Posted on Thursday, 11th June 2009 by admin
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Jullian one of our readers was debited with amount of 300. She was able to dig herself out using the tips she learnt on website Consumerist.com. Here we will share all those tips she followed to lower her monthly expenses and how she managed to dig out of the debit within 20 months.
She writes: “This morning I made my very last payment on ,300 in credit card debt and a personal line of credit for a home improvement project that was completed a few years ago. I paid it off over the last 20 months thanks to applying some of the stuff I learned at consumerist.com. It was tough. It took discipline, but I did it!
Instead of making abrupt changes, I took a little time to bring these changes. It looked something like this. It may not be in the sequence that may catch attention of financial planners or in the order that might work for others as well but bottom line is that it worked for me.
MONTH 1: NEGOTIATING BETTER CREDIT CARDS RATES:
I made a call to every bank offering credit cards and tried to negotiate with them. I made a successful deal with. I was successful with a lot of them. The interest rate after negotiation went down from 14% to 7.99%. In cases where negotiation couldn’t work I politely said thank you and disconnected the call. I canceled each card as it was paid off.
MONTH 2: GO CASH-ONLY:
I kept only one card for emergency purpose and rest I discarded each and every single card. I actually put my remaining credit card in a big plastic cup full of water and stuck it in the freezer. That way, getting the card was difficult. I just followed the CASH Only. If I didn’t have the cash, that clearly indicated I actually didn’t need it. The card I kept in the freezer still remains in the freezer because I never required it.
MONTH 3: START DEBT-SNOWBALL:
It really works. I first heard about this method on one of the site and started paying the lowest debit first. I used an Excel spreadsheet from a website. It was user friendly because it was easy to add extra one-time payments. I was having a surety that it would hopefully save me more funds to pay off the higher interest rates first, but it was very, very satisfying to get stuff paid and DONE with.
I can’t tell you that how it feels when you start paying off your debit . It was worth how much little amount extra it cost me extra to pay the smallest balances off first. It gives me a feeling of “light at the end of the tunnel”. At the same time I also set up automatic payments on payday through the online bill pay to make this a seamless process. For the first couple of months, I just started off with just extra because that’s all I could afford. Once I started living more economically, I applied more to the snowball.
You should make extra payments to the snowball. Believe me they will really do help, no matter how small. Every single extra penny that came was used to pay the debt. At the end of the month, anything left in the budget was utilized in extra payment. One thing about online bill pay that I like the most is that it’s just so easy to make as many payments as you want. The payment would range from 0 to at times, but every little bit helps. I purchased a printer which after rebate was almost free and the same rebate I applied to the debt.
I also did a few side jobs in which I help a caterer do some prep work; I also had sold some books on half.com, I cleaned out my garage and from a yard sale I manage to make 0 , I did not spent the money sent to me by my grandma sent me for my birthday and Christmas on things that are no use to me but instead of that I make extra payment to snowball, have you got the idea. The point that I am trying to explain is that, every single extra penny went right to the debt.
MONTH 4: SET UP BUDGET:
I made a budget and kept tracking where my money was exactly going.
MONTH 5: CUT BACK EXPENSES:
I looked over my expenses and figured out what are the expenses or things without which I can go on without any problem. Not only did I figure out what I was giving up would save me I also diligently applied that amount to the snowball. It also really helps to figure out what something is costing you per year. I had no idea I was spending 0 a year just on things that were hardly of any use to me!
Here’s what I gave up:
Cable TV. Got a cheap Netflix plan and a roku player instead. Savings: /month, 4 a year
Land line phone. I saved: /month, 4/year
Gardener. I saved: /month, 0/year
Got slower DSL. I saved: /month, 0/year
Manicures. I use to do my own. I saved: /month, 0/year
Public Radio Membership. I must say sorry to KQED and KALW, but I have to come first right now. I’ll continue to support them later. I saved: /month, 2/year
Gym Membership. I saved: /month, 0/year
Lunches at work. I saved: 0 month, 40/year
Starbucks. I saved: /month, 0/year
Total extra towards snowball. I saved: 5/month, ,380/year. Just like that.
MONTH 6:
I worked out on reducing my other spending as well.
I am a very passionate reader and most of my money was being utilized on buying new books. I found an alternate to that by not using Amazon rather I started going to public library. My local library allows you to browse the catalog online and request books be sent to the branch of your choice.
I work 2 blocks from a branch so I just picked up things there. I also used paperbackswap.com, bookmooch.com and swaptree.com to give books I no longer wanted and in return get books I wanted. It only cost me the price of shipping books to other users via snail mail. I made a saving of hundreds of dollars by switching the habits.
For example, in September, I spent on postage to send out used books, books that would otherwise just be sitting around and for that in return I received about 0 value books if I would have bought them at retailers price. For those who are into DVDs and CDs, swapadvd.com and swapacd.com are also awesome sites.
I stopped buying anything new. If I really needed something that is really important to me, I would first log on to freecycle http://www.freecycle.org/ and start searching the catalogue for used items for sale. For instance, my hairdryer stopped working about 6 months ago. Instead of rushing to the market to buy a new one, I posted an advertisement “Item Wanted” listing on the yahoo group and had a new and within 24 hours I received a free hair dryer.
Food Budget: I ate the kind of things I normally eat; I just made some simple changes. I preferred eating at home rather than eating out. I brought my meal along for work that surely saved me money, but I did let myself eat out on Payday Friday. I used discount coupons and I didn’t but things on a large scale to avoid waste.
I use to buy items like toilet paper and other of this kind when there was a good sale but never preferred buying perishable items on large scale . In this way nothing goes waste. I gave up paper towels and used rags instead. I shopped at the grocery outlet instead of Whole Foods.
Instead of buying new clothes (except for bras, panties and socks) I rather shopped for things at thrift and consignment stores.
I know following this way I gave a lot of stuff up, but I don’t bother such things, I kept thinking about the benefit I was getting , which is freedom from debt. I still gave myself a small budget for entertainment and economical dining out once in awhile, and please, nothing could induce me to give up my hairdresser!
You are really going to be surprised knowing that how much you can actually do for FREE if you just look around.
Free Theatre: There are a Lot of theatres around us that need volunteer workers. You may work in the theatre for an hour or so before the show, you might be stuffing envelopes or something. You have to help seat people before the show and then you get to see the show for free. May be doing this you get good seats too. I saw 3 or 4 free show a month this way. To work in theatres you often have to wear black slacks or skirt and a white shirt, but that’s a small price to pay for free show.
Artist’s receptions: You get to mix with the people and talk to them, you get a chance to see some lovely and interesting art, in addition to this get fed wine and cheese.
I also used squid list to find cheap and free things to do.
How does it feels to come out of debt
I was determined to pay off my debt and where there is a will there is a way I did it! Thank you consumerist! I am debt free today and except for my thankfully low fixed-rate mortgage, I feel like I am relieved from a very big problem I feel so good. My spirit feels so much light. Its kind of feeling of FREEDOM. Even now when I am debt free I would still prefer to live economical and make a saving . I learnt a lesson that I will not accumulate that much debt again. I never want to feel the stress an anxiety of being debited so much.
One more thing I would like to tell you all that , all during this time, I also put just per month away into a savings account which I set up as an automatic deduction every payday. Right now I have 0 to spend guilt-free and just after waiting for 20 months I’m ready for a vacation. It’s a reward for getting debt free, I just booked a 5 flight to Cancun a bit later in October. I really deserve this vacation for a job well done and best of all? The best thing is that It’s NOT going on a credit card. And I wont be debited for it.
Tags: bank accounts, Bankruptcy, credit card, Credit Cards, Debt, debt consolidation, debt return, economical living, Interest Rates, living frugally, loans, making return easy, mortgage, pay back, pay back debt, paying back money, personal finance, Tips & Advice, tips to pay back debt
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