How to pay off your credit card and get out of debt

Before we moved over to Ireland, we were living paycheck to paycheck and both of us had massive credit card debt. It’s not like we had an extravagant lifestyle in South Africa, we were both earning good salaries – we were just terrible at budgeting how to spend what we earned each month.

We both come from fairly conservative, budget conscious families so I am not really sure why we were so bad at managing money. I can only put it down to the fact that we just ignored the issue, and thought about living in the now, without much consequence for the future. But the truth is, the lack of a good budget and the fact that the last week of the month was always the hardest – it really did worry us. We spoke about it a lot in private, we lay awake at nights plotting how we could get out of debt. Looking back, we never really made the necessary sacrifices to budget properly and we never honest with ourselves about how we were spending money.

How we got into debt

A couple of things happened which I think caused the debt to spiral out of control, the biggest being that we bought a house. We used our credit cards to finance some of the hidden costs that come with buying a home (transfer fees and legal fees etc). Being in so much debt, especially credit card debt, was a hard lesson to learn. I don’t regret buying our first home together, but I do think I would do it differently if I could do it all over.

We both can be people pleasing, so often when people invited us out for dinner or to go away for the weekend – we said yes, even though we knew we couldn’t really afford it. We wanted to have a certain lifestyle, one were we went to great restaurants, bought things for the house and ourselves, and went away on nice holidays. Before we sold all our belongings, and packed up to come to Ireland, we had both maxed out our credit cards. The money we were paying into our credit card each month was basically paying off the interest only, and by the time the end of the month rolled around, we had maxed our credit cards again.

How we got out of debt

Fast forward to the decision to move to Ireland. Although we didn’t realise at the time, this was the second chance we had been waiting for. Selling all our belongings, including our cars, helped us pay off some of the debt.

We came over with 2 suitcases each, 3 boxes that we shipped over (which we probably didn’t need), and some savings that we got through our last paychecks, paid out leave, and selling our belongings. This fresh start meant that we had to do things differently. We both agreed that once over in Ireland – things would be different. We didn’t know it at the time, but we ended up living on one salary for a year – and yet we still managed to pay off the outstanding credit card debt and start saving properly. This is how we paid off our credit card and got our of debt:

Stop using your credit card

We started with our credit card debt first because that was the biggest, most obvious debt we knew we could tackle. It was an obvious move, but we stopped using our credit cards – we took them out of our wallets and put them safely away in a cupboard at home. This meant that when we were out, we didn’t have the convenience of using them.

Pay off debt each month

Each month we paid back our credit card debt, and at the end of our first year in Ireland we paid our last lump sum to the credit card on Black Friday of all days. I guess that shows you how our mindset changed over that first year abroad. We saw paying off the debt as more important than buying something new.

Know where your money is going

We both have credit cards here in Ireland. I actually haven’t used mine at all – it is still in the envelope it arrived in. We use Rob’s credit card only to rent cars, but we pay off the car rental costs as soon as we book a car. The credit card is now only used to hold deposits, or to buy something we intend on paying for in full at the end of the month. We prefer to stick to our budget each month, and have carefully consider all the things we spend money on each month – everything is accounted for. From obvious bills and food costs, to getting my nails done and paying a small fee for my blog maintenance. Every euro we spend is accounted for. At any given point in the month, we know how much we have left for groceries (we do a weekly shop now) or our entertainment budget – yes, we now have an entertainment budget. We also have a travel savings pocket that we use to save up for holidays we plan to do. Once you get used to sticking to a budget, it becomes habit.

Prioritise how you spend your money

Living on one salary forces you to prioritise. You quickly discard the things that are not essential – like eating out, coffees, even things like hair appointments, and a big one for me was that I stopped buying clothes. I started realising that we were trying to buy our happiness, but that being in debt made us unhappy – so we learnt to say no to things we couldn’t afford and through that – we started to pay off our credit card debt. We used bonuses and tax refunds to further pay off our debt. In the past that money would have been spent on some big thing we really wanted – but what we really wanted now was to get out of debt.

Stick to the Budget

I am not saying that sticking to a budget is easy. It is still really hard. In the early months of getting out of debt, we struggled saying no to things. We missed important weddings, skipped out on meeting friends for dinner, said no to concerts and events others were going to. It was really hard to say no to all of it, but we knew we didn’t want to go back to the way we were living back in SA. We figured in the bigger picture, if we stick to the budget, we can do the things we really want to do later. Not everything has to be immediate.

Have a rainy day fund

Once we paid off our debt, we took the money we put into our credit cards and started putting that all into savings. The reality is there might be unexpected costs that crop up during the month that your budget hasn’t planned for. Like one of us could lose our job and we could go back to living on one salary. We now have a nice rainy day fund set up – its not where we want it to be, but we are getting there slowly.

Now that we don’t have credit card debt, and we have a budget we stick to – we don’t live paycheck to paycheck any more. January is not a hard month for us. We have learnt our limits, and we have learnt to focus on the future, by saying no to things right now, or holding off on big expenses until we can actually afford it. Slowly managing our money has gotten easier. I didn’t realise at the time, but getting out of debt was not the end goal – staying out of debt is.

WHAT ARE SOME OF THE WAYS YOU STAY OUT OF DEBT?

Live Simply & Travel Slow,

~Meg~

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