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How I dealt with debt and personal relationship turmoil and came back in a normal financial life

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Today’s post is contributed by Amy Nickson, a passionate writer on finance. Amy is a professional blogger whom has started her own blog and also works as a contributor for the Oak View Law Group. Please share your opinions by commenting below.

How I dealt with debt and personal relationship turmoil and came back in a normal financial life

I grew up with my mom; she was the only bread earner of my family. My mom was more like a friend than a mom. She pampered me, cared me and tried to fulfill all my desires. I used to share my feeling, everyday ups and downs until I entered my college and found a boyfriend. During that time Starbucks was our destination to hang out. My mom had given me a credit card for convenience, but for me, it was the medium of fulfilling every lavish desire like planning several trips, shopping, and partying.

At the end of the college, I got a job and soon I took out an auto loan and bought a brand new Volkswagen Beetle. My mom told me to buy a small car, but I didn’t do that and bought the new car to impress my new friends.

All was well until I discovered the life-taking illness of my mom (liver cancer). She was admitted to hospital for 15 days and passed away leaving me alone. That time I was already in $88,000 outstanding debt including credit card debts, student loan, and a car loan.

I was totally devastated. Even my boyfriend, who mostly used my income, left me and settled down in another state with a good job.

There was no one to help me. I spent many sleepless nights thinking about my mom and her last word that she told me on her deathbed. She told me to get organized and become established.

But, I was thinking how could it be possible with so many financial obligations? To get out of the financial calamity, I had no option, but to sell the house.

I opted debt settlement to pay off the debts

Some days later, I called a friend John, who is a financial advisor, for getting advice to get out of the intense financial situation.

Since I had a job, he suggested to me to consider debt settlement. I opted for the settlement program and paid off the higher interest credit card debt ($16000).

I was unable to continue the service as my earning was low.

I still had to pay off $35,000 credit card debts including a car loan and student loan debts.

How I paid off $35,000 credit card debts on my own

Again I called John for help; he told me to boost my income first. He suggested to me to start freelance working. He helped to get some online blogging projects to start with.

After a few months, I started earning a good amount through the freelance projects.

Then, John told me to pay off the lowest credit card balance by paying extra while making minimum payments to the rest of the debts.

By following this method (debt snowball), I was able to pay off the lowest balance on my own.

I still remember the day when I smiled for the first time after losing my beloved mom. I went to her graveyard to let her know about my first win.

Yes, debt snowball method was the ray of hope for me. When I opted debt settlement, the heavy amount made me scared.

I kept following the debt snowball method to payoff the rest of my debts. I was determined to get rid of debts. To do so, I saved the remaining monthly income after meeting the basic necessary expenses. I paid off my credit card debts successfully after 3.5 years following this strategy.

How I paid off the auto loan and saved money

Since the car loan was extremely high, I decided to sell the car to pay off the loan. I rented the garage and a portion of my home to earn some extra money. After paying off my credit card debts, I bought a small car with cash and saved money on the interest rate.

How I paid off $37,000 student loan debt

The student loan debt payoff journey was smoother than the credit card debt payoff journey. Because the credit card debt payoff journey had taught me quite a bit of financial insights.

The debt journey totally transformed me from an extravagant person to a frugal person

  • I started following a monthly budget.
  • I cut down all the unnecessary costs like cable, gym memberships that I hardly used, and club memberships, etc.
  • I started setting aside a certain part of income into a savings account as well.
  • I stopped partying and clubbing and also didn’t plan a single trip during the debt payoff journey. (However, after paying off the credit card debts, I made a short trip to celebrate my win.)

Debt is debt; student loan debt was also a burden which I wanted to get rid of badly.

To do so, I started following the frugal lifestyle and extreme savings to save as much as possible so that I could pay a little extra than the minimum payments.

Finally, I paid off the loan after 3 years.

Lessons I learned from my debt payoff journey

Honestly, the financial and personal relationship turmoil forced me to learn some crucial lessons;

  • I realized, when parents shower their love to a child, he/she shouldn’t take them for granted. I shouldn’t have used the credit card recklessly that my mom gave me for emergency use.
  • College time is a very delicate phase; you should be very careful to build a personal relationship. You can make friends but if you trust someone blindly and let the person use your money, then you should be 100% guaranteed about the person’s feeling for you. Otherwise, the person can use you as a bank account. More heartbreaking is, when the person realizes you have no money, he/she can leave you forever.

I learned some financial lessons as well

  • I learned the importance of living life within your means. If you spend more than you’re earning, you have to fall into debt to make the ends meet. Thus, you should follow a budget to know where the money is going.
  • The intense financial situation forced me to leave all bad financial habits like eating out, partying, going to long trips, etc. Now I know how much I can afford to feel rewarded. So, I plan to have fun based on my savings.
  • The most important lesson that I learned is that credit cards are dangerous if you don’t manage them properly. If you use credit cards and don’t make payment within the stipulated time, then you will be in credit card debt. Thus, you have to use credit cards to get an item when you know you can afford the item.
  • Lastly, the importance of good income is also important. I am very grateful to my friend John, who is now my fiancée and who told me to boost income. The part-time blogging is now my full-time job, and I am earning well.

Now John and I are planning to make investments to secure our financial future. I have started saving money for retirement and looking towards saving money on an HSA (Health Savings Account).

I believe in “all’s well that ends well.” So, I am quite happy that now I am a more organized and settled person that my mom always wanted me to see.

 

3 comments on “How I dealt with debt and personal relationship turmoil and came back in a normal financial life”

  1. What a hard road. I can tell that your mother was a wonderful woman and you miss her very much. But I can also bet she would be very very proud of you today. It’s not easy to climb out of that mindset and tackle that debt.

  2. I cannot believe what it must have felt like to first loose a family memer to whom you were clearly so close, but then to also be heavily in debt. I am in awe at how you managed to work your way out and up. Amazingly done!

  3. Reply

    Congratulations to you on turning things around like that! Look at it this way, you learned from your mistakes and turned it around at an early age. The fact that so many people in their forties and fifties don’t have any money saved for retirement and are still in debt shows that most just keep making the same mistakes over and over again.

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