bills deducted from our account every month, so it's just another bill that we're paying, but instead we're paying to ourselves. So it's like insurance for our sanity. I am not a natural saver. I love to spend money, and so if I had to manually transfer my hard earned money into a savings account every single month, It would be really hard for me to do it, and I would keep putting it off because I wanna spend that money.

So knowing that the money is already there, I don't have to think about it. It's so much easier on my brain. And then when I go into my account, it's so much fun to look at all the money that's there. Knowing that it has its purpose, especially for Christmas. As Christmas is coming up, I'll be able to take the money that I've saved over the past year, take it out of my account, and know that I have that set amount of money to spend for Christmas.

 So the third thing that we did to pay off $41,000 of debt in one year is that we got on a plan. Instead of just making a budget every single month, we would actually live on a budget and live according to those numbers. Previous to that, during our debt free journey, we would kind of make a budget, but we weren't really sticking to it. 

Only going to have this much for groceries, but then if something was on sale, I would most likely buy it. Instead of saying, I already have enough food at home. I need to live and use the food that I have instead of buying more. So that was another important thing that really helped to accelerate our debt free journey.

It's also great that when you're first starting out, it's better to over budget instead of under budgeted categories like dining out, groceries and gas. During at least the first 90 days of doing a budget, you're still trying to get a handle of what your budget should actually look like. And I can tell you when we first started, we set an amount for food that was so low that we spent the entire months budget in a couple of weeks, and so then we had to go back and readjust our budget to put more money and groceries, feeling like I was a failure, that I wasn't living to the budget, that I wasn't living according to what my budget says. So have a cushion on your groceries, on your gas, dining out, especially if you're used to dining out a lot, you might just wanna put a little bit more money than you actually want.

So let's say if you really want your dining out budget to be only $200 a month, maybe budget for 300, and then you can slowly adjust it to what fits your needs. Once you know your sweet spot, then moving forward budgeting is just going to be so much easier because you'll kind of know, you know where creatures of habit. So we know what kind of foods we like to eat month after month. So we might want to just stock up on those items, have it available all of the time, and then knowing that.

We might just wanna have those food items available in our house all of the time. So, That will make it a lot easier knowing that the prices really don't change on those items. We kind of know how much ground beef will be, how much chicken will be milk, bread. If those are the things that we always have, then we can budget according to what those items cost.

Once we were on a plan, I found that sticking to the plan wasn't as hard as I thought. There was a lot of stuff that we were spending on that we no longer needed, like it no longer served its purpose, so it was easy to cut it out, and that extra 300 to $500 a month is. Really helped to accelerate our debt payoff.

Our habits also had to change instead of just swiping that debit card without thinking twice. I actually looked at our budget before we went to the store to see how much we had left to spend.

So looking at the budget each week was actually kind of fun. It just helped us to strategize a plan for our budget for the following month and the months beyond. So we could say in October, since the holidays are coming up, can we spend less on groceries this month? Use up what we already have on hand, knowing that we're going to be buying a lot of items in November and December when the stockpile items come on sale.

So things like sugar and flour and canned goods. All of these things normally come on sale during the holidays, so for us, it's a great idea to use up a lot of the items that we already have on hand in October and save the money that we were normally going to spend on those groceries to carry over into the following months.

We also did a couple of no spend months, meaning that we only spent money on the necessities and nothing extra. And this was actually not as hard as I thought it was going to be cuz especially like in months like January where we're just ending the holidays, we already have a lot of things and don't need a lot of things to be bringing into the home. 

So January is a great time for me to do a no spend month because it's getting off of the holidays and getting over the excitement of the shopping, putting away all the holiday decoration. Putting away all of the holiday decorations and just resetting my money, resetting my mind for the following for the current year.

Doing a no spend month also helps to kind of plan for an upcoming expense. There were times when we would do a no spend month in January and do another one maybe a few months later before the summer began because we were so close to paying. One of our debts. So if we had a credit card that had a really low balance, it would just work that credit card really hard until it was all paid off, and then we could, then we could check it off our list.

No spend months are also great because we can save that money for an upcoming expense or because we were so close to paying off our debt, it just made sense to cut back a bit and have it all paid off. So, for example, if we had a. Credit card that only had $2,000 left on it. Well, if we could do a no spend month and have an extra $500, we could pay off the entire thing in the following month, be done with it, and then we could cross one debt off our list and move on to the next one.

So the fourth thing that we did to get out of $41,000 of debt in 2019 is that we got our priorities straight. We got rid of anything that didn't serve us anymore and doing a no spend month actually help with this because as we were. Staying home more or staying out of the stores more, we could declutter any item in our house that did not serve us anymore.

 

First one, starting with clothes and then moving on to home goods and so forth. You're kind of familiar with Marie Condo's book about sparking joy. She talks about this a lot, that anything that doesn't serve you anymore, get rid of it. Probably won't be wearing that dress from 10 years ago that you are looking to maybe like lose some weight or, you know, really wanna fit into that dress. If it's not serving you anymore, just get rid of it.

But then we also made a list. We made a list of things that we weren't willing to sacrifice and things that we could live without. So some of the things that I wasn't willing to sacrifice was my skincare products. I have very sensitive skin that needs special attention, and so I factored that cost into my budget. Shoes was also something that's very important to me. Instead of buying cheaply made shoes that I would need to replace every couple of months, I invested in good pairs of shoes that would last me for a really long. As for my husband, he loves his surf shores that can range from 80 to over a hundred dollars a piece, but that is something that brings him joy and that he constantly uses over and over.

So we made an entire list of things that we weren't willing to sacrifice or cut out of our budget. And then on the flip side, we made a list of things that we. No longer needed. For example, dining out. We love to eat out, but we probably didn't need to eat out five to six times a week. I canceled beauty subscription boxes that I no longer needed.

Even my clothes I, after I got rid of. Everything that didn't fit me anymore, I didn't want, I took inventory of what was left and I looked at it and I saw that I had a great capsule wardrobe that I didn't really need to buy new clothes for the next six months. So looking at all those capsule pieces, I realized how much clothes I already had, and I probably didn't need to buy new clothes for the next six months.

We also DIY a lot of stuff. My husband is very handy and knows how to build and fix stuff, so if something broke, we could easily fix it instead of buying it new. We also got really creative in the kitchen, finding restaurant copycat recipes that we could make from home. We YouTubed a lot so we could learn new skills at home, and it really wasn't much a sacrifice because we had our priorities straight. We're intentional with our money. We said we're not willing to give up the things that bring us joy, that bring us happiness, that make us feel good.

But on the flip side, we knew that we needed to give up other things that just didn't serve us anymore or that we could get rid of for a short period. There were other things too that I wanted to incorporate in my budget, like getting my nails done or getting a haircut. Every six weeks, but it didn't come with a little bit of sacrifice. So there were things that I wanted to get on a monthly basis. I wanted to get my nails done a lot of the time, or I wanted to, you know, get that expensive dinner at least once a month.

The last thing that we did is we found some side hustle ideas. So, This was what had really accelerated our progress really, really fast. We started looking for side hustles that we could do on our own time. I knew that I didn't wanna get another brick and mortar job that would take me away from my family, and so I needed to find something that we could incorporate into our already busy life.

So my husband started flipping cars. He would buy secondhand cars. That worked well and just needed some tlc, a good cleaning paint, touchups, getting out the dance for a while. Every couple of months we had new to us cars. It was really, really fun. The amount that he got for these cars after flipping, it brought in a good amount of income that we could put towards our debt.

We also sold stuff at Craft Fair. Since my husband already has a T-shirt business, we would go to local craft wars and sell his products. Craft fairs are a ton of work, but it can also be a lot of fun, and we were having a lot of fun meeting people being around people. Getting to show off his product. So it was actually really relieving as well to kind of change up the scenery with the monotony of just going to work, coming home, paying off debt, being out and about, and actually seeing people buying the products instead of me being on the recipient and, you know, Spending the products on me was a nice change of pace, and then it also got me into this mode of, um, what's possible, Like you don't need to have another brick and mortar job to pay off debt.

So the last thing that we did is we became secret shoppers. So in 2018, I found a YouTube video by his and her money. And they were talking about how they had made $400 at secret shoppers. And I thought, Well, this has got to be a scam, right? Like, who pays you to shop at stores? And so after I watched that video, I researched it through, Forums and looking up the companies online, and I found that it was a real industry.

So how it works is that companies hire shoppers like us to go into these businesses and evaluate their customer service and their processes. This is the part of where our debt free journey that really started to get.

Because up until this time, all of our extra disposable income from our regular nine to five jobs was just going to the debt. But once we started as secret shoppers, we were actually getting paid to. Eat out at restaurants, go to high end retail stores, mail packages at the post office, buy groceries, inquire about certain products.

So a lot of our expenses were being taken care of through these mystery shops. And so a huge part of that $41,000 of debt that was paid in 2019 was paid through our side hustle as a mystery shopper. Not only was it fun and exciting, but it was motivating and it helped to strengthen our relationship because actually we were now actually doing things with each other, um, to the point where, you know, my husband was actually helping me on the shop.

If there were certain things that I needed to look out for, um, on the mystery shop, you know, he would point that out to me. And so doing both of it. So being on the same page together was really, really fun. And that is how we were able to pay off $41,000 of debt in 2019.

So to sum up this podcast, the first thing that I had to do was I had to be brutally honest with myself and really understand why I was spending this money going shopping, what was going on with my emotions, and why I felt the need to spend money to feel better. The second thing that we did was we prioritize savings.

We put an importance on saving for those irregular expenses that come up. Car registrations, school supplies, Christmas car repairs, and the like.

The third thing that we did was we got on a plan. Instead of just seeing that we were going to put a budget together, we were actually living on a budget, living on living and breathing on this budget. That, and actually following through on what we said we were going to do.

The fourth thing that we did was we got our priorities straight. We made a list. Items and things that we wanted to keep in the budget. That made us happy, that served us, that we weren't willing to sacrifice. And on the flip side, we made a list of things that we could live without that would bring in an extra 300 to $500 a month by cutting out those expenses so that we could put it towards our debt. 

The last thing that we did is that we got a side hustle, and the last thing that we did is we got multiple side hustles. We flipped cars, we went to craft fairs, and we started as mystery shoppers. So, Depending on what side hustle you like to do, I would definitely say check out Side Hustle Nation. He has a great podcast and a great website on all these side hustles that you could do.

It's a great site that just shows you everything that's possible and what people have done to bring in extra income per month.

So that wraps up another episode of the Budget Divas podcast. If you like this episode, I would love to hear from you. Please leave a review on Apple Podcast and let us know what you liked about this episode.

So until we meet again. Just want to encourage you that it is possible to get out of debt. It is possible to build wealth. While all living is possible to get out of debt, it is possible to build wealth. It is possible to live on a budget without sacrificing your social life.