The feeling is so palpable I can taste the adrenaline in my mouth. Another creditor was calling. Another person on the other end of the line asking me for money I didn’t have. I had gotten myself into $50,000 of credit card debt. Sure, I had my college degree, but no prospects for how to use it because all I could think about was the financial hole I dug myself into. This is my story of how I got out of debt and became a millionaire. If I did it, you can too.
Table of Contents
I Started at Rock Bottom
So many times, people don’t tell you where they started. Only where they ended up. I’m not going to do that. I won’t paint a rosy picture, either. I graduated college with insurmountable debt. Debt I couldn’t climb out of.
I was going to declare bankruptcy, until a roommate talked me out of it.
He convinced me to get help, but that didn’t make the next few years of my life any easier. In fact, they would have been easier if I would have just declared bankruptcy.
I Got Help
Tough love from a roommate got me in front of a credit counselor. I was lost and had no idea how to climb out from the combined $50,000 in debt I owed between credit cards and student loans.
This was in the fall of 1997, so the $50,000 would be equivalent to roughly $95,000 today.
I Started a Budget
As a college graduate, I knew nothing about budgeting. My parents didn’t live on one. I heard some people say you couldn’t have fun on a budget.
The counselor told me I would soon learn that was wrong. She said budgeting would help me make a plan for what I wanted in life. She was right.
I Wrote Down Everything I Spent
Tracking my spending was vital in attacking my debt. The counselor told me to write down everything I spent. If it was $2 spent on a drink at the gas station I wrote it down. If it was $250 for a car repair I wrote it down.
The amount didn’t matter. The goal was to see where every cent went.
I Made Money However I Could
I was doing side hustles before they became a thing. I donated plasma, delivered pizzas, took second jobs, and I sold items I didn’t use.
Everything I earned went towards the debt.
I Cut Up My Credit Cards
My problem was I was living a lifestyle I wanted but couldn’t afford. Credit cards and extra student loan money financed what I wanted.
I cut up the cards so I wouldn’t use them again. Ironically enough, my family and I wisely use rewards credit cards today to stretch our travel budget.
I Started an Emergency Fund
Life happens. I saw numerous times how I was left in dire straits because I had nothing to fall back on when an emergency occurred. Reports show that nearly 60 percent of Americans don’t have at least $1,000 saved. That leaves them at peril.
The counselor directed me to open a savings account. I started it with less than $100, and when I had money I put money in it. It seemed foolish to direct money away from repaying debt, but she said it would help me in the long run. It has many times over.
I Got an Accountability Partner
Going from a spending addict to debt killer isn’t easy. Managing money is an emotional battle, especially when you feel like there’s little chance for success.
The counselor directed me to get an accountability partner. They would be there to encourage and challenge me. It was immensely helpful.
I Developed a Plan
There’s an adage that says prior planning prevents poor performance. That held true for me. I was not a victim. I had created the situation myself.
The freedom in embracing that meant I could also create the way out.
A plan was the best way to attack my problem. The counselor helped lower rates on my credit cards and establish a plan to repay my indebtedness wisely. It’s a philosophy I still use today.
I Broke the Plan Into Chunks
Staring at a significant sum can be overwhelming. This can lead you to apathy. The counselor directed me break my debt into small chunks, using the debt snowball philosophy.
The idea is that achieving smaller goals gives you the momentum to gain the confidence you need to continue. It was true here, and is in many areas of life.
I Took One Step, Then Another
A big goal always seems impossible at the beginning. So often we get in our own way by thinking we have to accomplish everything at once.
Instead, I took one step. That was meeting with the counselor. She gave me steps to take, and I followed them one at a time. Over time, I went from crawling to walking to running.
That is what helped me pay off $50,000 of debt in five years.
Today
Fast-forward 20-something years, my wife and I are self-made millionaires. It wasn’t easy, and it took time and lots of work.
I went back to school and got an MBA in Finance. My wife and I started our own business over a decade ago. No longer do I view money as something to throw away. Money is a tool to get what you want in life.
Manage it wisely and you can often achieve what you want, though not always. Be foolish with it and you typically fall short.
Our philosophy is simple, we take planned steps to reach what we want. We bring our growing children along with us so they can become financially literate.
Personal finance is personal for a reason. However, life rewards those that take small but purposeful steps to reach the goals they want. You may not always hit your mark, but the lessons you learn along the way help you achieve something remarkable. It all starts with that first step.
How to Build an Emergency Fund
Having a fully-funded emergency fund is the gold standard of personal finance. However, it’s not always easy to achieve. Follow these steps to start and grow one that gives you peace of mind.
How to Build an Emergency Fund
7 Steps to Break the Paycheck-to-Paycheck Cycle
Making ends meet is hard on a limited income. However, it is possible to break the cycle and find financial stability. You just need to know where to start.
How to Stop Living Paycheck to Paycheck
How to Create a Budget
Budgeting isn’t difficult, but it does allow you to spend your money as you wish. If you’re new to budgeting, read our beginner’s guide to budgeting and see just how easy it is.
Do Dave Ramsey’s Baby Steps Work?
Love him or hate him, Dave Ramsey has helped millions of people get out of debt. That all starts with his Baby Steps ideology. If you’re struggling financially, his system may work for you.
What Are Dave Ramsey’s 7 Baby Steps? Do They Work?
I Need Money Now!
Are you in a cash rut and need money quickly? Don’t take out a loan. Here are 19 ways you can get cash today to make ends meet.
I’m John Schmoll, a former stockbroker, MBA-grad, published finance writer, and founder of Frugal Rules.
As a veteran of the financial services industry, I’ve worked as a mutual fund administrator, banker, and stockbroker and was Series 7 and 63-licensed, but I left all that behind in 2012 to help people learn how to manage their money.
My goal is to help you gain the knowledge you need to become financially independent with personally-tested financial tools and money-saving solutions.
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