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We must face our fears to obtain success, maybe I read that somewhere, or perhaps I made it up.
However, for a very long time, being broke was one of my biggest fear, and I ran from the word debt until I realized I was in it, but not as deep as I thought.
Consumer debt is my issue. Thankfully, my student loans were paid off by my dear grandfather – God bless him.
Unfortunately, his saving me from that stress, enabled me to spend my money whenever, however, and wherever I want.
Coming from a household that spoke little about managing finances and predominantly on how to acquire money- legally, of course- had me live above my means and float.
I didn’t drown in debt, I floated.
What is Floating in Debt?
You don’t hear that much.
If you don’t know, to float in debt is having the means to pay for your necessities -rent, food, utilities, health, business, and mild entertainment- and overspending on your wants and desires.
I tell myself over and over how I don’t need to purchase this or that. Still, the things I do buy are expensive and unnecessary because I don’t live in, or desire the lifestyle I buy into, that’s a different post.
So, since my basic needs are met instead of investing my extra cash into my future, I would spend it. This spending had me living paycheck-to-paycheck and credit card debt.
I would pay off my credit card and fall back into reusing and abusing them until I felt like I was drowning.
It wasn’t until I was reading ‘Broke Millennial’ and practicing (zero-sum budgeting)- which taught me a lot about my financial spending habits- I realized my method of paying off debt was hurting me.
What is Debt Avalanche?
The method is known as ‘Debt Avalanche’ while many of you may have heard of this method to pay down debt, don’t get me wrong it works well for many people, but not for me.
If you don’t know what Debt Avalanche is, it is when you start by paying off one debt and then use that money you were paying off a debt with for another debt, until all of your debt is paid off.
It’s pretty simple, and it takes a lot of time, depending on how much debt you have. While I could’ve easily used this to pay off my consumer debt, the Debt Avalanche method kept me in an overspending cycle.
I would start by paying off one credit card and put it aside for “emergencies.” I would use that money that paid off the previous credit card towards another, but I would always end up using the paid off credit card- lack of discipline.
Time and time again, I would sit down at the end and beginning of every month and wonder how did I manage to overspend. I was just about to give up on the book ‘Broke Millennial’ because the last budget I tried didn’t work, but as I was telling myself to read one more chapter, that’s when I realized my issue.
The Debt Avalanche is often the “right way” to pay down your debt… However, it could also be the option that’s most likely to lead you back to your life of overspending.”
Lowry, Erin (2017) Yikes, I Already Have Consumer Debt What Now? Broke Millennial, 4.100. New York New York, NY. Penguin Random House LLC.
- I was spending my money fast.
- My brain couldn’t decipher the fact a paid-off credit card did not mean I had extra cash.
After Debt Avalanche Fail
Once I realized where my problem in overspending was, I was able to try a tactic that worked for me. Which was to build an emergency fund and incorporate a budgeting strategy that worked for me, which are zero-sum budget, and percentage budgeting.
Instead of paying each credit card debt down one by one. I began to pay each debt individually at the same time with a payment I was comfortable with.
This repayment method is similar to Dave Ramsey’s debt repayment technique Debt Snowball.
This method allowed me to budget for all of my credit card debt instead of the one that might be maxed out.
One must note to understand your finances, you go through some trial and error to find out what works for you.
While some stick to their family financial traditions, others have to find their own methods, and I got lucky enough to be apart of the others crowd.
While I am still in the process of understanding, tracking, and growing my finances. Knowing where mistakes are taken place and catching lousy spending habits through the mint app gives me and my bank account less of a headache.
My goal once all of my credit cards are paid off is to get in the habit of not spending that leftover cash and watch it grow with interest instead of paying interest off.