Let’s Get Down to Business, Or My Budget Breakdown to Get Out of Debt

Let’s talk budgeting. I hate that word, and I think most people do, too. But it’s a great tool to help limit spending and live the life you’ve always wanted. I’m a huge proponent of values-based budgeting. Spend money on what matters to you. 

I always make my monthly budget off of my net income, instead of my gross income. For those of you unfamiliar, your net income is the money that is deposited into your account. And your gross income is your income before taxes and other expenses your employer takes out. For me, that’s taxes, 5 percent into my 401(k), 5 percent in company stock, and healthcare. Since I never see that money, I don’t really put it ins into my budget. However, it’s working in the background, and that’s really important. My take-home pay winds up being just over $2200. Anything over that, I immediately put in my savings account as “extra money”. 

Currently, I have around $7,000 in credit card debt and it feels insurmountable if we’re being honest.

High-Interest Credit Card Debt 

Here’s the nitty-gritty of my current debt. I had several cat emergencies, I was hospitalized, I took on the marital debt when my ex and I split because that was easier than settling in court. Very little of this is frivolous purchases. The one “frivolous” purchase I made was my cell phone – but I use that for work so often it was a necessary purchase, even if I couldn’t afford it when my phone broke.

Citi Bank	$150	2,253.31
American Express	$50	679.69
Care Credit	$175	2,180.52
Chase	$75	2,192.90
Total	$450	7,306.42

By paying just over the minimums it’ll take me several long years to get this paid down. I’m hoping that a project I’m working on starts producing income to help this go faster. Since my goal is to have this paid off in 2 years. Thankfully my Care Credit debt is interest-free, and I’ll have that paid off in 12 months. And American Express is a small amount that I’ll have paid off by the end of the year. So I’ve started my debt snowball. 

The reason this feels insurmountable, though, is the rest of my bills. I’m thankful that I live at home and the rent isn’t much. 

All My Other Bills

Rent	$100
Student Loans	$270
Dog Training	$500
Future Car Payment	$250 (hopefully less)
Future Car/RV Insurance	$350
Total	$1,470

Some of these payments are estimated. I’m buying a new car in a couple of weeks, and I don’t want my payments to be more than $250. And my car insurance will also be a pretty penny since I don’t have the cleanest driving record. (It’s true what they say, the gay’s really can’t drive). Geico does my RV insurance (currently $50 for storage) and I’m assuming full coverage on my car will be around $300. However, this number could change. I’m fitting them into my budget right now and the amount I would be spending I’m saving for the car. 

My other payments are fairly standard: student loans and rent. Since Sylvia hasn’t completed her service dog training, I’m paying $500/month for her classes and a fun class we take together. I signed a two-year contract with my trainer and we’re 4 months into our official training. She had a good foundation when I signed her up, but a trainer was needed to help her blossom. I’m happy I made this financial decision, but sometimes I wish it wasn’t so much money. Especially when that money would boost me out of debt. 

In total, it costs me $1,920 to live without eating out, spending any fun money, or going on any excursions. Thankfully, I have a $280 margin for “misc. living expenses” before I hit my net pay of $2200. I live at home with very limited expenses outside the ones outlined above, so this is tight but doable. 

Right now, I have $500 in savings, so I don’t want to allocate more money towards my credit card debt until I’ve built an emergency fund buffer. I’m hoping for somewhere close to $2,000. Thankfully, each paycheck I make slightly more than my estimated budget of $2,200 (I just round off to the nearest paycheck, but every check is around $1,169) and am contributing about $120 a month into a savings account. Since I have money going straight into savings, I’ll be able to save $2000 in about a year. And I’m picking up overtime shifts whenever they’re offered as well. Any extra money goes into my savings account. 

How I Found Myself in Credit Card Debt

It’s hard to feel so behind when I have so much financial knowledge. I know that I could have made better choices, but I got into most of that debt (all but $679 for a new phone when mine died) when I was working as a barista and making $15k a year and going through a fairly trying divorce. Now that I have a full-time job with benefits, I’m slowly rebuilding my life. 

I don’t miss my life as a barista, but I have huge empathy for those who aren’t able to climb above their station. It’s an excruciatingly hard place to move out. You’re overworked and underpaid, and often times work 12-14 hour shifts. The energy it takes to apply to jobs and the courage it takes to believe in yourself was hard for me to muster as a college graduate who had worked an office job before. If you haven’t, it feels hard to believe it’s possible. That’s more of a battle than actually applying to new jobs. And for others, the flexibility of low-income work allows them to work weird hours and help their children, so office jobs with better pay are not an option. 

Even with the financial knowledge I had, I still found myself in a position where I needed to use credit cards to survive. And that was with living at my mother’s house. I had dental expenses to pay, several ER visits for my cats, and a hospitalization to pay for.

My Debt Repayment Plan

Overall, I don’t have a plan to speed up my debt repayment process. And I hate that for me. 

However, that’s a very short-sided way to view my goal, to say the least, especially since debt recovery is a marathon, not a sprint. In a year, I’ll have $50 freed up from my American Express card, $175 from my Care Credit card, and $120 from my savings. That’s a whole $345 to use towards my debt. A month. And it’ll snowball from there. 

I recently met with a financial advisor to go over my debt repayment plan. We adjusted some of my budgeting and determined that we’ll have the debt paid off in 28 months or so. It’s definitely not one of those “I paid off 500,000 in debt making minimum wage in 15 months” stories we read so often. But I think that it’s okay to share the slow debt repayment journeys. Things will be tight for a while, but if it were ever the time to stick to a tight budget, it’s when I’m living at home with my mom. 

And, I’m still contributing to retirement, maybe not as much as I would like to, but I’m contributing. That’s important to me.