6/7/2013 5:45 PM ET|
How I dug out of $80,000 in debt
A financial blogger explains how he accumulated and then got rid of a mountain of debt.
After graduating from college and moving to New York City to work as an editorial assistant at SmartMoney magazine, David Weliver found himself $80,000 in credit card and student loan debt. It took him roughly three years, but Weliver became debt-free after making his last payment in September 2009.
He's now married with kids and living in Portland, Maine, where he runs MoneyUnder30.com, a personal finance blog aimed at helping twentysomethings transition from broke college students to young professionals.
U.S. News chatted with Weliver about climbing out of debt, developing a saving mentality, and maintaining good spending habits. Excerpts:
Tell us about your journey into and out of debt.
It's the classic story of signing up for credit cards when you're a freshman in college and not knowing anything about money and using them as free cash. Back then, I didn't have a rent payment, and the minimum payments start so small. You borrow $5,000 and you think "this is fine," so you borrow more. When I graduated and moved to New York, I was rapidly adding to (my debt) because I was trying to make it in New York on a very small, entry-level salary, and the cost of living was exceeding what I was earning.
I was trying to live how I had always lived growing up, when my parents supported me, and that wasn't flying on my income. So I was using the credit cards more and more. It wasn't until a couple of years down the road that I left SmartMoney and I had this epiphany that I had to change my ways.
What sparked that epiphany?
It was a kind of bottoming out. I was always good about making payments and keeping my credit score healthy, but I had a month where I couldn't make the minimum (of about $1,500 a month) anymore. That's what set me in motion to reverse the trend and pay it all off.
What strategies did you use to turn things around?
It wasn't like there was any one thing that I was overspending on. It was more that I just kept living like I was earning twice what I was. It wasn't an extravagant lifestyle -- it was just a lifestyle that I wasn't able to afford at that time.
So I did a couple of things. I worked at Starbucks nights and weekends while working a full-time job. I also put a lot of energy into my career and into finding a higher-paying career path. I went into sales, which is not something that I wanted to do forever, but I did it to earn more money when I needed to. Being able to have a few months of bigger payments and see the balances drop really motivated me to do more.
The other thing I did was look for ways to reduce big expenses in my life. There weren't a whole lot of them, but one of them was my rent. I moved back to Massachusetts because New York was too expensive for me. I moved into a smaller place, with a bunch of roommates, for about half the rent that I was paying.
We can drive ourselves crazy trying to cut out a lot (of small expenses), like trying to bring our lunch to work. If you're really good about it every single day, that might add up to $50 or $100 at the end of the month. If you can take on a roommate or move back home with mom and dad, that adds up to a lot more.
If you could go back in time, what would you do differently?
If I could have developed the saving mentality in high school, I think I could have changed a lot. My parents are very opposite with (how they treat) money. My dad is a saver, but my mom is a spender. She used credit cards and just bought the things she wanted. In a lot of marriages, I think the woman's personality ends up winning out. I did what my mom did rather than what my dad said.
As soon as I started earning a little bit of spending money, I spent it all. I think if I had learned to save, it would have colored my whole relationship with money, and I don't think I would have gotten in the situation that I got into. Plus, I would have had all that savings 15 years later.
VIDEO ON MSN MONEY
They should really teach "Money Fundamentals" in high school. A very basic explanation of credit pitfalls, 401k or IRA basics and how taxes work for young kids before they are let out in the world. This story has a happy ending but there are WAY TOO many sad stories that you don't hear about.
The one thing that I wish I had learned a whole lot earlier was to pay yourself first! It is amazing how much you can stash if you put aside just a lil' bit of each paycheck away.
For me, it was an eye-opener when I became paralyzed from the waist on down. I was $15,000 in debt on my credit card, had a $428.00 vehicle payment and didn't have any type of savings what-so-ever.and I was renting a lil' place for $500.00 a month.
Just two months before my injury, I had created a two year plan to pay off all of my debts, establish a retirement plan, liquid savings plan and purchase a house. After my injury, I had thought that this plan was impossible, however I did manage to accomplish my goal, albeit six months later than that of my plan.
In the six years after my injury, I had accumulated over $60.000 ,in savings while I struggled to relearn to walk. Today, I do not have any of that money set aside, as I had to give up my job as I just couldn't do all that I was anymore. I learned to keep myself out of debt and my home is paid in full.
Today I live a vey simple life and still am able to put aside over 20% of my income each month.
At one point I had $12,000 in credit card debt at age 60 while renovating our 2nd house before putting it up for sale. Having gone through life living beneath my means, that was a HUGE debt in my eyes even though both homes were mortgage free. That attitude is why the debt was only $12K.
Of course, as soon as the house sold, I easily paid off the debt.
You know, my curiosity was peeked, so I wanted to see what this guys big secret was to pay down his $80,000.00 nut in one year. Talk about a let down. Here I'm thinking something new & different on how to get out of debt. Like the "snowball" theory, or maybe he died & he resurrected himself. He had nothing "new" up his sleeve because in reality, there isn't anything out there that hasn't been tried before. Basically, the guy worked his butt off, day & nights, changed his zipcode, brown bagged his lunch, & dumped all his new found wealth into his mountain of debt. Other than dark circles under his eyes, I'm not impressed.
Normally you can go to your bank or credit union for help as they will have debt services which they will help you to set up.
By paying on the credit cards or other debt with the most going to the lowest owed amount first, then adding that amount to the next lowest debt, you will end up paying it off in the allotted time no matter what the interest rates. Another good read is the David Ramsey book. He tells you also how to get out of debt and stay there.
Today being out of debt will be worth all the money you could save in the stock market. If you are out of debt, any savings you have will be that much more when the economy collapses. Buy what you can afford and with cash. Only have the assets you need and don't over burden yourself with too much "stuff". Once you are out of debt and you can pay cash for it, you can get some of the toys you deserve. One neighbor I had when a youngster told me to buy the best quality product that I could afford. It could be a bicycle or a Porsche, but only what I could afford.
My parents are very opposite with (how they treat) money. My dad is a saver, but my mom is a spender. She used credit cards and just bought the things she wanted. In a lot of marriages, I think the woman's personality ends up winning out. I did what my mom did rather than what my dad said.
Copyright © 2014 Microsoft. All rights reserved.
Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.
RECENT ARTICLES ON CREDIT CARDS
Cheap LED light bulbs cost more upfront -- between $8 to $10 apiece -- but begin to pay off within 18 months.
MUST-SEE ON MSN
- Video: Easy DIY smoked meats at home
A charcuterie master shares his process for cold-smoking meat at home.
- Jetpacks about to go mainstream
- Weird things covered by home insurance
- Bing: 70 percent of adults report 'digital eye strain'