This editor gave herself 30 months to pay of $55000 in debt—here’s how she did it even faster – msnNOW

This editor gave herself 30 months to pay of $55000 in debt—here’s how she did it even faster – msnNOW

I wasn’t always nerdy about money. In fact, when I decided to take control of my finances in January 2015, I didn’t even know how much debt I had.

My mom gave me a personal finance book that year for Christmas. I read it in two days and went from being oblivious about my finances to starting an emergency fund and creating a budget. My ultimate goal was to pay off all of my debt, and I gave myself 30 months to do it.

I still remember when I sat down to crunch the numbers. I honestly had no idea how much my car, credit cards, personal loans and student loans would come to. I was shocked when I discovered I owed more than $55,000.

This was especially distressing because I had recently moved to Washington, D.C., and was already nervous about the expensive city I had just made my home.

Watch: How to balance saving for retirement and life in your 30s

Creating a budget and cutting expenses

I was fortunate to have a secure job with the government that paid well. At the time, I worked for the Navy as a civilian and served in the Navy Reserve as a public affairs officer. By the time I paid off my debt in March 2017, my total annual salary was around $100,000.

I used a zero-based budget, which means each month my income minus my expenses, debt payments and savings equaled zero. This gave me a clear plan for spending and saving every month. For example, when the money I budgeted for entertainment ran out, I stopped going out for the rest of the month. I also used cash to pay for certain spending categories — like eating out, groceries and the rare occasion I went shopping — to make sure I didn’t overspend.

Even though I was making a good income, I still felt stretched every month because of my monthly minimum payments and the high cost of living in D.C. My 600-square-foot studio apartment cost $1,800 a month.

After learning how to make and stick to a budget, I got serious about cutting my expenses. I moved in with a roommate, which reduced my rent by $600 per month. I rarely ate out, and when I did, I ordered happy hour specials. I stopped buying clothes and even canceled my Amazon Prime membership. These changes weren’t easy, especially after moving to a new city and wanting to get out to explore and meet new people, but I knew they weren’t permanent.

Paying off debt

There are two popular methods for paying off debt: the debt snowball or the debt avalanche. If you use the debt snowball, you pay off your debts in order from smallest to largest. You focus all your extra debt-payment money on the smallest debt while paying minimums on the others. When that’s paid off, you roll over that money to the next. With the debt avalanche, you pay off debts in order of the highest interest rate, again focusing all extra money on one debt while paying minimums on the others.

Also see: How much should I invest?Getting started …….

Source: https://www.msn.com/en-us/money/personalfinance/this-editor-gave-herself-30-months-to-pay-of-55-000-in-debt-here-s-how-she-did-it-even-faster/ar-AASnsKX

Budget lifestyle