Debt can slowly creep up on you until it suddenly gets out of control. No one knows this better than David Bakke, a contributor for financial education website MoneyCrashers.com. Before Bakke became an expert at money, he learned some pretty tough lessons along the way. Bakke, a recovered overspender, shares with us how he overcame $30,000 in debt.
BlackEnterprise.com: How did you accumulate $30,000 in personal debt?
David Bakke: I got into $30,000 of debt through a combination of student loan debt and terrible spending choices with my credit cards. The truth is, I just wasn’t mature enough to handle the responsibility of what seemed like inexhaustible lines of credit. I started eating out all the time, blowing money on a range of entertainment activities, and just didn’t consider that I’d eventually have to pay all the money back, plus interest.
How long did it take you to accrue this debt?
My debt developed over the course of three years. For the first couple of years, I was able to keep up with minimum payments, but eventually I couldn’t even do that. Just about every one of my credit cards was closed due to going over the limit or non-payment.
What inspired you to get out of debt? What was your turning point?
At one point during this ordeal, I had to move back in with my parents because I was between jobs. During that time, they found one of my credit card statements and saw what dire straits I was in. So they gave me an ultimatum: I could either do something about it on my own, or they would essentially police me and my spending activities. That was embarrassing and I decided on the former. That was my wake up call.
What advice do you have for others on how to dig themselves out of crushing debt?
First, you have to commit to doing something about it. Know that credit card debt does not have to be a permanent part of your life. Once you accept that, the process becomes much easier.
Next, get yourself on a budget (the Mint.com website is a good resource), and reduce your monthly bills. Be prepared to cut back personal spending tremendously. Although this may seem extreme, it’s just an adjustment until you’re debt-free—you don’t have to make personal spending sacrifices forever.
Then, total up your debts and develop a long-term plan to pay them off—all of them. For example, if you have $250 left over each month after slashing personal expenses, and you have $10,000 worth of debt, it should take about three years for you to pay it off.
Create mini-goals along the way (every time you decrease your debt by $2,000, for instance) and give yourself a pat on the back each time you reach one. In other words, celebrate a little—a concert or nice dinner out is in order—just don’t overdo it. Motivational boosts like these will help you stay focused and on track until you reach your goal.