A couple days ago, I posted on Instagram to share the exciting news that for the first time in my life, I’m ‘net worth positive’ (my assets outweigh my debts). I nearly cried when my budgeting spreadsheet told me the exciting news! In that same post, I asked if you would be interested in more information on what the heck I’m doing to chase my debt so hard. The response was a resounding YES! so I’m here to break it down for you.

DISCLAIMERS:

• Everyone’s financial situation is different - not all of these options will apply to you in equally impactful ways. Some of these options might have even more of an impact for you than they did me. This post is meant to be my journey and not debt-free advice.

• I am in a season of life where hard hustle is possible - I don’t have kids and I’m largely “unattached” (not married, etc). Know that you might not be able to (or want to) hustle as hard as I do in some of my examples and that’s okay!

• I am not a financial professional - I am not claiming to have all the knowledge on finances, I am just sharing what has been working for me. Please consult a financial professional for questions specific to your financial situation.

• I know my situation is one of privilege. I have an advanced degree. I work at arguably one of the best places in the world to work and also have a successful ‘side hustle.’ I was actively saving money before I started on this journey. These and many other factors have given me privileges that not everyone has and I am aware that changes pieces of my story.

Scroll down to get the full story!

THE SITUATION:

Near the end of 2018, I was reviewing my finances and found some hard numbers. I was looking at approximately $140,000 total in debt. It was a mix of consumer debt, a car, and student loans. I remember feeling overwhelmed and really scared. I also remember thinking that I was working so hard to save for retirement and have an emergency fund, but what was the point if I had all this debt? I knew I needed to do something.

Debt breakdown by category:

• Credit Card Debt: $29,726.65

• Car Loan (2015 Ford Fiesta): $12,381.66 (original loan of $9,000, plus accrued interest since purchase)

• Student Loans: $98,099.52 (original balance of $80k for a Bachelor’s + Master’s, plus between 3-5 years of interest)

• TOTAL: $142,138.33

MY PERSPECTIVE:

The first thing I did was read everything I could about debt payoff. I knew two things - I didn’t want to consolidate my debt and I didn’t want to do any balance transfers, etc. I found Dave Ramsey, the FIRE Community (on Reddit), and Alyssa Nicole Budgets on YouTube. Dave Ramsey teaches the “seven baby steps” to get out of debt, the FIRE community focuses on financial independence and an early retirement, and Alyssa Nicole Budgets is a 20-something woman working on debt and living frugally. The three combined became my foundation.

I knew that I didn’t want to follow Dave Ramsey to the letter (he advises stopping all retirement/saving activity besides a $1,000 emergency fund until all debt except your house is paid off). I am young and have the advantage of compound interest on my side. I didn’t want to lose 1-3 years of compound interest. The “future balance” of saving just $100/mo is $201,000 with compound interest. I wasn’t willing to sacrifice that (and more) just to get out of debt quicker. Having said that, I also did want to get out of debt as fast as possible. Talk about a catch 22!

MY COURSE OF ACTION:

As I was working through my Powersheets at the end of December, I sat down and took a hard look at my budget. I had intentionally chose an inexpensive place to live when I moved back to MI to take the job at Google, but I hadn’t curtailed my spending to match. In fact, I had expanded my spending to take up the money I was saving on rent. I decided that in 2019 I was going to do a no-spend year. I was going to cut back on all non-mandatory expenses and give myself a small allotment for “fun” money that would cover any ‘unnecessary’ variable expenses plus a little extra. I also stopped contributing to my monthly sinking funds (money for car maintenance, travel, etc). All in all, this math was able to free up an additional $2,000/month in 2019 that could be put towards debt.

To start working on my debt, at the end of December 2018 I liquidated half of my cash savings, except for a $1,000 emergency fund. This was to dip my toes in the water and see if I was ready to get started. (I’m a classic Scrooge and hate seeing my savings account be low. I needed to know I could emotionally tolerate it being low until I was out of debt.) That month, I paid off $11,359.86 of debt, all credit cards.

In January 2019, I knew I wanted to push on and keep working at my debt. When I started at Google in 2017, I was given an equity grant (as all nooglers are) and the first portion of it had “vested” meaning that it was mine to spend. So in January, I took my $2,000 in expense savings, a portion of my vested equity, and all of my net profit from my business that month and put it towards my debt, paying off an additional $11,149.04 in credit cards and one student loan.

In February 2019, I had to put my negotiation skills to work. I had a credit card that was in collections and I was able to negotiate to pay 74.5% of the outstanding balance and they would consider the card paid in full. I cashed out the remaining portion of my vested equity, again collected all my net profit from my business, as well as the $2,000 monthly expense savings and put it towards my debt. I also received my tax refund this month. Because I run a business and have W2 income, my tax situation is a little different than most entrepreneurs. My federal and state refunds totaled around $11,000 and this month I paid off $17,082.84 (including the ‘cancelled’ debt) in credit cards and student loans.

In March 2019 (the month I’m writing this post), I was/am moving. This means that there will be a few more expenses than I would normally have, but also means that I will be selling my car and getting rid of a big chunk of debt by ‘offloading’ an asset. By continuing the same method (expenses savings, 100% business net profits) and by selling my car, I will end up paying off $20,153.84 in debt this month.

MY THOUGHTS:

If you’ve been following the math, then you know that to date, I’ve paid off $60,906.60 and have $81,232.23 remaining. Roughly 43% of my debt is gone in three months. My existing savings and the initial vested Google equity helped me get this jumpstart (as did selling my car). I know that the remaining 57% is definitely not going to go as fast as this first potion did. I plan to revisit my monthly budget at the end of this month to see where I can squeeze out additional money.

WHERE DID ALL THE MONEY COME FROM?

I get this question a lot. Where did all the money come from and am I still saving for retirement.

When I sat down and was looking at my budget in 2018, I knew I was going to be in a full-on season of hustle to attack my debt the way I wanted to in 2019. I consciously made a few choices:

1. The choice to not invest money back into my business during this season of hustle. Once I pay my recurring business expenses, my team, and save for taxes, 100% of my net profit goes to my debt. Period. Normally I would take 30% to pay myself and invest the remaining 70% back into my business - through either business savings or improvements. I’m not doing either of those right now, which means my business is largely in a “maintenance” mode in terms of self improvement.

2. The choice to cut my ‘sinking funds.’ Sinking funds are this idea of proactively putting away money for things you know you’ll need to buy in the future. For me, it was car maintenance, travel, toiletries, etc. I’ve cut all contributions to these and will be budgeting very carefully in 2019 to only spend the money that is absolutely necessary to stretch these funds further.

3. Choosing a co-living space in Chicago. I’m moving back to Chicago at the end of March. While I could have chosen to get a studio or one bedroom apartment by myself, and I could have lived comfortably doing so, in order to better attack my debt I’ve chosen a co-living space. I will be living in a 5-bedroom 2-bath apartment shared with 4+ other people until my debt is gone. I also really love the space and the community (check out co-living spaces if you’ve never heard of them!) so I believe I’ll be happy there, but I was a little sad to not be getting my own space. My total living expenses will only increase by $400/mo and by getting rid of my car and car insurance, the net change in my expenses is actually $0. This will help tremendously as I continue on this journey.

As for the retirement question, yes I am still saving for retirement. 11% of my paycheck goes straight to my 401k, an additional $100/mo goes into a brokerage account, and I contribute to a separate Roth IRA when I can. I truly believe in the power of compound investing and I wasn’t ready to give that up just to pay off debt faster.

Thank you if you made it this far down into my story. If you want to know more about my journey and relationship with money, check out the Worth It Podcast later this week where I’ll be on as a guest talking about this more in depth! Are you working through your own debt free journey? Tell me your story in the comments! I can’t wait to hear more!