How I Got Out of Debt Without Killing My Lifestyle

I married young and divorced within a few years, walking away with a five-year-old child, debts and no job. Though I quickly found employment the weight of my credit card bills, rent and car payment quickly snowballed into a growing debt problem. I had to learn how to manage my finance and get out of debt without killing my lifestyle. Here's what I learned.

Stopping My Credit Card Spending

Before I could get out of debt, I needed to stop increasing it. I took all my credit cards out of my wallet and placed a twenty dollar bill in their place for emergencies.

Keeping My Debt Tally

I needed to have an accurate picture of my debt situation. I created a list of my credit cards with balance, APR (interest rate) and monthly payments included. If the APR was a temporary promotion, I wrote down the date of expiration.

Negotiating with My Credit Card Companies

I ordered my list of credit cards by their APR's from high to low, then I called each company to negotiate down my interest rate. I pleaded financial hardship and was successful in reducing the APR with two credit card accounts. As a result my monthly payments went down.

Balance Transferring My Debt

To further reduce my credit card APR's, I inquired about promotional balance transfer offers. Knowing that getting out of debt would take a few years, I opted for offers with fixed APR for the life of the loan, even if short term promotions offered 0% APR. If there was a balance transfer fee associated with the offer, for example a fee of 3%, I would make sure that the balance transfer would reduce my APR by more than 3%.

Making a Monthly Payment List

Now that my credit card bills were reduced, I created a list of my monthly expenses. Since my salary was paid on a weekly basis, I divided the list into four sections, each containing the bills that were due that week. For each quarter I calculated how much of my income would remain after the bills were paid. I was then able to see why my debts kept increasing. I didn't have enough money left over for food, gasoline and other expenses. Reducing the credit card bills helped but it wasn't enough.

Eliminating My Expenses without Killing My Lifestyle

I decided to eliminate expenses that I could bear to live without. I cancelled my cable TV but kept my Netflix membership. I cancelled my home phone and used my cell phone instead. I reduced my high speed internet to a slower and cheaper DSL. I stopped dry cleaning work clothes and washed and ironed them at home. Though the savings at each point seemed small, they added up nicely.

Making the Most of My Food and Gas Allowance

To make the most of my limited food and gas allowance I stopped shopping at the supermarket every other day and started shopping once a week at Costco, where I could also fuel my car. Though buying in bulk limited the variety of things I could afford, soon I had a store of non-perishable supplies at home, which freed up money for fruit, cakes and other treats I considered essential to my lifestyle.

Paying Only in Cash

Since Costco did not accept credit cards, there was nothing to temp me into my old habit of spending more than I earned. Instead, I used my debit card. Soon, however, I realized that a debit card felt too much like a credit card, making it easy to spend money. I then switched to carrying my food and gas allowance in cash. Then I could see the money dwindling in my wallet.

With time, I was able to double my credit card minimum payments and pay off my debt in three and half years. Making conscious choices about my spending habits got me out of debt without killing my lifestyle.

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