$25,000! The amount I racked up in debt was pretty massive. The worst part of it all was I ended up with this huge amount of debt within one year. I was young, restless and like everybody else wanted all the new gadgets, brand name clothes and everything that appealed visually.

When I was going to college I started getting credit card offers left and right. Some were pretty low with $300 credit and some well over $5,000. I was in heaven. I didn’t hesitate swiping my credit cards for anything. If I liked it and the credit card had enough balance, the thing I had my eye on was mine. Within a year I realized that my credit card spending had gone so overboard that my minimum payments alone came to about $900. I had a job but while working in college I certainly didn’t have anything that would support paying minimum payments on credit card that was equivalent to a house payment. Well, that’s my past. It’s been 4 years since then and I am completely debt free. The only thing I owe now is a mortgage which I plan to knock it out by 2015. I bought my house in 2008.

It feels good to know that I don’t owe anyone anything. Although the economy is trying to find it’s way to recapture the essence it once had, I have been doing better than ever. Here are a few things I did to knock my debt to $0.

Initial Steps

Credit Cards Out, Debit Cards In

Everyone knows this. When you rack up too much on your credit cards, it’s time to shred them into pieces. Once I realized that I had maxed out all my credit cards, I decided to cut all my credit cards. I had been making my payments on time and of course, credit card companies were still offering to raise my limit. For once, I learned to say no. After I ended up with $900 on minimum payment, the first thing I did was cut all my credit cards. It was time to live solely on cash and no credit cards at all. It was tough. Like most college students, there were days when my survival was possible because of Ramen noodles.

When you are so dependent on credit cards, it’s hard to run on cash, all the time. It was a good decision to get rid of my credit cards but it was a hard one. There were times I felt like calling the credit card company and asking for a new card, but I resisted. I was almost heading to the bankruptcy route, thank god it didn’t come to that point. The first step to my financial freedom was getting rid of those nasty little plastics that forced me to make irrational choices for one whole year.

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Consolidated My Debt

Most people think debt consolidations firms are scams. This is far from true. I agree that there are some or majority of them that are out their to sink you even deeper into the hole, but there are some legitimate ones that will help you lower your monthly payments and regain the financial stability. For 2 months after cutting up my credit cards and making $900 monthly payments I knew I couldn’t carry it for too long. That is when I decided to go with a debt consolidation firm. I researched for weeks before choosing one and I am glad I did. I faxed necessary documents and after two weeks I received a note saying my monthly payments had been reduced from $900 to $400. This was my second step to being debt free. In February 2009, I received a letter that all of my debt had been paid and I am completely debt free.

If you are not sure how debt consolidation works, here is a brief explanation,

Fill a form with all your credit card information including credit card limit and balance

Fax or mail the form

Debt consolidation firm contacts your credit card companies and lowers your monthly payment by lowering the APR (if you are over the limit, they might be able to take that off altogether)

Once everything is done, you get one bill each month. If you have 10 credit cards, you will no longer receive 10 bills. Just one bill from the consolidation firm. You make payments to them, they make payments to your creditors.

Usually their monthly charge is around $25.00 (varies)

The process is pretty easy. The only thing is to do the due research before picking one. There are many fraudulent debt consolidation services out there so make sure to research in depth before you decide to go with one.

What I Do Now

capture96I have been debt free for a little over a month but the time came after 4 years. It was hard making $400 monthly payments for 48 months but it was better than $900 a month. During these 4 years I followed strict rules of staying within my budget. As you can imagine while going to college, I didn’t have much left after paying that amount to my credit cards each month. I made some adjustments then and I follow those rules to this day.  I have changed my lifestyle to make sure I don’t end up where I was a couple years ago.

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If I Can’t Pay In Full, I Don’t Need It

When I see a shiny gadget, my eyes light up the way they did back in the day. I am married now and my priorities have shifted. I have gone from wanting to buy the newest cell phones, computers and video games to buying washer/dryer, dishwasher etc. If you are a family guy, you know what I mean. Every furniture, every appliance in my house is completely paid for. If we (me and my wife) decide we need a new couch, we make sure we can pay for it in cash. We avoid monthly payments on anything (besides utilities). At first it was hard but now we have gotten used to it and our financial situation is much better than it was before (kudos to my wife for marrying a guy who was broke and in credit card debt 😉 ).

When we need a new appliance or something that is required, we don’t simply go and buy it right away. We usually wait it out and make sure we have enough to pay for it in cash. Of course, there are emergencies and you don’t always have cash in hand. If we ever find ourselves in a situation where there is no way out, we get it on credit but make sure we pay it within a month. Trust me, it’s hard living solely on cash but it’s better than giving money away to hungry creditors that are ready to shred you into pieces any chance they get.

Eating Like a King at Home Not At Restaurants

I am a food junkie. A nice medium-rare steak, grilled shrimp and a glass of wine is my choice for a fine dinner. Well, you can imagine if I go out and eat at a restaurant this can cost quite a bit. However, if you make the same food at home it’s much cheaper. Almost 50% cheaper. Me and my wife go out to eat every once in a while. It’s nice to break the monotony and enjoy a different environment once in a while. But we mostly eat at home. The fact that my wife is an amazing cook certainly helps.

One of the ways I have been able to cut my spending is by limiting eating out. I love food and if you were to look at me you could tell 😉 . I still enjoy the same kind of foods that a Totobet SDY restaurant has to offer but instead of forking out $60 at a restaurant I eat it at home for $25.

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One Nice Vehicle, Another I wouldn’t Care If It Got Lost

Cars today aren’t mere means of transportation, they have become equivalent to class, status and what not. I don’t have any car payments. I work from home so I don’t really have the need to have a nice vehicle. I own a 1998 jeep that was bought 3 years ago for $6,000 with cash. One way I eliminated another monthly payment. Most people put cars on credit and their monthly payments are anywhere between $200-$1000, if not more. I now have two vehicles. The 1998 jeep and a van that I bought for $1,500. Trust me the van works like a charm. The best part about it – I am not worried about it getting scratched or ending up with burned seats while I am smoking a cigarette cause it’s what they call a “beater vehicle,” one of those that you drive till it dies.

Setting Money Aside With Each Pay

Today I am doing good financially. I am not rich but by no means am I hurting. Life is good. One of the reason I have been able to run solely on cash for so long now is because I save a certain portion of my pay each month. I set it aside and think it’s never there. I do have the tendency to go and buy the iPhone, FLIP Camera and other fun gadgets, but the only difference between my past and today is that I don’t have to worry about it. I have been able to save enough over the years that if something breaks down in my house, I have enough cash to replace it. This is one lesson we hear each day but most of us fail to apply, do it now…it helps tremendously. Start today and look back years from now, you will be amazed.

Well, that’s my story. I am 26 years old and I have been living the American dream. If anything on this post sounded like I was bragging, please forgive me as that wasn’t my intention. My intention was to purely show how I took charge of my finances that almost wrecked my life, hoping it might be helpful to some that might be in the same position I was a couple years ago. And if you still think I am bragging, I guess I have the right to brag a little….I worked my butt off to get here and it certainly wasn’t an easy route.