Many are familiar with my $8k in 90-day challenge, where I famously paid off over $8,000 in high-interest credit card debt (that I got into after this home renovation went awry) in under 3 months. Many of you also know that’s not the only debt ninja payoff story I have - before the $8k in 90 days, I paid off $10,000 of credit card debt while living in New York City. I got in the debt via a nasty shopping addiction in college. You can read that story here.
This is, admittedly, a dated story. I graduated college in December 2009, moved to New York City in the Fall of 2010 with only $300 because of the big debt hole I was in, but even though this happened YEARS ago, I feel there’s still merit in telling this story.
Why Now?
I was taking a course on blogging and one of the tips was to review your content and prepare articles based on where the holes in your content are. Honestly, the initial $10,000 payoff all those years ago is what sparked my own interest in money, and although I’ve mentioned it several times throughout this site: on my about page, in posts themselves, and in several interviews, I’ve never written a full post about the experience.
As I was looking for “holes” in my content, I couldn’t believe I’d left a gap this large.
But after renewed interest in the $8k in 90-day challenge this summer, I thought it was worth writing a post about other ways to pay off debt. Not everyone can commit a full three months to accelerated debt payoff, not everyone can work a full-time job, AND side hustle, AND stay at home and save money.
This post is about the slow and steady approach - about being methodical with your debt pay off for an extended period of time. In reality, it's how most of us will make our debt payoff goals happen.
Related: The Debt Master Plan
If you haven’t read the full post on how (and why) I moved to New York City with $300, you should definitely read that post here.
The TL: DR is - I graduated right in the middle of the recession, and with few job prospects and an extreme itch to get out of my parent’s house in Alabama - I moved the NYC with my unemployment checks and $300 in my checking. Basically, I got by via the gracious support of dear friends who let me sleep on their couch while looking for work.
Step #1 - Get a High Paying Job
I am (was?) a trained actor. I graduated with a B.A. in theater and my lifelong dream was to be a Broadway actress, and admittedly, this is why I set my sights on New York City. It’s THE place for stage actors. But because of my folly in college, graduating with so much debt so that I didn’t have any savings and moved to NYC with nothing, the only way to stay in the city was to bite the bullet and get a job.
And not a Starbucks-retail-so-you-can-audition job, a real job, with a decent salary and benefits.
I knew the only way to get rid of the debt for good AND get on my feet was to take a high paying, salaried position. Maybe I would’ve been able to “make it” by taking something more flexible so I could still chase my dreams and audition, but I knew I wouldn’t have been able to pay off the debt. And, honestly, the minimums were crushing me.
Being in the city, and realizing I needed to put my dreams on hold because of financial mistakes taught me a very important lesson, but also because I was so bummed about it - I wanted to get rid of the debt ASAP.
Step #2 - Make Low Cost of Living Choices (More Sacrifices)
This is the thing no one likes to talk about when it comes to debt payoff. Most people (myself included sometimes) don't want to accept the reality that debt means you're living a lifestyle you simply cannot afford.
For instance, when my $8k in 90 Day Challenge went viral in 2015, the trolls came out. They complained it wasn’t a realistic story for people who had kids, who didn’t have jobs with a $60k salary (what I was making in 2015), those who didn’t have time and energy to hustle the way a single, childless woman can.
And I mean, I get it. I had a certain set of circumstances that enabled me to hit my goals.
But I also feel people tend to forget that they dictate the set of circumstances in their own lives.
- I had to PRIORITIZE my debt repayment.
- I knew that by making it THE PRIORITY in my life I had to make big sacrifices.
- So, I committed to putting my Broadway dreams on hold for a year so I could take care of THE PRIORITY.
This wasn’t the only “sacrifice.” I chose to live in Harlem because it was cheaper. I chose to live four people to a three bedroom house to save money. (Although, admittedly, this was way more “fun” than sacrifice.
Making those sacrifices allowed me to make enough money to pay off the debt, and save enough room in my budget as well. Nothing hard comes without some form of sacrifice, but again, sometimes people are just looking for a magic debt payoff bullet.
In short, it doesn’t exist.
Step #3 - Create a Bulletproof Budget
At the time of this story, I was 23, and knew very little about personal finance. As such, I didn't investigate other options to lower my interest rates, such as 0% balance transfer offers, or a debt consolidation loan. Not that my credit would've been good enough for either.
I was also on my own for the first time and living in the most expensive city on earth. I’d never had a budget before and knew that it was time to start.
After some investigative detective work, I found my way to Learnvest.com (still, to this day, one of my favorite financial websites) and took one of their free courses on “How to Create a Budget” (it’s no longer on the site, or sadly, I would link to it.)
It was the first time I’d heard of the 50-30-20 budget, and so I used this as a guideline for how to divide up my first “Grown up job” paychecks. I made $45,000/year as a hedge fund administrative assistant, and my paychecks looked something like this.
After New York City & State Taxes, I took home $2,924.11 a month.
- 50% = $1,462 in living expenses like rent and utilities
- 30% = $877.00 for spending money
- 20% = $584.82 for debt repayment
I know these numbers, because I’ve been using the Learnvest My Money Center to track my income and expenses all these years, so it’s nice to be able to grab historical data such as this for these posts. If you don’t already have a budgeting app, I highly recommend Learnvest.
Best of all, I was paid once a month, which was actually easier to pay down debt because I did it all at the start of the month. I know in reality this shouldn’t make any difference in the way I budgeted vs. when I had bi-weekly paychecks later on, but for some reason, budgeting off that once-a-month payment was super easy for me.
Step #3a - Set Up An Emergency Fund
It’s also important to note here, that I wasn’t splitting that amount between debt and savings, I was living paycheck to paycheck because every spare nickel went to debt.
For the record - I don’t recommend this. I think it’s important to save simultaneously that way when you’re done paying off debt, you have something to fall back on in case of emergency, but I was young and felt confident in my job security.
Step #4 - Enable Autopay
This point is important.
Looking back on it, as I write this piece, it almost seemed easy to pay off that $10,000. I committed to a timeline, set my payments to autopay and just let online banking do its thing. I was living and working in New York City, and while paying off my debt was the priority, I don’t remember devoting as much mental energy to the payoff as I did for the $8k in 90-day challenge.
Autopay is what made this a reality for me. I had autopay set to minimums, and then I did the Debt snowball method. Once I paid off a card in full, I routed that minimum to the next card and so on.
Step #5 - I Mainly Paid Off Debt While Living in New York City by Sticking to My Budget (..Arguably The Hardest Part)
Ironically, even though I was living in a place like New York City, where many people easily pay over 30% of their incomes in rent (most budgeting sites recommend spending no more than 30% of your take home pay on housing), I had very low living costs because I opted to live with multiple roommates.
Being able to swing this was due in part to being young, and very much part of the “culture” of living in NYC - everyone has roommates. Now that I’m 30, I doubt I’d want to live with that many people, but at the time it was both super economical and fun.
Here are a few other ways I was able to shave money off my monthly budget.
- I received many perks at work that allowed me to lower my cost of living - they paid for my cell phone, home internet, gym, and gave me a daily meal stipend for lunch (which I often stretched to two meals a day, because, hello, I was poor.)
- But even though $877 is a lot “fun money” it didn’t go far in New York City, and I also had a lot of expenses at the start because I moved with nothing. I had to buy a bed and a mattress, cold weather clothes, and snow boots. I also used a fair amount of this money to travel home and visit my family twice a year.
- I remember my roommates and I entertained at home A LOT. Always having people over for wine instead of going out. We also took advantage of a lot of free events in the city. Sometimes I feel it was easier to pay off debt when I was younger because we were all broke, and so it was easier to hang out and be social without dropping a ton of money.
- New York is one of the most vibrant cities in the world. There’s a lot to do there that is very expensive (read, broadway shows and fancy dinners and cocktails) but there’s also a TON to do that is very budget friendly. Get creative, read the paper to find free events, or at the very least, grab friends and do a picnic in Central Park.
- But I also made other “budget savvy” choices: I wore the same seven outfits to work all the time. I took the subway whenever I could instead of a cab, and I often brought home snacks from the snack closet at work to offset my grocery bills.
Step #6 - Create Visual Reminders of Progress
Super cheesy, but anytime I paid off a card in full, I printed off the zero balance screen, highlight the “0.00” on the page and tacked it to my refrigerator.
This was the very first iteration of the debt vision board I tout in both this post and my course, The Debt Master Plan, and my first type of visioning exercise. It felt so satisfying when I was able to print the screen and put it on my fridge, and I know first-hand how little efforts like this go a long way to keeping you motivated and encouraged.
Step #7 - Make Extra Payments (Even if They're Small!)
Using the breakdown above, I should’ve paid off my credit card debt in around 17 months, but I did it in 14.
Whenever I had an extra $30 or $50 leftover at the end of the month, I’d make an extra debt payment. It was slow going, but every little bit (and it was always just that...a little bit!) helped me shave 3 months off my debt payoff timeline.
Step # 8 - Avoid Lifestyle Inflation
I hope this piece especially inspires young people (think right out of college) to pay off debt ASAP. Paying off debt when you’re young and on a small salary isn’t as tough since you’re still on a college lifestyle. Like, seriously. Looking back on my two debt payoff journeys - one I did at 23 and the other at 28 - the one I did later in life felt way more difficult because I had to "cut back" a lot more.
At age 23, my $45,000 annual salary felt ginormous.
In Conclusion
I hope this post displays that paying off debt on a low salary while living in an expensive city is entirely possible with a few strategic choices, the ability to commit to a budget and stick with it. This is something ANYONE can do, regardless of their ability to side hustle.
After all, way back then, I wasn’t a blogger, I didn’t know what a “side hustle” was, and I was able to get by and meet my financial goals by simply budgeting a small salary.
You got this!