Part 2: Getting Out of Debt for Personal and Professional Freedom
In 2017, I moved from Hong Kong to Atlanta. I had been abroad for 6 years and had buried my head DEEP in the sand when it came to my personal finances. Even though I was making good money, my lifestyle was out of control as I jetted off to yoga retreats and resort vacations, binge shopped with girlfriends, and participated in one too many champagne brunches.
Around the same time that I moved back to the States, my mom sold her house and decided to gift me some of the proceeds to help pay off my student loans. This was an extremely generous move, because it motivated me to tackle whatever was leftover on my own.
So I sat down and wrote out what debt remained after my mom’s gift…
Between my credit card balance, a car loan, and student loan debt, I still owed 106k. Ouch. Convinced I had no future in America and my best bet was to change identities and move abroad permanently, my mom suggested we go through Dave Ramsey’s Financial Peace University together as accountability partners (she had quite a bit of debt of her own at that point).
FPU is not for everyone. Dave Ramsey is a conservative evangelical whose morals have hardly any overlap with my own. I groaned and rolled my eyes every time he said the phrase ‘Prince of Peace’. But all that being said, his personal finance ‘7 Baby Steps’ worked for me.
Over the next 18 months, I worked harder than I have ever worked in my life and tapped into a level of discipline of which I didn’t know I was capable. It was like someone had lit a fire under me and I worked those Baby Steps with the devotion of a Justin Belieber waiting in line hours before a venue opens.
The basic principles for debt payoff in this program are speed and intensity. If you are stuck with debt for too long or not making enough progress, you will lose hope and give up, Ramsey argues.
To pay off the 106k as quick as possible, I committed to…
Dissolving all of my accounts and assets in Hong Kong (I had saved up about $27k during my 4 years there) and put it entirely on the debt, leaving me $79,000 left to tackle
Cutting my expenses to practically nothing. No concerts, no restaurants, no spa or salon services, no shopping, no travel, no tattoos, no coffee shops or bars, no name-brand products (hello Great Value and Suave products)
Increasing my income and working extra jobs. I worked a total of 5 jobs during those 18 months, although not always at the same time. I was a full time teacher and got a pay raise when I became a Head of Department, and I also worked as a summer camp counselor, IB exam assessor, rev.com transcriptionist, AND babysitter.
Operating only in cash. I had a dorky wallet with different sleeves or envelopes. I put in my grocery money for the month, gas money, etc. and once each sleeve was empty, I could either move cash from a different designation or wait for a top up when the month ended. This kept me living within my means. I did ‘treat’ myself to $10/week that I could splurge on something random, which addressed my impulse spending.
The snowball method in particular was really motivating. Rather than spreading my payments across all the different loans, I used the snowball method to tackle the smaller debts first, and once those were paid off, I rolled that money into the next debt. By the end, a LOT of money was going into the final payment each paycheck, so I could see my progress, which kicked me into even higher gear.
As soon as I paid everything off, I quit the part time jobs but kept the minimal spending momentum going and saved $10,000 in an emergency fund as my next Baby Step.
I don’t know if I would have been able to afford to take time off work and experiment with career options if I still had that 106k in debt. It gave me the freedom to walk away from a situation that was no longer serving me. Being debt free gave me freedom in so many senses of the word.
Check out this lesson on personal finance principles for beginners that I developed for more resources.
