Personal Story: Two Years to a Debt-Free Existence

In a new monthly feature we’re going to call “Personal Story”, we’re going to publish our own and reader’s personal finance stories. We’ll focus on how we got into debt, how we’ve worked (or working) our way out of it, and how we keep ourselves on track financially. The hope is that we can all get ideas and encouragement from each other to find ways to live within our means, stick to budgets, and save for a rainy day. It’s hard to stick by these plans by yourself, so we want to try to build a community that encourages these principles. I’m going to kick things off by talking about my own debt story.

I moved to NYC about four years ago, straight out of college. I had a nice little bundle of student loan debt, although nothing compared to some of my friends who owed $30-$40K in student loans, and a couple of low-balance credit cards. All in all, I was in pretty good financial shape. I was bunking with a friend of a friend who lived in Washington Heights (Manhattan). It wasn’t the greatest setup since I was crashing on a living room sofa, but I ended up staying there for about four months until I got settled in. Around the time that I was planning to move out, my friend found out that she was eligible to purchase a studio apartment in one of those rare, somewhat mythological middle class housing projects. Since she had to move quickly to take advantage of it, I was left with the apartment if I wanted it. Needless to say, I was pretty psyched about having my own place, especially considering that it came without all the hassles of a broker’s fee and moving expenses. The major downfall was that I had to sign a new lease and the previous $875/month shot up to around $1,100/month. For a lot of people in New York, this would still be considered a bargain. But since I was fresh out of school with no real work experience my full-time job was bringing in around $26K a year.

Like most people fresh to New York City, I had conjured up my ideas on what my life in the big apple would be like. It was primarily based on what I saw on television and was a far cry from the way that I could even remotely afford to live. In my attempt to stake out the perfect little urban utopia I had imagined for myself, I decided to keep the apartment – even though it was well over the amount I could afford to pay. I got my father to co-sign for a personal loan which I used to furnish the new place and pad my checking account for a little while. I lived decently for the first six months or so, somehow managing to still have a few dollars left over to occasionally grab drinks and eat out with friends. But like all free money, my loan finally ran out and my lack of cash started to catch up to me. My answer to the problem was credit cards. I began funding my burgeoning social life with them and eventually took to paying all of my monthly utilities with credit for well over a year.

Since I was using my entire paycheck plus some to pay my rent and my credit cards to pay my utilities, I had little cash left over to buy anything else including food. I reverted back to my college days, buying Ramen by the boxes and filling up on cheap bagels. I was fine with this because food was something I was willing to scrimp on in order to have some cash on hand to play with. After about a year, I reached a point where I couldn’t afford to keep living in the one bedroom by myself, so I found a room for rent in the city and moved into a tiny bedroom on the Upper West Side. I stayed there for a few months and then continued to hop around from place to place.

Fast forward to a few years later, I found myself at a new job with a better title with a higher salary. And not even two months after securing the job, I had found a new apartment to move into – a two bedroom that I shared with a roommate for $2,100. My share was $1,050. This move was basically a reaffirmation to make me feel like I had “made it” in the big city – even though it was taking a nice, fat chunk of my earnings away each month. This kept on for about a year and I continued to struggle to pay my bills. By this time, my credit cards were completely maxed out and I was being moderately harassed by creditors

My moment of realization came two years ago when I was still living in the overpriced Lower East Side place. After buying a laptop on credit and not making payments on it for well over a year, I was threatened with a law suit for negligence to pay. After many a phone call with a shark lawyer who represented the company, I started rethinking my financial situation. I sat down with a close friend and hashed out a budget. I joined Consolidated Credit and let them take over sorting through my debts, and this was probably the single most effective thing I have ever done in managing my finances. They did a fantastic job at getting creditors off my back and negotiating fair interest rates. Realizing that I couldn’t possibly keep paying a huge portion of my rent for a bedroom in Manhattan, I decided to downgrade my living arrangements. I found a nice room in Brooklyn for $600 a month in a much larger space.

Fast forward a few more years, I’m still here, and in November I will be completely debt free. It would have never happened without me making some drastic changes to my lifestyle. Once I started to focus on myself and what I needed to do to be able to live well, I was able to stop focusing on trying to impress other people and get myself on sound positive financial footing.

Submit your own “Personal Story” to lauren@lifestylermag.com. If your story is chosen for our monthly feature, you will receive a $30 Amazon gift card and a by-line.

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