It began with a guitar, and was a $20K debt: How I paid it off in 8 steps

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This article is reprinted by permission from NerdWallet. In this collection, NerdWallet highlights individuals’s debt payoff journeys. This month, Kenley Young recounts how he mixed plenty of instruments for chopping debt, with information he gained working at NerdWallet, to wipe out bank card debt. 

In the primary week of 2022, I checked off a long-running New Year’s decision: I paid off the greater than $20,000 in bank card debt I’d owed for about 20 years.

It was removed from an in a single day success. I didn’t actually begin attacking my debt in a deliberate approach till the summer time of 2016. Five-plus years later, by the point I zeroed out my balances throughout these two bank cards, it felt like I’d exhausted each trick within the ebook.

“At some level, it dawned on me that excessive frugality alone wasn’t sufficient.”

Even acknowledging my struggles with debt makes me self-conscious: I work at NerdWallet, so shouldn’t I’ve been capable of keep away from this?

Well, I do know extra now than I did 5 years in the past, together with simply how troublesome it may be to keep away from bank card debt as main life occasions unfold.

Here’s how I racked up my debt, how I attacked it — and the instruments that made essentially the most distinction.

How I accrued my debt

My debt journey began within the early aughts with an $1,800 Martin guitar I couldn’t afford. Once I justified that buy on a meager newspaper wage, it was no sweat to rationalize journey, furnishings, rounds of drinks, no matter.

But guitars and Guinness are one factor (properly, two issues, technically). Then, got here the home. The engagement ring. The honeymoon. The vet payments for a really sick canine. The cross-country transfer to Los Angeles for a brand new job. The LA lease. The two youngsters. The day care invoices.

I had no emergency fund—or any financial savings to talk of — so I leaned on bank cards. I used to be drowning in debt in an costly metropolis.

How I dug out

Maybe it was the afternoon I discovered myself driving the streets of West LA, scanning gutters for aluminum cans to show in for pennies. But in some unspecified time in the future, it dawned on me that excessive frugality alone wasn’t sufficient. The steps I took from there included:

1. Moving to a less expensive state

In the summer time of 2016, my household and I moved from Los Angeles — one of the crucial costly cities on the planet — to Columbia, South Carolina, a metropolis routinely acknowledged as one of the crucial reasonably priced within the nation.

Before I get too far with this tip, I have to acknowledge my privilege and the truth that merely packing up and leaving city will not be a risk for everybody. Uprooting your self might be painful and prohibitively costly. We not solely misplaced my spouse’s $40,000 wage after we left city, however the transfer itself price hundreds of {dollars}. We paid for it by liquidating a life insurance coverage coverage that my spouse’s late grandfather had put in her identify.

Long time period, although, it made sense. I’d gotten a brand new, higher-paying job that allowed me to work remotely. And regardless of the momentary internet loss in family revenue, we had a delicate place to land.

My spouse and I are from South Carolina, and our households are right here. We had a village to assist us get on our ft. For the primary eight months, the truth is, we lived rent-free with my gracious and accommodating in-laws. That’s a security internet that not everybody has.

Now that we now have our personal place in Charleston, we’re paying a mortgage. It simply occurs to be $1,000 cheaper a month than our LA lease. Those financial savings on housing prices have been what made the most important distinction, at the same time as our family revenue had initially shrunk to $95,000.

Also see: The 5 finest —and reasonably priced —locations to dwell in California and The finest and most reasonably priced locations to dwell in Florida

2. Using steadiness switch bank cards

Counterintuitively, the second-most-important weapon in my bank card debt-zapping arsenal was…one other bank card.

But this one had a superpower: a 0% introductory APR on steadiness transfers for 21 months. I moved a big sum to it from an present card with a double-digit APR, in order I chipped away at that steadiness for almost two years, none of my cost was wasted on curiosity. It was a step I used repeatedly with comparable card presents.

Some caveats about steadiness switch bank cards, although:

  • You’ll often want not less than good credit score (scores of 690 or greater) to get one. Even although I had important debt, I’d by no means missed a cost and had an extended credit score historical past. Thus my credit score scores have been in good condition.

  • You can switch balances solely as much as the brand new card’s credit score restrict, and also you often gained’t know what that’s till you’ve utilized.

  • You’ll sometimes owe a charge, typically 3% to five% of the transferred steadiness. So “parking” debt on these playing cards — letting it sit there with out paying it off till curiosity resumes — is counterproductive.

Also learn: Suze Orman says to do that proper now for those who’re frightened about inflation

3. Taking on aspect gigs

In one other life, I used to be a singer and guitarist in a rock band. We broke up way back, however I held on to dwell music as a interest. I additionally held on to a lot of the gear I now use for aspect gigs.

My typical solo acoustic gig pays $150 to $200, and on a great night time, ideas can add an additional $75 or so to my haul. I’ve additionally arrange a digital tip jar, so patrons who don’t carry money can slide me a five-spot by way of Venmo.

In a great month, I’ll ebook two to 4 gigs. So, conservatively, that’s not less than an additional $300 a month that I as soon as put towards my debt and now drop right into a high-yield on-line financial savings account.

(Turns out that guitar wasn’t such a foul funding in spite of everything.)

4. Putting windfalls to work

Tax refunds, Christmas items, escrow overages. You identify it — I threw it at my debt.

Of course, as a father or mother and a house owner, these windfalls have every kind of tempting makes use of, so prioritization is vital. I had plenty of needs, however the greatest was getting out of debt.

5. Renegotiating payments

We purchased our dwelling in 2017, and I’ve since refinanced our mortgage twice and paid off a automotive mortgage. That saved us a bit every month.

But smaller cuts helped, too. We ditched cable, discovered cheaper dwelling and auto insurance coverage, received a greater deal on our cellphones, unsubscribed from month-to-month companies like newspaper supply, Sling TV and extra.

Read: ‘I’m a 53-year-old single man with little or no financial savings’: I wish to take out a 30-year mortgage, however pay it off in 7 years. Is that potential?

6. Paying with cash-back bank cards

Yes, bank cards received me into this jam. But my new job taught me rather a lot about them, and I knew that utilizing playing cards strategically would reap advantages.

My credit score was adequate to qualify for a rewards bank card, which I used for vital purchases like groceries and gasoline. I paid off no matter I placed on that new card instantly, so it didn’t add to my debt, then used the rewards to assist pay down what I nonetheless owed.

7. Using cash-back web sites and apps

When I realized about “double-dipping” — utilizing a rewards bank card on a cash-back web site to earn each the cardboard’s and the location’s rewards — I used to be hooked.

My most frequented websites once I store on-line are PrimeCashback and Rakuten, however I at all times examine the Cashback Monitor aggregation web site to verify I’m getting the very best charges.

I additionally joined a web site referred to as MyFactors, which helps you to take surveys or snap photographs of receipts for factors you can redeem for cash. I now save receipts religiously and submit them to a wide range of cash-back apps: Ibotta, Fetch and Upside, to call a number of.

In addition, I used an app referred to as Qoins, which helps you to spherical up purchases to the closest greenback and put the distinction into an account. At the top of the month, Qoins mails that steadiness — minus a charge — to your collectors.

Read: Personal financial savings are being depleted as Americans address red-hot inflation. People are being pressured to make ‘troublesome selections’

8. Selling undesirable gadgets

A tried-and-true option to make fast money? Sell some stuff on Craigslist. I targeted on in style and high-margin gadgets, largely electronics and musical gear, but additionally youngsters’ toys and bikes. Some child on the market now has a good hand-me-down guitar she will smash to bits on stage someday.

And it wasn’t simply merch I unloaded. Many vacation seasons I acquired a present card to a retailer I not often frequented. It’s the thought that counts, in fact, however on many events, my predominant thought was, “If solely I might liquidate this factor.”

Good information: Many on-line exchanges allow you to promote undesirable present playing cards for money, though you gained’t get full face worth.

See: Three professional ideas for a profitable, money-making yard sale

So now what?

After eliminating bank card debt, I can focus sources elsewhere. My spouse and I’ve began a month-to-month funds and monitor our spending. We’re setting objectives for journey, dwelling enchancment, investing and saving.

Our discussions aren’t at all times straightforward. Talking about cash — particularly debt — not often is. But I discovered that confronting my debt and being sincere with myself about it made the method simpler.

More From NerdWallet

Kenley Young writes for NerdWallet. Email: kyoung@nerdwallet.com. Twitter: @@kenleyyoung.

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