"I paid off $20,000 debt in 18 months. There were 8 rules I lived by."

Amy, a 32-year-old accountant looked like she was living her best life. She rented a fabulous apartment in the eastern suburbs of Sydney, was going out for drinks, endless brunches, giving herself little shopping treats here and there, mini weekends away with friends and ubering all around town.

On Instagram anyone would think she was living the dream. But there was a secret looming over her which she knew she would soon have to face. After she didn’t get the pay rise she had expected at a job performance review, it became clear that now was the time. She took out her credit card statements - yes, all of them - and faced the cold hard truth.  

“I saw the debt and was shocked. I was in $20,000 of credit card debt and, apart from superannuation, I had almost no assets (I was renting, had less than $1k in savings, no car and no investments), I knew I had to make a massive change”, Amy said.  

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Prior to that moment Amy had always taken a more relaxed approach to her personal finances. She had known for a while she was probably living beyond her means, but had been avoiding facing the full reality of the situation and conveniently stuck her head in the sand. 

“I wasn't earning enough to sustain the life I was living. Even though I was an accountant, I actually wasn’t on a very high salary. I was living in a suburb where rent was high, I was eating out often, travelling regularly... but couldn't really afford it.”

In 18 months, Amy was able to get out of $20,000 worth of debt. 

And she took precisely eight steps.

1. She had an honest pep talk to herself 

"Realising you are in debt, or finally coming to terms with the reality you actually knew about for some time and accepting it, can be quite confronting. It is really easy to beat yourself up over your past behaviour. The reality is that these thoughts are not going to help you move forward. Once you accept the situation, and your past spending behavior, making a commitment and a plan to turn things around is empowering."

2. She put a plan together

"Take a few hours to summarise all your debt on one page. Then create a strategy about how you can start to reduce it and a realistic timeframe to pay it off." 

Molly Benjamin, Money Coach and Founder of Ladies Finance Club recommends the snowballing method to get out of debt. 

• First you list out your debts smallest to largest (everything from fines, to credit cards and ‘Buy Now Pay Later’ schemes etc.). 

• Second pay the minimal requirements on all the debts. Molly recommends you really focus your attention on paying your small debt first. 

• Third get rid of any credit cards (this is always the hardest part).

• Then, finally, once the smallest debt is paid off, continue with the next debt on the list.  

"When you pay off your first debt, you have a sense of achievement, your brain gets that hit of dopamine and it builds momentum to keep going, when you pay a little bit off a big debt, it’s hard to see the progress and you can lose motivation," Molly says. 

3. She got support 

After listing out all her debts, Amy sought the emotional support of friends and family members. They helped to reassure her that getting out of $20,000+ of credit card debt was possible, but that it would require her focus and attention.

Ladies Finance Club Founder Molly Benjamin says this is why they introduced accountability groups into their membership. “Having someone to support and keep you accountable really helps you stay on track, keeping your situation a secret can make it feel like something shameful, which it doesn't need to be”.  

4. She tracked her spending 

“I kept a small book and pen and wrote down every single thing I spent. I did this for the first few months when using my weekly $100 discretionary budget. The act of having to write it down made me think before I would buy something. It made me see how all the small purchases really added up.” 

5. She lived on a weekly cash budget 

“I put all my credit cards away and each week I withdrew $100 cash for 'discretionary' spending. This cash was all I had for 7 days for all expenses outside of food, rent, transport, utilities. This $100 had to cover all coffees, drinks, dinners out, lunches…”

Now in the time of COVID this might be tricky with less places accepting cash, however, at Ladies Finance Club we suggest you have a card which is just for ‘fun money’, load it with an amount and only spend what’s on the card. 

6. She used balance transfers 

“I moved the majority of the debt from interest accruing credit cards to cards which offered up to 18 months interest free on balance transfers. I wasn't approved for new credit card limits up to the amount of the total debt, so I could only balance transfer around $15,000 of the debt to 0% interest offer cards. Once this was done I paid down the interest accruing debt first (i.e. the debt remaining on the original credit cards). Once that was paid off I calculated how much I needed to pay off each month from the interest free credit cards in order to pay the debt off in full by the time the interest free period stopped.”

7. She moved house 

Now this might be a bit extreme but by moving locations Amy reduced her rent by 33% and reduced her commute costs. It was a win win. 

8. She counted the cents and the dollars

Amy did small things like bringing her own lunch to work and she opted out of expensive social activities. She also started suggesting free things to do with friends, like going for a walk, going to galleries or just meeting at the beach.

“Apart from spending less when out, the crazy thing was my social life didn't change too much. I was still able to socialise a lot but opted out of high cost social activities.”

Molly Benjamin says, "You don’t need to make a massive change and never see your friends again if you’re trying to save, you just have to get more creative."

It took 18 months for Amy to become debt free and she vowed never to end up in that situation again. "Once all the debt was paid off, I did not start spending the old way... instead, I used the money that was going to paying off debt and started the next steps in building my financial wellbeing by starting to build up an emergency fund and now have invested in EFT (exchanged traded funds) on the stock market." 

Ladies Finance Club empowers women to get money savvy without the boring bits. They run a tribe and investing courses to help educate and keep you on track of your financial goals. Check them out at www.ladiesfinanceclub.com or join their Facebook group Ladies Finance Club Money Chat.  

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