Woman Reveals The 3 Things She Did To Pay Off $65K In Debt — 'Break The Cycle Of Living Paycheck To Paycheck'
She paid off her debt in less than two years.
Prostock-studio / Shutterstock If there’s one thing everyone would love to eliminate as we begin the new year, it’s debt. But how can people achieve this in our financial economy?
Sadly, there is no magic formula for getting out of debt, but there are steps you can take toward financial freedom.
Becca Bergmann, a 28-year-old debt adviser, took to TikTok to help individuals get out of debt by sharing three vital tips that worked for her.
Bergmann explained the three things she did to pay off $65,000 worth of debt, save $20,000, and buy her first house.
1. Change your mindset about money.
Your thoughts and words have an immense impact on your life. Saying phrases like, “I’m broke,” or, “I don’t know how to get out of debt” won’t do you any good.
While it’s difficult to rewire your mind to visualize a life of financial freedom when you’re struggling financially, letting these struggles consume and control your life will only repel money further.
Bergmann pointed out how many people were raised with the belief that money was hard to attain, likely because of the ways their parents and grandparents may have struggled to make ends meet. In our society, we are surrounded by the belief that we need to work excessive hours so we can make as much money as possible to pay off our debt, pay our taxes and bills, and ultimately live a successful life.
The problem with this hamster wheel mentality is that you allow your mind to believe you are stuck on this never-ending cycle of chasing the dollar bill, but it’s always just out of reach. You let yourself believe you need to just keep pushing yourself to work harder, with the glimmer of hope that you will finally be free one day.
The reality is that you’ll only feel free once you release the restraints your mind has over your life, and “change your mindset from scarcity to abundance.”
To see a difference in your finances, Bergmann urged, “Stop viewing money as a limited resource that you have to work really hard for, and start viewing it as a tool to build wealth.”
The tools for financial freedom are already at your disposal, and it starts with your mentality.
2. Make a budget.
As overwhelming as your to-do list might already be, tracking every dollar you spend will save you so much money. You might feel like you’re too busy to keep track of everything you spend, but what you don’t realize is that once you add this effective task to your routines, you will begin to realize where all of your money is actually going.
To create a budget, Bergmann explained you need to keep track of how much money you get per paycheck, and then look at each of your expenses to see where you’re spending every dollar.
Write every charge down in a budget spreadsheet, and then calculate how much you’re spending each pay period. You’ll likely need to make some sacrifices and decide what’s worth keeping in your budget and what’s “stealing your money.”
“Track your spending. Write down every dollar you spend, and then look at the trends,” Bergmann said. “And while you’re doing that for a few months, you’re starting to save for a small emergency fund.”
Bergmann said it’s extremely important that people wait until they have $1,000-$3,000 saved for emergencies before trying to get out of debt, or else something will come up that will cause them to go back into debt to pay it off.
3. Choose a debt repayment plan.
Once you’re ready to start paying off your debt, Bergmann suggested two debt repayment methods that you can use: the debt snowball and the debt avalanche.
The debt snowball method is the process of paying off debt from the smallest balance to the largest. The debt avalanche method is the process of paying off debt from the largest interest rate to the smallest.
While the debt snowball prompts you to focus on knocking out one small balance at a time, the debt avalanche allows you to prioritize your debts with the highest interest rates first, which will allow you to pay less interest over time and essentially save you more money in the end.
Bergmann said either method can be successful, and individuals should determine which method works best for them depending on their financial situations.
By taking control of your expenses and implementing a budget into your life, you will simultaneously begin eliminating debt while learning how to save.
As time-consuming and dreadful as this task may appear, taking the time to learn your spending habits and use your money wisely will benefit your finances in the long run.
“Once you’re out of debt, this is where the magic happens,” Bergmann shared. “All of a sudden, all the money that you were contributing to your debt every month gets to stay in your pocket.”
Now that Bergmann is debt-free, she has learned to never use a debit card; she only uses one credit card, and she puts all of her expenses on it. By doing this, she gets credit card points for everything she spends, which she can apply towards other expenses.
However, Bergmann makes sure to never put anything on her credit card that she wouldn’t be able to pay for with her debit card. She keeps track of everything she spends per month, she never uses her credit card to pay for things she can’t afford, and she always pays off the full balance of her credit card every month.
On top of that, Bergmann has additionally learned to use her money wisely and avoids spending it on unnecessary things, like trendy clothes, shoes, or jewelry, for the sake of impressing others.
Because of Bergmann’s dedication and patience, she was able to pay off all of her $65,000 worth of debt in under two years and is now saving heaps of money.
While it may take some time, following these steps will allow you to break free from living life on a hamster wheel. Budgeting and paying off debt looks different for everyone, but choosing to take action and use these tools to your advantage will do wonders for your life.
The abundance and prosperity are already available to you, you just have to take the right steps to receive it.
Francesca Duarte is a writer on YourTango's news and entertainment team based in Orlando, FL. She covers lifestyle, human-interest, and spirituality topics.