Face Your Debt, Spit in its Eye, and Thrive

You can’t fight what you can’t see.

[Image: a paper chain made from magazine pages] This is just my credit card debt.

Note: Since I posted this, I’ve reduced my overall debt by about $3,000 just by tracking and saving. I’m astonished.

Every link in this paper chain represents $1,000 I owe to credit cards. There were 25 links when I snapped the picture in December. There are only 24 now. The chain shows me the beginning of my long process of liberation: at least two more years till I’m done, but probably more like five.

Then there will be other debts to clear. I’m in it till 2025.

All told, I owe just over $450,000 in mortgage, student loans for me and my husband, medical bills, a car loan, the credit cards…you get the picture. As detailed here, I know I might never get through it all. But you can’t manage what you don’t measure.

So, taking a cue from J.D. Roth of Get Rich Slowly (actually, from his reader Alissa) and Kitty of Bitches Get Riches, I decided to get physical with my debt. That’s right: when the going gets tough, the tough drape themselves with chains made from old Smithsonian magazines.

You can’t manage what you don’t measure. So I decided to get physical with my debt.

Here are a couple of my smallest debts. The top one is the remainder I have to pay on a payment plan to the state for 2016 taxes. The bottom one is a medical bill:

These’ll both be gone by the end of 2019.[Image: Two small paper chains with six and eight links]

During 2019, it will get worse before it gets better. We will have to take on a loan to replace our house’s roof (can’t wait anymore) and to hopefully get my son through the last two years of college (because the savings of two families only got us two years). By the end of the year, we could have negative net worth.

Why am I so happy?

Because this is changing. It won’t change dramatically in 2019, and maybe not even much in 2020, but within five years, our lives are going to be very different. I’m already seeing the benefit of retiring our credit cards in October and focusing more of my energy on getting rid of debt.

How are we turning things around? Two new habits.
Peggy Olson’s triumphant hallway walk on Mad Men. Via Vox

I now budget and track daily expenses.

We’ve gone back to collecting paper receipts and logging them into a budget spreadsheet (if you hate paper, you can also do this by using your bank‘s software or an app like Mint or Personal Capital; I use Mint but I also find the spreadsheet approach simpler to visualize, and the physical activity of logging expenses helps me stay aware).

The key that made it work for me was budgeting by the paycheck, not by the month. I acknowledge that for years this would not have worked for me because I was a freelancer with uneven income (check Mint for tips on budgeting for freelancers).

The key that made it work for me was budgeting by the paycheck, not by the month.

I have shifted focus from simply trying to control debt to also saving.

I know, I know: debt costs so much, you should put every penny you have every month toward paying it down. Problem is, each time I did that, it would ratchet back up as soon as we needed tires or gave in to the impulse for take-out or had a sudden dental emergency for the geriatric cat (true story, $500). So on October 1, we started a modest savings plan: $60 a month toward a $1,000 emergency fund, which we expect to have by April. After that, we’re aiming to save three to six months’ worth of living expenses. Doing so could take years, but it will happen.

Funny thing — and many other people report this phenomenon — but the second month we found a little more money to save, and the third month too. Sometimes, I admit, I do shift back a twenty or so when we’re low at the end of the month, but so far I have been able to repay and add to it at the beginning of the next pay period.

Changing just those two habits — establishing a budget and establishing short-term savings — has shifted us from paycheck-to-paycheck in only three months. Budgeting also showed me that we must bring in extra income to make a real difference. So I am earning about $150 per month in gig work now, tutoring through Chegg Tutors and getting small payments from User Testing and Mechanical Turk. I am hoping to get it to $500/month soon. My husband is applying for positions to grade papers at his school or do other work, including possibly working part-time at our grocery store, which would also help us with a discount.

So go ahead. Start from where you are. Figure out exactly what you earn and what you spend, and then assign the rest to savings or debt repayment. Don’t be discouraged if it’s only a little — my initial contribution to savings was $60, and in the first month I had to use it and pay myself back, but I’m now routinely putting away $100 each month. Set a few goals for 2019, and know that I will be here alongside you, doing my part to manage my own traumatized budget.

Visualizing my debt with a paper chain is a hack I picked up from Get Rich Slowly, one of my favorite money blogs. Check out J.D. Roth’s sane advice — he is way further down the road than I am, having achieved financial independence in his forties.

Need to start a budget? Check out these four approaches — soon to be five, when I add Paula Pant’s Anti-Budget.

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