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8 Beginning Steps to Overhauling Your Overhead; Or, How I Paid Off Over $10,000 of Consumer Debt While Making Less Than $30K a Year

8 Beginning Steps to Overhauling Your Overhead; Or, How I Paid Off Over $10,000 of Consumer Debt While Making Less Than $30K a Year


I am thinking about creating a new section to this site that concerns itself with personal finance. But before I do so, I thought I would try to gauge how much of an interest in these types of things there is in my readership. Now, if you pay attention to things like the kind of shampoo I use, you might be operating under the impression that I am a hopeless spendthrift. While it’s true that I have always had expensive tastes, I actually have a lot of experience with saving money and paying off debt. How did I get this experience, you wonder? Well, I got it the way I gather most of my experience in life: by fucking up royally and then having to clean up the mess.

When I was in graduate school, I had a low income and was living in a fairly expensive area. And before this, I had never been good at cutting things out of my budget in order to live within my means. What am I even talking about? Like I even had a budget! Hah! No, what I had was a low income, expensive tastes, and a disturbingly large credit limit. And so, while I wasn’t exactly living “high on the hog,” whatever the hell that means, I definitely wasn’t living within my means. I think I was pretty convinced that living within my means was impossible, in fact.

So naturally, one day I found myself with a buttload of credit card debt that I had to pay off, and I felt pretty desperate and pretty alone in this mess. I never missed a payment on a card, and never faced foreclosure, but for me, having debts that totaled almost as much as I would make in an entire year–with no real career job prospects–was plenty terrifying.

And so, one day I did what I always do when what I’ve been doing isn’t working anymore, whether it is with alcohol, drugs, food, money, or whatever substance I happen to be using at the moment: I hit bottom. And I embarked upon a pretty radical debt reduction program, with help from some key concepts and support groups, and began the process of slowly climbing my way back into financial sanity. Today, about 5 years later, I am consumer debt free–yes, this includes cars–with a healthy emergency fund and even a 529 account started for Mini’s college. I still have a way to go to make my personal finance picture exactly what I want it to be, but if you had told me five years ago that any of this was possible, I would have thought you were crazy.

So, let’s look at what I did. I am going to focus on the steps I took before I met Mr. Right-Click, because that was the period of my most dramatic debt reduction on the least amount of income. I did not pay off all of my credit card debt until shortly before marriage, but I did manage to pay off over $10,000.00 when I was making less than $30K a year. And here are first steps I followed (and recommend) to get out of debt.

  1. Read The Total Money Makeover by Dave Ramsey. This book/program was a lifesaver for me. If you are not already familiar with the Dave Ramsey program, it is a hardcore, no-punches-pulled approach to getting out of debt and living “like no one else.” And you know it has to be good, if I am recommending a book by an evangelical Christian and Republican. I have to bite my tongue through all the references to God and tithing and all that biblical bullshit, but I still recommend it because it is just the thing when you need to give yourself a jump start into acting like a sane person when it comes to money. When you first read it, you might think it’s too hardcore for you. That’s OK. You only have to ease into it. There was a time when I was a full-on Dave Ramsey Bible Thumper, a real strict constructionist, but now there are a few of finer points upon which I disagree with him (these have mostly to do with real estate, but we will discuss this later). Point is, if you just allow yourself to consider thinking about money and debt in a new way, you will get yourself on the right path even when you don’t follow his every word to the letter.
  2. Start listening to Dave’s radio show, if it is available in your area. If not, download a free podcast to listen to on your ipod. Yes, you will have to hear about God now and then, but it will inspire you to keep on track each day. Plus, you won’t feel alone. Because, as is the case with AA, there is always somebody who is worse off than you who is fighting the good fight, and there is always a success story to inspire you to keep going. Also, there will inevitably be situations that come up that leave you in a quandry as to how to handle them–these kinds of questions are answered every day on Dave’s show.
  3. Commit to having a written, zero-based budget for your household every month. This must actually be on paper (or on an excel spreadsheet, as is the case in the Right-Click household), and you must do it even if your income is fluctuating because of self-employment. My future articles will discuss this step by step, but for now, please see this link to get an idea of how to do this. If you are married, you should be working on the budget with your spouse, or have one spouse do it and then the other one reads it and approves it. It needs to be a goal that both partners are working towards. The main rule is that no money gets spent in your household without being on that budget sheet, and that the budget is something that you are looking at each month, keeping up with, to make sure you’re staying on the road to financial peace.
  4. Cut up/destroy all credit cards. Yes. All of them. You can keep a debit card, of course, but nothing attached to a credit line. I don’t care if you’re getting “points” on something. If you have a credit card balance that you cannot afford to pay off now, in its entirety, then you are not going to be making any money off those stupid “points.” There are always those people (my parents, mother-in-law, among others) who pay off their balances in full each month and get free airline miles, I know. But if you need a hardcore debt reduction plan, guess what? You’re not one of those people. So cut them up. You don’t have to cancel the accounts (yet), but you do have to cut all of them up now. Sorry.
  5. Related to last rule, commit to using cash (literally, money made out of paper) whenever possible. But you need to commit to paying for as many things as possible with cash. And I mean that literally–whenever you can get yourself to hand over actual paper money, the better. The reason for this is that it is more psychologically traumatic to hand over paper money for some reason than it is to use a debit card, even when money is coming straight out of your account, and there have apparently been studies done that show that you spend less when using cash because of this. No, I don’t have a source. Just trust me. Using cash also gives you a visual representation of how much money you have left in your budget for whatever category (food, clothes, etc.), which leads me to the next rule. Last, but not least, you can sometimes get deals on things if you pay in cash. Mr. Right-Click is much better than I am about negotiating this type of thing. But it’s definitely true, particularly on big purchases.
  6. Use an envelope system for organizing your budget categories. This one will draw objections from many people, but getting out of debt is rarely stylish. What you do here is that you go to the bank once a month and get out enough cash to pay for all of your different budget categories in cash. This won’t work for everything–you can’t just pay your mortgage in cash, probably. But you can pay in cash for a bunch of things. Examples of envelopes we use include: “grocery,” “baby supplies,” “date night,” “pocket money,” etc. When the money from an envelope is gone, you’re done for the month in that category. This system keeps you honest.
  7. Start looking at your house for things to sell on ebay and/or in a yard sale. Or “tag sale,” if you’re from New England. You would be surprised how many things you can turn into cash with a digital camera and an ebay account. Did I tell you I made $1500 by selling off a fugly set of china (piece by piece, of course, since the sum of its parts is worth more than the set) that I inherited on ebay. Please don’t tell my grandfather. But yeah. Stuff was sitting in a closet, wrapped in newspaper, and I converted it into CASH MONEY. Big items that are tough to ship (furniture, cribs, sports equipment) can be sold on your local craigslist, or at a yard sale. You can also donate for a tax write-off, but if you’re really hurting this is rarely of much consolation. Also, if you have a bunch of CDs, DVDs, and/or books that you’re done with, consider selling them on amazon. I have a set of tips for this that I will discuss in a later post.
  8. Check into reduced prices for utilities. If your income is below a certain level, you may qualify for reduced rates for your phone and other utilities. I got my landline phone for about $15 during most of graduate school, and received 10% off my Edison bill. Check with your service providers for information on this. Also, with cable services, a lot of times you can get them to lower the rate if you call and tell them you’re thinking of switching to another company or to DirecTV. You have to be convincing on this point. As far as switching to VoIP technology (e.g. Vonage), this will save you money but you will sacrifice quality, so I would not recommend it. Many people like these services, but I am not one of them. Consider getting rid of your landline and using only a cell phone, if you don’t already do this.

So, what do you think? Is this a series you can get into? What are your conquering debt stories and quandries, Internet?

Got a list to share? Here’s what to do:

  1. Write a “list” post on your blog.
  2. Copy this code, and paste in the text of your post:
  3. Either comment or email me at anna at abdpbt dot com to let me know you’re participating, and I’ll link you up below.

Check out these list lovers:

  1. Super Ninja Mommy at 2 Under 2
  2. Michele at Dogslife
  3. Crazylovescompany
  4. Keely at Un-Mom
  5. Ginny Marie at Lemon Drop Pie
  6. Becky at Suburban Matron
  7. Ginger at Ramble Ramble
  8. Pauvre Plume

Comments (21)

  1. Nov 24, 2008

    If you decide to start a new site about personal finance please send me your link. I plan to inter-library loan the book you mentioned. I try not to pay retail for books. Ever!

    Here’s my listlessness Monday post. Thanks for the button. http://michele-dogslife.blogspot.com/

  2. Nov 24, 2008

    I think I’m going to try the envelope system. I think I keep track of our budget in my head, but then I pull out the card for gas, dry cleaning the one thing I need to run into the store for, the occasional coffee, and if I just kept it to cash I’m sure it would make a difference. It’s gotten so easy with debit cards!

    crazylovescompany´s last blog post..Listlessness Mondays – Signs you’re super pregnant, in case you weren’t sure.

  3. Nov 24, 2008

    I wish I could do that. I mean, I could do that, but getting hubby on board is utterly impossible. He just smiles and nods and then…doesn’t do it.

    My list is up 🙂

    Keely´s last blog post..8 Laws My House Should Have, and 2 it has in spades

  4. Nov 24, 2008

    I’m looking forward to your tips on how to sell stuff! Congratulations on working yourself out of debt. What you accomplished is very impressive!

    I have my list up!

    Ginny Marie´s last blog post..I’m Still Freaked Out After Writing this List

  5. Nov 24, 2008

    i love writings like this. i wrote a very similar list several years ago. now i just need to get back to it. :-/

  6. Nov 24, 2008

    Great post. I keep hearing about Dave Ramsey from the Christian lady coupon bloggers–I love those guys–but your recommendation really has a lot of influence. I think it’s time for us to check him out.

    I’m all listed up today!

    Becky´s last blog post..3 Things Standing Between Perfect Contentment and Me

  7. Nov 24, 2008

    Bring on the financial help series! Although I’m still in awe about the cat-crap-hider you made, so it may be awhile before your get-out-of-debt post sinks in.

    Shawna´s last blog post..Spontaneous

  8. Nov 24, 2008

    Very good.

    shonda´s last blog post..I’m An Asshole

  9. Completely interested! I’m planning to save money by using my perks as a bookstore employee and borrowing (rather than buying!) that Dave Ramsey book, and in January, on the suggestion of a friend who is working the Ramsey plan now, I’m going to attend a workshop series to further learn the finer points of these ideas. We’re pretty debt free, but we live paycheck to paycheck, and it’s scary.

    foradifferentkindofgirl (fadkog)´s last blog post..that whole mama bear instinct? yeah. totally true.

  10. AKD
    Nov 24, 2008

    Yeah, I’d get into this. If only because I want to be able to afford $25 bottles of shampoo without feeling like it’s the worst extravagance ever. This weekend we went to Target and only bought the things that were on the list. It was awful. Almost like not going to Target at all. And we had a giftcard.

  11. surcey
    Nov 24, 2008

    I’m totally on-board for this series. More please!

  12. Nov 24, 2008

    There’s part of me that wants nothing to do with a series like this. I read blogs for fun, not knowledge! Buuuut, since I’m sorta kinda having to be a grownup, I think it’s probably a good thing. Rather than my current strategy of burying my head in the sand about our finances. So yeah, bring it on.

    Oh, and I’m all listed up.

    Ginger´s last blog post..7 ways to make Thanksgiving more fun and less stress

  13. Nov 24, 2008

    @Michele, I am in the process of building the section of the site right now! The link is: . If you want to subscribe to the feed, you can do so there. For now, I’ve just copied this post to that section of the blog, and will get working on new posts this week! Very exciting.

    @CLC, yes, you’ll be surprised. There is a guy who writes about money–David Bach–who calls this the “latte factor.” Because you can easily spend a bunch of money that would otherwise be saved on little things that don’t scream extravagance, like the $25 shampoo, @AKD!

    @Becky, that’s great. I was wondering who this coupon woman was who started following me on Twitter. It really makes things easier when you have a support network, so that is the advantage of starting a section of the blog.

  14. Nov 24, 2008

    @Keely, it was hard to get my husband on board at first, too. We had some heated discussions when we first started trying to work out a budget together. But now he’s very happy we did it.

    @FADKOG, if you don’t carry debt, then it’s really much easier to get on board and live more comfortably. It has really removed a ton of anxiety from my life to commit to living without credit cards. It’s definitely worth the short-term sacrifice, IMO.

  15. Helen
    Nov 24, 2008

    I would be really interested in a discussion on finance, because, like you, I have used alcohol, drugs, cigarettes, caffeine, and money to be my substance of the moment. (Give me something that will give me a buzz and I will find a way to abuse it) I have been talking about my debt problems in AA and trying to use the principles with money, but, like food, we all need to deal with money and can’t give it up entirely. Can’t wait for more content on this and love the info so far.

  16. Nov 24, 2008

    Hey Anna…
    OK, so I’m totally, like, takin’ notes about your post, which is EXACTLY the kind of information I’ve been needing for way too long. THANK YOU.

    Also, I finally got my A in gear and pogged a list and put your awesome little button at the end.

    (ps: all that Bathroom Wall craziness is…well, CRAZY.)

    PauvrePlume´s last blog post..3 unfortunate things I am unable to eject from my brain right now

  17. Nov 24, 2008

    @Helen, cool. Nice to have you here! Check out the new personal finance section and pull up a chair!

    @PauvrePlume, hey! Long time no see–you’re all linked up. And yeah, the Bathroom Wall is kind of a post-apocalyptic landscape right now. Nobody go over there without a hazmat suit, or you might turn into a vampire.

  18. Nov 24, 2008

    I love all these ideas, but….I would add that canceling a card actually has a negative impact on your credit score which is determined by how much you have at your disposal vs how much you use. Cut it up, don’t get a new one but let that credit help you for when you do need a loan…like buying a house. It’s helped us a ton on interest rates on homes, cars and when we do need to use a card. Suzy Orman is also a God in this arena!

    The Stiletto Mom´s last blog post..Oh Superman Where Are You Now?

  19. Nov 24, 2008

    this is fantastic. Today I consolidated all my debt into one place, shredded all cards, gave remaining emergency card to husband (who is much better at gauging emergencies than I am).

    I will also be moving to a cash system for our groceries & dining out.

    FANTASTIC tips. Thank you.

    Amy´s last blog post..So

  20. Skinn
    Nov 25, 2008

    I’m a fan. I want someone who knows how if feels to pay some money into a credit card only to withdraw it at the end of the month because you are broke to explain their tips and budgeting tips to me. Not someone who lives in a million rand house and drives a convertible.

    I’m getting my scissors out as I type this.

  21. Dec 2, 2008

    Thanks — very inspiring.

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