Eight years ago, Emily Shutt found herself in the same scenario as over 44 million Americans: in debt and overwhelmed with how to pay it back.
“When I graduated from college I had about $15,000 in credit card debt and another $15,000 in student loan debt,” says Shutt, 30. “I couldn’t even make my minimum payments on my credit cards, and I didn’t even know I had taken out loans my freshman year of college.”
She hit rock bottom after she had to make a pizza and a grocery care package from her mom last for two weeks while waiting for a paycheck. “I was anxious and ashamed about having no money and all of this debt, especially because I was working in the financial industry,” Shutt says of her January 2010 breakdown. “I spent the rest of that day mapping out my plan and timeline for getting out of debt, and then I took action.”
A year and a half later, Shutt had completely paid off her credit card debt. She made the last payment on her student loans in October 2017.
Figuring out a debt-free life inspired the determined college grad to help others. Shutt became a financial expert and life coach and has helped clients get out of a total of $150,000 in debt. She helped one couple go from living paycheck to paycheck to saving $50,000.
So, what’s Shutt’s secret? Here are some of her top tips for becoming debt-free fast.
4 pro tips for getting out of debt
Shutt used these methods for ditching her own debt and successfully getting others to do the same.
1. Figure out your take-home salary and nonnegotiable expenses
Shutt says many people in debt forget the basics of creating a budget. They get overwhelmed with the large looming number and forget how to break it down into a manageable payment system.
“The first step to getting out of debt is to figure out how much you’re actually bringing home each paycheck after taxes, retirement, and other costs such as insurance,” she says. “Then make a list of recurring nonnegotiable expenses: rent, utilities, groceries, internet, cellphone, student loan repayments, etc. This will help you get a grasp on your finances and determine what you can afford.”
If you’re feeling overwhelmed with this process, don’t worry. You can try out some financial apps to set up and track a budget.
2. Research your mystery expenses
After Shutt took the first step of creating a budget with her take-home pay and recurring expenses, she was baffled when she realized she was left with zero leftover money.
“I thought surely I would have some cash after looking at my monthly budget, but I didn’t have any,” she says. “I needed to figure out what I was spending the rest of it on because I truly had no idea.”
That’s when Shutt looked at her credit card statements and faced the truth about how she spent her “extra” money. Like many millennials, she was inadvertently overspending. “I was going out to eat, buying new clothes and home decor, taking trips with friends, getting manicures, going to happy hour, paying for cable and a gym membership I didn’t use,” she says.
In fact, 73% of millennials surveyed said their generation overspends on unnecessary indulgences, according to a 2018 Bank of America study. If you’re wondering where your money is disappearing, examine your credit card and debit card purchases. Then figure out which extraneous expenses you can live without, so you can build a savings account or have more money to pay off your debt.
3. Commit to conscious spending
Each time you spend on something that’s not a nonnegotiable expense, you’re choosing to stay in debt, Shutt says. She went through all her expenses, determined what was important to her, and then focused on spending her money consciously.
“I cut cable immediately, canceled my gym membership, switched my phone plan to one that reflected my data usage, negotiated with my internet provider to give me a discount, etc.,” she says. “I ended up insourcing almost all personal upkeep, and everything I saved went toward debt repayment.”
Each person’s necessities will vary, so it’s important to think carefully about every purchase. Being mindful of your money will prevent you from overspending and open you up to creative alternatives. For example, instead of buying lunch every day, commit to meal planning and price out your groceries.
By taking that extra second to think before you spend and knowing that the trade-off for any expense can be a longer debt repayment timeline, you could save hundreds of dollars each month. That can go a long way, considering the average student loan payment is $351 per month.
4. Keep reassessing as life changes
Just because you make a budget that works for you at age 22 doesn’t mean it’ll make sense when you’re 30.
“My life has changed radically since that morning sitting on the floor of my apartment realizing I wasn’t going to be able to pay my credit card bills that month,” says Shutt. “I relocated another seven times, got married, bought a house, adopted two dogs, started my own company, and am planning to start a family soon. What I needed and wanted to spend money on in my early 20s looks nothing like it does today.”
Your needs and priorities will continue to change as life does. The key is to learn to make conscious decisions that reflect who you are and where you’re headed. As you continue to grow and change, you’ll be able to use money effectively with no regrets.
It’s less about setting a strict “money diet” for yourself and more about evaluating your financial goals. Every four to six months, look at your income, spending, and future plans. Then ask yourself:
- How are the numbers lining up?
- Where can I cut back?
- Where should I spend more?
- What will make me happy?
Taking the time to come up with answers should keep you in control of your finances and lead to successful money management in the long term.
Manage your money successfully
It’s possible to get a grasp on your finances and get out of debt faster. Shutt’s tips aren’t complicated, but they do require some dedication and effort. If you’re serious about making a difference in your bottom line and aiming for a healthy financial future, set aside the time to be conscious of your expenses.
Saving a few extra hundred dollars here and there can make a huge difference.
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1 Important Disclosures for Earnest.
To qualify, you must be a U.S. citizen or possess a 10-year (non-conditional) Permanent Resident Card, reside in a state Earnest lends in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: https://www.earnest.com/eligibility. Not all applicants will be approved for a loan, and not all applicants will qualify for the lowest rate. Approval and interest rate depend on the review of a complete application.
Earnest fixed rate loan rates range from 3.89% APR (with Auto Pay) to 5.87% APR (with Auto Pay). Variable rate loan rates range from 2.47% APR (with Auto Pay) to 5.87% APR (with Auto Pay). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 8.95% for loan terms 10 years or less. For loan terms of 10 years to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95% (the maximum rates for these loans). Earnest variable interest rate loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 1.82% and 5.50% to the one month LIBOR. The rate will not increase more than once per month. Earnest rate ranges are current as of Month/Day/Year, and are subject to change based on market conditions and borrower eligibility.
Auto Pay discount: If you make monthly principal and interest payments by an automatic, monthly deduction from a savings or checking account, your rate will be reduced by one quarter of one percent (0.25%) for so long as you continue to make automatic, electronic monthly payments. This benefit is suspended during periods of deferment and forbearance.
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4 Important Disclosures for LendKey.
Refinancing via LendKey.com is only available for applicants with qualified private education loans from an eligible institution. Loans that were used for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not eligible for refinancing with a lender via LendKey.com. If you currently have any of these exam preparation loans, you should not include them in an application to refinance your student loans on this website. Applicants must be either U.S. citizens or Permanent Residents in an eligible state to qualify for a loan. Certain membership requirements (including the opening of a share account and any applicable association fees in connection with membership) may apply in the event that an applicant wishes to accept a loan offer from a credit union lender. Lenders participating on LendKey.com reserve the right to modify or discontinue the products, terms, and benefits offered on this website at any time without notice. LendKey Technologies, Inc. is not affiliated with, nor does it endorse, any educational institution.
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