Personal experience: how to pay off all debts and repay loans in six months

2024 Author: Malcolm Clapton | [email protected]. Last modified: 2023-12-17 03:44

It is not necessary to refuse your favorite take-away coffee and somehow infringe upon yourself.

I took my loan in 2016. At that time I was working as a freelancer: I was leading social networks and writing texts for companies. I had many clients, but I didn’t know exactly how much I earned: money came irregularly.

When there was not enough finance, I asked for a loan from friends or used an overdraft card. It also happened that on account of the debt, you had to give everything that you earned and borrow again. It was not possible to postpone for the future in this mode: I could barely cope with paying rent for an apartment, and spent everything else on taxis, food and clothes.

Once, when the next payment for housing was approaching, I did not have a ruble: clients were delaying payment, I just owed money to my friends, and I was ashamed to ask for a delay from the landlady. A month earlier, my dog gnawed at the wallpaper in the hallway, and I was afraid that if I dared to pay later, I would simply be evicted.

Then I decided to take a consumer loan: 200,000 rubles at 31.9% for 3 years. These conditions were offered by the bank, and I agreed without looking. “I’ll take more work, deal with debts from clients and pay off everything in six months,” I thought.

The amount received was barely enough for two months: I paid off with my friends, managed to pay the rent three times, bought new sneakers, but did not make any progress on the path to financial well-being.

It was a great disappointment to find myself not only without money, but also with a huge loan, for which I had to pay 7,500 rubles every month.

Two years later, at lunch, I read a couple of articles about how people repay loans, and it shocked me: it was only by someone else's example that I realized how much I overpaid to the bank during this time and how much I continue to overpay, remaining in debt. My own chaos in finances cost me dearly: only interest on the loan was charged to me in the amount of more than 100,000 rubles, and the overdraft on the card cost me almost 15,000 a year.

I imagined: what if I could put things in order in the money and not give the bank hundreds of thousands, but set them aside for my future? So I decided to close the loan as soon as possible, study the topic of finance and learn how to count money in order to finally get out of the vicious circle of debt. And this is how I began to act.

1. Began to study tips on finance

If I had read at least something on the topic before, I would have been aware that a loan at 30% per annum is just a machine for pumping out money and for few people it can become a profitable deal.

I clearly lacked knowledge, and the first thing I did was put together a list of references in order to carefully study the theory and not make any more mistakes. Books about the development of "money thinking", visualization of desires and affirmations, I brushed aside and chose those that looked more like textbooks on financial literacy:

1. 1. Trick or Treat? By Vicky Robin and Joe Dominguez. The authors propose a nine-step financial management system, thanks to which I realized that there are no small savings - every action leads to the achievement of a large goal.
   2. “Where Does the Money Go?”, Yulia Sakharovskaya. A good book adapted to Russian realities, which gave me an understanding of banking terms and opened my eyes to the financial mistakes of the past.
   3. “A Million for My Daughter”, Vladimir Savenok. One of the most useful books available explaining how investments work. The author's experience will be useful to everyone who is also saving up for a child's future or their own pension.
   4. "My own financier", Anastasia Tarasova. A simple book on financial literacy that helped me organize the knowledge about money in my head and fill in the gaps. It has a little bit about everything from recording expenses to compiling a portfolio of securities.

Many of the tips in the books overlapped, so I marked the most popular, accessible and close to me and made a step-by-step plan of action:

1. Calculate all debts and your own financial balance.
2. Keep track of income and expenses.
3. Refuse coffee to go.
4. Refuse lunch in a cafe.
5. Use buses instead of taxis.
6. Disable subscriptions to paid services.
7. First, pay off the most "expensive" loans for which I pay the bank.

2. I counted all the debts

The first step was to collect all the debts in a general list. I calculated the amount and wrote it down in negative balance format. Until now, I think that this is half the success: the desire to go from minus to zero gave excitement to the process and helped not to deviate from the goal.

Here's what to deal with:

• 80,000 rubles - the main debt to the bank;
• 20,000 rubles - card overdraft;
• 15,000 rubles - debts to friends;
• 1,500 rubles - debt for French lessons.

Total: 116,500 rubles.

I recorded this value in my notes and updated it every time I made a loan payment. The interest that was charged off for using the loan, as well as the daily overdraft fee on the card, I fixed separately to see how much money I was paying for my mistakes.

3. Began to record expenses

It is difficult for an unorganized person to master cost accounting and keep it disciplined. I tried many things: I installed various applications, used signs and took notes, but it was all in vain.

After all the unsuccessful attempts, I lowered my expectations and agreed with myself that I would only observe, and not try to drastically save money and write down as little as possible.

To begin with, I chose several categories of expenses: cafes, transport, entertainment and shopping - it seemed to me that they should be dealt with first of all - and left expenses like rent, groceries and paying bills outside the brackets. I kept records in a Google spreadsheet and every week I wrote down the amount that I spent.

In the first month, I just trained myself to regularly look at statements and receipts and devote 10 minutes to filling out the table. In the second month, I set realistic limits. And only by the third month, when the habit became firmly established in my life, I began to add other categories and monitor all expenses.

Now my plate has grown and instead of four lines it takes 15, but I already write down expenses on the machine: every Sunday at breakfast I distribute the data to the cells, and at the end of the month I look at what happened in the end.

4. I learned to save on unimportant

I was worried that in order to get my finances in order, I would need to change my usual way of life. The item “Give up coffee to go” depressed my enthusiasm: for me it was not just a portion of a drink, but an opportunity to go to my favorite coffee shop, meet neighbors, and have fun chatting.

In order not to part with the morning ritual, I was looking for other ways to save money and found several curious "black holes":

• changed tariffs for Internet and mobile communications to cheaper ones;
• found a store where you can buy pet food in large packages;
• made appointments in the office with clients, so as not to order lunch or dinner just for the company.

But most of all, I won by abandoning taxis in favor of buses. If earlier I spent 8-10 thousand rubles a month on trips, then after a couple of months the cost of transport began to amount to 1.5-2 thousand rubles. I took the bus, sometimes walked, and occasionally I could call a taxi if I was late somewhere. Interestingly, before the experiment began, I had no idea how I would love listening to podcasts and reading books on the road, so extra time on the road is now even a joy.

Expenditure items per month	It was (rubles)	Became (rubles)
Internet and telephone	1 500	750
Food for cat and dog, litter for the tray	6 300	2 100
Eating outside the home	11 000	4 000
Transport	10 000	2 000
Total	28 800	8 850

When I cut the cost of communication and pet supplies, gave up taxis and meals outside the home, I began to save about 20 thousand rubles a month. I transferred them to early repayment of the loan.

5. Sold unnecessary things

One of the biggest challenges on the road to being free from debt was paying off the overdraft and turning it off. For using this service, 39 rubles were withdrawn from my card every day. But it was not possible to return 20,000 rubles to the bank at once to deal with the overdraft. Yes, and it was not possible to close the debt in parts - there was not enough willpower, and I constantly spent the entire allowed limit.

Many of my friends regularly sold unnecessary things, and I thought, "Why not try and sell me something?"

First of all, I revised my wardrobe and chose something that had not been worn for a long time or did not fit in size: a bunch of dresses, a down jacket, a pair of new elegant shoes. I photographed everything, made detailed descriptions of things and put them up for sale. To my surprise, the attempt was unsuccessful - no one was even interested or bargained.

I had to consult with my friends and monitor the buy-and-sell platforms in order to find out what people are buying and selling on them. It turned out that sports equipment and equipment, as well as things of famous brands, are quickly disappearing. There is a lot of clothes, no matter how good it is, and in my experience, you can win the attention of buyers either by price or by brand.

As a result, in a month I sold a Tiffany pendant, an old iPhone and a longboard and received 26,000 rubles. Everything scattered very quickly - literally in a day, a buyer was found for each item. With the money raised, I finally completely returned the overdraft to the bank and disabled this function forever.

What did she sell	How much (rubles)
Tiffany Pendant	17 000
iPhone 6	6 000
Longboard	3 000
Total	26 000

6. I used a credit card in my favor

The books on financial literacy mentioned that in the case when a person has a lot of debts, they can be refinanced at a lower percentage in order to pay one bank, and even save money. I did not consider myself one of those who would be suitable for refinancing. Less than a year was left before the loan was closed: I was required to pay the balance - 72,000 rubles, including interest - in a disciplined manner, and not get into new debt. But then an unusual solution turned up.

Once, during a promotional call from one of the banks, I was offered to issue a credit card. I proudly replied that I was not interested in such products now, because I was just trying to end my debt. The operator told me about the service of repaying a third-party loan using a credit card, and I took a break to study everything carefully and calculate the benefits.

In the description of the service it was said that I can arrange a money transfer from a credit card to pay off any debt at any bank. In this case, a 120-day interest-free period is provided: if you return all the money in four months, then no interest will be charged on the credit card.

Taking into account the cost of annual maintenance of the card, this trick saved me 10,000 rubles in interest. Not much, but I was curious to try. By this time, 60,000 rubles were left before the loan was closed, so I issued a card and transferred this amount towards the final repayment of the debt. Then I deposited 20,000 rubles on a credit card for three months and closed it, keeping within the interest-free period. The experiment was a success!

There are people who use this trick on a regular basis to get cashback and other bonuses from using a credit card. To do this, you must have impeccable discipline and know all the terms of the service agreement by heart. I am still worried that I might lose control of myself and miss the required payment, so I postponed this life hack until better times.

7. Victory

Six months later, I only had to pay off my debts to my friends and the French teacher - 16,500 rubles. And within a month after I closed the loans, I finally got a profit. For the first time, I saw a positive value on the balance sheet, which I wrote down at the very beginning. This, of course, was a victory - first of all, over the destructive habit of spending more than I earn.

The financial result of this whole story is only 10,000 rubles saved on interest, but I gained much more:

• learned to plan expenses, created her own system of accounting for income and expenses;
• I stopped feeling pangs of conscience and continuous anxiety about my future;
• learned to save and save money.

The order in finances helped to deal not only with loans, but also with other areas of life: I began to be conscientious and attentive to working documents so that I was paid on time; learned to plan a menu for the week and adjusted food; started making savings; saved up for a down payment on a mortgage and moved into her apartment.

I also want to pay off the mortgage ahead of schedule, as another author of the story did on Lifehacker.