How I Gave Up Debt: From $20,000 to $0 in Five Years and 8 Steps
In this series, NerdWallet sheds light on people’s debt repayment journeys. This month, Kenley Young shares how he combined many debt reduction tools, with the knowledge he gained working at NerdWallet, to wipe out credit card debt.
Paid: Over $20,000 in 5 years
In the first week of 2022, I ticked off a longtime New Year’s resolution: I paid off the over $20,000 in credit card debt that I owed for about two decades.
It was far from an overnight success. I didn’t really start attacking my debt deliberately until the summer of 2016. Over five years later, by the time I reset my balances on those two credit cards, I had the impression of having exhausted all the tricks of the book.
Even acknowledging my difficulties with debt makes me embarrassed: I work at NerdWallet, so shouldn’t I have been able to avoid this?
Well, I know more now than I did five years ago, including how difficult it can be to avoid credit card debt as major life events unfold.
Here’s how I racked up my debt, how I attacked it — and the tools that made the most difference.
How I accumulated my debt
My debt journey started in the early 1990s with an $1,800 Martin guitar that I couldn’t afford. Once I justified this purchase on a meager newspaper salary, it wasn’t hard to rationalize travel, furniture, drink rounds, whatever.
But guitars and Guinness are one thing (well, two things, technically). Then came home. The engagement ring. Honeymoon. The vet bills a very sick dog. Moving across the country to Los Angeles for a new job. LA rent. The two children. Daycare bills.
I didn’t have any emergency fund – or any savings to speak of – so I relied on credit cards. I believed in debt in an expensive city.
how i dug
Maybe it was the afternoon I found myself driving through the streets of West LA, scanning the gutters for aluminum cans to hand over for pennies. But at some point it dawned on me that extreme frugality alone was not enough. The steps I followed from there included:
1. Move to a cheaper state
In the summer of 2016, my family and I moved from Los Angeles – one of the most expensive cities in the world – to Columbia, South Carolina, a city consistently recognized as one of the most affordable in the country.
Before I go too far with this advice, I must acknowledge my privilege and the fact that simply packing up and leaving town is not an option for everyone. Uprooting can be painful and prohibitively expensive. Not only did we lose my wife’s $40,000 salary when we moved out of town, but the move itself cost thousands of dollars. We paid for it by liquidating a life insurance policy that my wife’s late grandfather had registered in his name.
In the long run, however, it made sense. I had gotten a new better paying job that allowed me to work remotely. And despite the temporary net loss in household income, we had a soft place to land.
My wife and I are from South Carolina and our families are here. We had a village to help us up. For the first eight months, in fact, we lived rent-free with my kind and accommodating in-laws. It’s a safety net that not everyone has.
Now that we have our own house in Charleston, we are paying off a mortgage. It happens to be $1,000 a month less than our rent in Los Angeles. These savings in housing costs made the biggest difference, even though our household income had initially dropped to $95,000.
2. Use credit cards with balance transfer
Unexpectedly, the second most important weapon in my credit card debt zapping arsenal was… another credit card.
But this one had a superpower: an introductory APR of 0% on balance transfers for 21 months. I transferred a large sum to it from an existing card with a double-digit APR, so since I’ve been eating away at that balance for nearly two years, none of my payments have gone to waste on interest. This was a step I’ve used many times with similar card offers.
A few caveats about balance transfer credit cards:
- You will usually need at least good credit (scores of 690 or higher) to get one. Even though I had large debts, I had never missed a payment and had a long credit history. So my credit ratings were in good shape.
- You can only transfer balances up to the new card’s credit limit, and you usually won’t know what it is until you apply.
- You will usually have to pay a fee, often 3% to 5% of the transferred balance. So “parking” debt on these cards – letting it sit unpaid until interest picks up – is counterproductive.
3. Take Side Gigs
In another life, I was a singer and guitarist in a rock band. We broke up a long time ago, but I stuck to live music as a hobby. I also kept a lot of the equipment that I now use for side gigs.
My typical solo acoustic gig pays $150-$200, and on a good night, tipping can add about an extra $75 to my transportation. I’ve also set up a digital tip jar, so customers who don’t have cash can slip me five points via Venmo.
In a good month, I will book two to four concerts. So, conservatively, that’s at least $300 more per month than I once put on my debt and now deposit in a high-yield online savings account.
(Turns out the guitar wasn’t such a bad investment after all.)
4. Make deals work
Tax refunds, Christmas gifts, escrow surpluses. You name it – I threw it at my debt.
Of course, as a parent and owner, these bargains have all sorts of tempting uses, so prioritization is key. I had many desires, but the most important thing was to get out of debt.
5. Renegotiate invoices
We bought our house in 2017 and since then I have refinanced our mortgage twice and paid off a car loan. It saved us a chunk every month.
But smaller cuts also helped. We ditched cable, found cheaper home and auto insurance, got a better deal on our cell phones, unsubscribed from monthly services like newspaper delivery, Sling TV and more.
6. Pay with cash-back credit cards
Yes, credit cards got me into this mess. But my new job taught me a lot about them, and I knew that using the cards strategically would bring benefits.
My credit was good enough to qualify for a rewards credit card, which I used for necessary purchases like groceries and gas. I immediately paid off everything I put on this new card, so it wouldn’t add to my debt, and then used the rewards to help pay off what I still owed.
7. Use cashback websites and apps
When I heard about “double-dipping” — using a rewards credit card on a cashback website to earn both card and site rewards — I was hooked.
My most frequented sites when shopping online are TopCashback and Rakuten, but I always check the Cashback Monitor aggregation site to make sure I’m getting the highest rates.
I also joined a website called MyPoints, which lets you take surveys or take photos of receipts for points that you can redeem for cash. Now I religiously keep receipts and submit them to a variety of cashback apps: Ibotta, Fetch and Upside, to name a few.
Also, I used an app called Qoins, which lets you round purchases to the nearest dollar and put the difference into an account. At the end of the month, Qoins sends this balance – minus a fee – to your creditors.
8. Sell unwanted items
A proven way to make money fast? Sell stuff on Craigslist. I focused on popular and high-margin items, primarily electronic and musical equipment, but also toys and children’s bicycles. A kid there now has a decent used guitar that she can smash to pieces on stage one day.
And it wasn’t just cargo that I unloaded. Many holiday seasons I received a gift card to a store I rarely visited. It’s the thought that counts, of course, but many times my main thought was, “If only I could liquidate this thing.”
Good news: many online exchanges allow you sell unwanted gift cards for cash, although you don’t get full face value.
After eliminating credit card debt, I can focus my resources elsewhere. My wife and I started a monthly budget and tracked our expenses. We set goals for travel, home improvement, investing and saving.
Our discussions are not always easy. Talking about money – especially debt – rarely is. But I found that facing my debt and being honest with myself about it made the process easier.
Photo by Jonathan Sharpe.
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