How I Paid Off Over $40,000 in Debt: A Journey from Overspending to Financial Freedom

For years, I was more of a spender than a saver, despite spending a lot of time thinking about saving money—especially for retirement. It wasn’t until a startlingly obvious observation hit me that I realized my spending was delaying my only long-term money goal: retirement. The more I spent, the longer I’d have to work. The problem was, I had no idea how much I was actually spending.

Reining in Revenge Spending to Pay Off Debt

I knew I was burning through money, but as a self-identified spender, it didn’t bother me as much as it probably should have. Scientific research backs this up: savers feel the pain of spending money more acutely than spenders. Brain scans have shown that the area of the brain associated with pain lights up more for savers when they part with their money. Additionally, savers often find the act of saving money itself rewarding, while spenders enjoy the mood-boosting power of shopping, especially when stressed, sad, or bored.

The COVID-19 pandemic saw many people, including myself, indulge in “revenge spending” as a coping mechanism. I splurged on hobbies and home renovations, but eventually, my cash flow dried up, and I had to face the reality of my financial situation. YOLO (you-only-live-once) spending was no longer boosting my mood; instead, I felt stressed and trapped by debt.

Taking Control of Spending by Tracking Expenses

Free planning tools, such as budgeting and expense tracking, were instrumental in getting my spending under control. If you find yourself in a similar situation, tracking expenses is a great place to start. Here are some tips I learned along the way:

1. Don’t Judge Yourself for Past Spending Decisions: Budgeting is just math. Try to approach it dispassionately. The first time I tried tracking my expenses, I got overwhelmed and abandoned it for weeks.
2. Get Organized: Ease into the process. Start with one step at a time, such as linking accounts to a budgeting app, downloading spending history to a spreadsheet, or writing down every expenditure.
3. Limit Payment Methods and Make a Plan: Simplifying spending can make tracking easier. Using multiple payment methods complicates the process. While cash is convenient, it’s harder to track multiple small purchases. Planning your spending helps make tracking easier.
4. Set Realistic Goals: Not everyone needs detailed tracking. Some people just need a hard spending limit. For example, you might set a goal not to spend more than $2,000 a month and keep it simple.
5. Review Ways to Reduce Expenses: Forgotten subscriptions, expensive supplements, and beauty products were some easy areas for me to cut costs. Avoiding random online shopping sprees also helped significantly.
6. Make Spending Harder: Unlink credit cards from favorite retailers and avoid services that let you check out without entering card details. Implementing a waiting period before making purchases can also curb impulsive buys.
7. Schedule Time for Your Money: Treat it as self-care. Check in regularly to ensure you’re on track. Combine it with something enjoyable, like having your favorite wine while reviewing your expenses.
8. Grow Confidence by Learning and Talking About Money: Be proud of managing your finances well and openly discuss budgeting. This can help normalize good financial habits and reinforce your commitment.

From Silent Spending to Loud Budgeting

As I began tracking my expenses, I faced some harsh realities:

• My average monthly spending for the preceding three months was roughly twice my monthly take-home pay.
• Any spending above my take-home went on credit cards.
• My emergency savings were depleted, and I had no extra cash to rebuild them due to high debt payments.
• Unexpected expenses seemed to hit almost every month.

To get back on track, I returned to the basics:

• I saved $1,000 to start rebuilding my emergency fund.
• Most importantly, I paid off about $44,000 of credit card debt and a variable rate home equity line of credit.

Now, my focus is on saving more for emergencies, aiming to cover six months of essential expenses. Once that’s secure, it’s full speed ahead towards retirement. Keeping my ultimate goal in mind makes the choice between spending and saving much easier.

Setting Money Priorities

If you’re unhappy with your spending and saving situation, there are steps you can take to turn it around. Spending isn’t inherently bad—you work hard to earn money, so you should enjoy it. The key is aligning your spending with your values and priorities, ensuring you spend on things that truly make you happy, both now and in the future.

Tracking your expenses closely might not be necessary forever. Building a strong habit of spending less than you earn and saving for the future lays the groundwork for more sophisticated wealth-building strategies. This includes maximizing contributions to tax-advantaged accounts and saving in tax-efficient ways for other big goals.

Conclusion

Paying off more than $40,000 in debt wasn’t easy, but it was transformative. It required a fundamental shift in how I viewed spending and saving. By tracking my expenses, setting realistic goals, and aligning my spending with my values, I regained control of my finances and set myself on a path to financial freedom. If you’re struggling with debt, start with small steps. Track your expenses, cut unnecessary costs, and prioritize saving. With dedication and discipline, you can turn your financial situation around and build a brighter, debt-free future.