This week, I am sharing a more relatable debt payoff story with you. Not everyone goes pedal to the metal or has an exceedingly high income in a city with low costs of living (elements of my story).
Jane from Cash Fasting paid off $35,000 in debt over a period of three years, most of which was paid while living in New York City. Not only did she accomplish this on a single income, but she did it while still taking some time to enjoy life.
If you have a debt payoff story you’d like to tell, awesome! Please shoot me an email at firstname.lastname@example.org.
1. Please tell us a little about yourself.
Hey everyone! I’m Jane, the blogger behind Cash Fasting.
By day, I work in Manhattan doing Media Analytics, but by night, I’m a blogger with a passion for personal finance.
In my first job out of college, I did market research for credit card companies. The amount of data I saw in terms of average credit card debt in the US, confusing banking terminology, and general lack of financial education really frustrated me.
After moving to NYC in 2016, I noticed that my own spending was getting out of control. That’s how Cash Fasting began.
I write about my own journey to financial freedom, but also about general tips and tricks to keep money in your pocket.
2. You paid off $35,000 in debt. What kind of debt was it?
It was a debt to the bank of Mom and Dad which covered my tuition for graduate school.
Because it was an interest-free loan, I ultimately saved thousands of dollars compared to what I would’ve had to pay to a bank.
Using a basic scenario, a $35,000 student loan at 4.5% over a 4-year term would cost about $3,300 interest. Amazing. I love this almost “hidden” savings from Jane’s unique journey.
3. What was your household income during your journey?
I started off in 2014 making $60K. In the last three months of my debt-free journey, I was making $90K.
Along the way, I had raises, promotions, and new job offers. From $60K, I went to $61K, $63K, $69K, then $75K. Throughout my journey, my average salary was $67K.
An increase in salary did make a huge difference in my debt repayment timeline, but I also had significant expense changes along the way.
I lived at home the first year I started working, and didn’t have to pay for rent or groceries. That changed when I moved into my own place, and again when I moved to NYC.
I used to have monthly expenses of around $1,400 (which included a TON of entertainment and dining out spending), whereas now I’m regularly over $2,000 (I meal plan, save, and try to be frugal).
4. What kinds of sacrifices did you make to pay off all your debt?
I didn’t have to say no to too many things, thankfully. It was much more about a change in perspective.
I ate out less. This wouldn’t be considered a sacrifice, as I had been gaining a lot of weight after graduation. I drank less, but to be honest, I have a low tolerance, so I’m a pretty cheap date, haha.
When I wanted to go out and have a good time, I’d look for bars with salsa dancing, and just order water at the bar.
The only big sacrifice I can remember giving up was going to a friend’s bachelorette party. She was having a shower and a bachelorette, so I had to choose between the two. I wasn’t in the bridal party, so it wasn’t a huge deal (I was the officiant, though!).
Once I developed a more frugal mindset, I realized that I didn’t want half the things I had been spending my money on before.
5. What other income or cash, aside from your pay check, did you throw at the debt?
I had originally projected to have my entire debt paid off within 3-4 years. Aside from my regular income, I threw each of my tax refunds at my debt (all three).
Each refund was over $1,000, with the first one considerably more as I had only been employed a partial year. Those extra funds decreased my repayment by at least three months, if not four.
6. On your site, you talk about “negative cash flow.” Can you elaborate?
My cash flow is calculated as the balance in my checking account, minus the balance across all my credit cards.
For at least 75% of the month, this comes out to be a negative number. As I write this, my net liquid cash is currently -$227.
Due to the nature of credit cards, I can always use my next paycheck to cover the costs incurred in my previous billing cycle. So long as I have a positive cash flow immediately after each paycheck, I’m in the clear.
Generally, I like things this way because it makes me so uncomfortable to see that negative number. I spend the majority of the month thinking ‘okay, I’m already at -$47. Is this purchase worth going even further into the red?’
It may be more stress than it’s worth, but it’s working for me.
7. On your site, what do you mean when you say “overreach my savings”?
That’s an awkward way of saying that I have to draw from my savings every so often because I don’t leave myself enough in my checking account to survive.
Because of my negative cash flow, I need to pull back funds from my savings to cover large expenses from time to time.
8. Did you utilize any bank (or other) automation, and how?
Automation is ESSENTIAL to saving!
I use Capital One 360 for my savings accounts, and I have a Wealthfront account for personal investments.
I would take a large chunk out of my checking out immediately after each paycheck, and smaller amounts on a regular basis, semi-disguised as expenses.
With all the automated transfers I have set up, 45% of my paycheck is transferred out after payday, with another 5-10% spaced out throughout the month. This has worked pretty well for me so far.
9. You increased your salary by 50% in 3 years. How?
In the first two years, I hardly increased my salary at all.
I wasn’t aggressive in asking for what I wanted, and was passive in waiting for my well-deserved promotion to be granted.
I didn’t know then that companies take advantage of college grads by burning and churning them (at least at my company that was the case).
It wasn’t until the two-year mark that I started getting serious about salary growth. My second job was only a small bump in salary, but a huge increase in opportunity.
Due to company acquisitions, my team was put under a lot of stress. Our workload vastly increased, so we fought hard for significant raises, even though we knew promotions weren’t coming.
It was during this merit increase process that I realized I was being gypped in pay (check out the Glassdoor Know Your Worth tool, people). That’s when I started to interview elsewhere. Because my team was small and our skills were in demand, I was very lucky that my company was able to match an offer I had in hand.
One of the most important things to keep in mind is that it’s not about how much you’re currently being paid; it’s about how much you’re worth. That’s the only way to break away from continuing a cycle of being underpaid.
Interview often, and don’t feel pressure to take the first offer you get.
10. What are your top 3 tips for people looking to increase income?
Tip 1: Ask your manager for a raise.
It never hurts to ask. If you don’t feel comfortable being so direct, then bring it up in your next one-on-one. Say, “what do I need to do to be in line for the next raise/promotion?”.
Sometimes people get passed over just because their managers didn’t think of them. Express that interest and plant that seed.
Plus, if you get a list of requirements that detail what needs to be done before your next raise, you have clear goals to work towards.
Tip 2: Interview elsewhere.
This keeps your interview skills sharp, and help you get a sense of what your market rate will be. I’m a firm believer that you can always make more money by switching to a new job.
Employers can make all sorts of promises, but nothing counts unless it’s in writing. Walking into your manager’s office with a job offer in hand is one the most effective ways to find out how much your company values you.
Tip 3: Talk to co-workers and friends about salary.
Just like interviewing for other positions, talking to friends is a good way to collect information about pay. Co-workers may be able to give you company-specific tips on negotiating and what strategies actually work for increasing income.
11. If you had to do it all over again, would you change anything?
I would’ve sacrificed a few months of debt repayment and opened a personal investment account earlier.
Don’t get me wrong, I love being debt-free, but while I was paying it down, the rest of my money wasn’t growing. I’m happy that my net worth grew $100K in the same time period that I was paying off my debt, but I’m sure that could’ve been even bigger had I invested more. I also wish that I hadn’t spent as much in the first year after graduation, but to be honest, I don’t think I would change that. Without it, I wouldn’t have felt the need to over-correct, and I wouldn’t be where I am today.
12. What’s your best advice for someone in the early stages of paying off their debt?
The short answer that I always see is ‘just start’.
When I hear that, I get frustrated, although I know I’m guilty of it, too. If you’re in the early stages of paying off your debt, you’re already thinking about, and you know it’s important to do, not think.
The hard part is figuring out how. I’d suggest knowing your timeline. Given your current repayment amount, how long will it take you to pay off your debt? What would the timeline be if you added $50 more every month? $100? $200?
In my experience, this is the most motivating thing you can do to jump-start your debt repayment journey. Sure, if you have a 10-year debt, that sucks. But, if increasing payments by $100 a month shortens the period by two years, all of a sudden that becomes way more exciting.
Have something tangible to compare against and prevent you from frivolous spending. Are those new shoes worth two months of debt? No? Didn’t think so, put them back on the shelf. Frame spending decisions this way and it’ll help maintain focus for longer.
13. What’s next? How are you working to achieve it, and are you breaking it down into smaller goals as you did with your debt?
I’m still figuring that out. I want to save up $700K in a personal investment account; that’s my FIRE number. However, the balance in that account is well under $10K, so it’s a long way out.
Short-term, I want to max out my IRA for the first year ever, build up a proper emergency fund, and save for my wedding (I’m not even engaged yet or close to it; I just know it’ll be expensive and I don’t want my parents to pay for anything).
14. Where can readers find you online, and can you share any additional content they might enjoy reading?
As for who I enjoy reading… aside from Debt Free Geek, you mean? 😀
Jane gets points for courteously mentioning me among the stars who follow!!
I’m a big fan of The Luxe Strategist, who is a fellow New Yorker (more than I am, for sure) and has her shit together. She balances frugality with luxury desires so well and I’ve learned a lot from reading her blog.
I also enjoy Zero Day Finance. His Zero Day Challenges are a much cleaner version of my Cash Fasting Challenges, which shows based on how much his audience has grown this year. It’s a good challenge; I suggest anyone looking for some spending challenges go and check it out.
I’m also a huge sucker for the Lego images from My Son’s Father. My favorite? Check out the single post under the category “Lego Silliness”. The rest of the site is great, too.
I really could go on and on, but I’ll stop it at three. Twitter has been the best place for me to discover new content, so join me and DFG there.
This is just a fun round of questions I throw in at the end of an interview. Enjoy!
1. What’s your favorite board, card, or video game?
Settlers of Catan! The only game I’ve ever gotten black out drunk playing.
2. How do you like to have fun while still saving money?
$6 movie night Tuesdays with $5 any size popcorn; it’s how I go see any new release.
3. At what age would you like to retire?
I’d like the freedom to retire at 35; I’ll probably stop working in my 50s.
4. Would you rather have $100,000 guaranteed, or a 50% chance to win $1,000,000?
My BF, reading over my shoulder says I should go for the $1M, if I don’t have anything at stake. But I’d go for the $100K. I’m pretty risk-adverse, and since I’m still pretty young, I could grow that guaranteed $100K a lot by the time I retire, or use it to jumpstart large scale investing (real estate, anyone?).
end of interview
For me, the most compelling thing about Jane’s story is that she paid off a significant amount of debt while living in a high cost of living area, and while not making jaw-dropping money.
Part of it is hustling and hacking your way to success. You can check her story about living expenses in NYC by clicking here.
But the other part of it just comes down to setting a goal for yourself and putting in the time and work to make it happen.
Seriously, it doesn’t come easy. I am positive that Jane would have loved to have an extra $1000 a month to spend on anything else (even investing!).
But she chose to pay off her debt, and now she has that $1000 cash flow available, and that debt isn’t following her around.
I’m telling you… it’s an EXCELLENT feeling.
I’m so happy for Jane, and I hope that her story inspires and encourages you to keep working toward your goals.
What about you?
Do you have a debt free story to share? Even if it’s a major milestone, please consider sharing it with our community. You don’t know how much this stuff inspires people to keep going. Have a great week!
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