Living in LA definitely has its perks. The weather is amazing, the beach is a 20 minute drive away, and there’s a ton of great shopping……but how do you live in a city where the pressure to look and dress well is bad for your wallet? If you are like me, the temptation to get the latest jeans or that cute dress can be very hard to resist. I turned to a few oh-so-shiny credit cards to pay for them.
Before long I was in debt and practically maxed out on all of my credit cards (yes I had a few!). It seemed like every month, I was making payments, but they never made a difference. If you are also in credit card debt and see no way out, keep reading for my story and tips on how I got out of debt while still living in a town where there’s always pressure to have the latest designer duds.
Step One: Recognize there’s a problem
Every person is different, but if you are like me and have no control when it comes to swiping that card to buy the latest top, coming to terms with your shopaholic tendencies can be hard. That instant rush of having the latest can feel great in the moment or on that fun night out with your friends…until you see your month’s bill and how much you actually owe. Puh! I finally hit my breaking moment 6 months ago, right before Christmas. It was the season to be jolly and time to start buying gifts but I had no money and I felt simply low. All my cards were maxed out and my paycheck was going to making minimum payments on all of them. How was I going to buy my parents gifts when I couldn’t afford anything? Even making DIY gifts required some money to buy supplies! This was my moment where I realized that I was in trouble and needed financial help.
Step Two: Assess the situation and create a budget
Since I had no control with my credit cards I had to find someone to help me keep them in check. Luckily, one of my good friends is debt free and I knew I could go to her for advice. Let me tell you, it was very humbling to ask for help, but I knew that I needed it to make a change. If you know someone that is in a great financial situation and whom you trust, consider asking him or her to help mentor you and help you create a budget.
First thing we did was to sit down and look at what I owed. I can tell you it was very embarrassing to see my entire credit card situation in front of me! We made a list of all that I owed, my monthly income, and my absolutely necessary expenses, ex. food, gas, cell phone bill etc. When you have several cards that you owe money on, the best advice is to pay off the entire amount of the card that you owe the least amount on (if possible to make it one payment, go for it! If not then make the highest payment you can until it is paid off) while making the minimum payment needed on your other cards. This is called the “Snowball effect” and it worked for me. Once the smallest card is paid off, you can then move on to your next card with the lowest balance and make the highest payments you can while only paying the minimum balance on the rest of your cards. This is a great method because you actually see the results.
The biggest change for me was that I completely had to switch to a cash diet. I was no longer allowed to use a card for anything. No, not even when going grocery shopping. With each paycheck, I had to visit my bank to withdraw the cash that I was going to live on. My credit cards were locked away in my house and I was not allowed to touch them. When you actually have to count out your money to pay for something, it gets harder to justify spending money on certain things. I started eating cheaper and actually saying no to going out with friends. I stopped buying coffee since I didn’t want to pay almost $5 for it anymore. It made me accountable for what I was spending my money on.
Step Three: Stick to the Budget and Keep your eye on the prize
My first two months were the hardest but after a while it got easier. I learned what my priorities were when it came down to spending my cash. I would suggest making an inspiration board and hanging it on your wall with your top five financial goals. Maybe it’s to save up for a new car, or to have enough money to move out of your parents house, or even saving up for that European vacation you’ve been waiting for. Whatever it may be, write it down and put it somewhere where you will see every day to remind you of your goal. At first, you may be tempted to go back to your habit of swiping that card, but you have to ask yourself, is this something I really need or just something that I want right now? Oftentimes, it will just be something that you are lusting after in that in particular moment and not something you don’t really need. I always took a deep breath, clutched my purse tightly, and walked out of the store before I could make a purchase. I’m not saying that I didn’t make mistakes along the way, but I would always feel the remorse quite heavily when I bought something on a whim. That’s why you always keep your receipts so you can return things!
In June I will be making my last credit card payment. Yes, I survived living in LA and got myself out of credit card debt. I can tell you that once I make my final payment there will be a celebration….within the budget of course!
By: Iliana Carvajal