How I Wound Up In A $60,000 Debt Hole – And Clawed My Way Back Out
I’m living proof that despite being reasonably savvy, well educated and working hard, debt can creep up. I understood the risks, I just chose to ignore them and buy shoes instead. This is my journey to debt and (almost) back.
It was the parking fines that brought me undone in the end. My boss asked to discuss a ‘personal matter’ with me, and an angry letter from the State Debt Recovery Office was the last thing I expected to be discussing at work. But this discussion would force me to realise I had AUD$60,000 in debt. Gulp.
It was my ‘moment of truth’. If this was The Biggest Loser, it would be the moment I weighed myself and realised I was 30kg heavier than I thought.
Not only did the letter reveal the extent of my parking fine misery (two grand worth of fines and fees), but it asked my boss to dock my pay to settle them. Who even knew they could do that? Double gulp.
Facing the music
I left the office embarrassed and aware that my decade-long period of denial was about to end. My parking fines were overdue because everything was overdue. For the first time ever (yep, you read that correctly) I needed to work out how much debt I was in.
The process of debt calculation took way longer than it should have. My denial meant that I didn’t know my logins or passwords. I had to call every institution and ask for my balance and no, I couldn’t make a payment but thanks for asking! The result was a vomit-inducing figure of $60,000. I cried a lot.
How in the name of all that is holy do you wind up 60K in debt?
Cue flashback sequence:
It all started on a Saturday in Myer’s Miss Shop, 14 years ago. The fashionable look was low-slung hipster jeans and I was on my way to becoming the next Britney Spears. If only I had the cash. Suddenly my pop diva dreams came true with the suggestion that I sign up for a store card. I had $1000 credit. I was rich and probably only an Aussie Idol audition away from fame!
From that moment, the journey to being 60K in the hole sped by like a movie montage.
I coupled my store card with a student loan, which I refinanced into a personal loan to fund an interstate move – and an even bigger loan when I bought my brand new car. While my loan was never my major issue, I made the good times last by making only the minimum repayment.
As my career developed, so did the opportunities to acquire debt. I signed up for another a store card and a handful of credit cards. When you’re earning enough, they’re easy to come by. Plus, I ‘needed’ them.
I splashed my credit (note: not cash) on shoes, beauty treatments, expensive drinks, holidays, fast fashion and parking fines. I’d love to regale you with tales of ridiculous spending but the reality is, I didn’t actually buy anything that crazy. No designer handbags or stays in luxury hotels. I simply became habituated to living outside of my means.
Denial became a friend
From there, the debt became self-perpetuating. Initially, I bought stuff, but after a while my cards were maxed out and frozen. Despite the freeze, I managed to add even more debt with late fees, admin fees, annual fees and some big fat interest charges.
I refinanced and balance-transferred myself into oblivion, and my phone was constantly alight with an ‘unknown caller’. Each week I received multiple letters with threatening red font, which I’d tear up immediately. Denial was my best friend.
The worst part is, my debt was ‘bad’. Aside from my depreciating car, I didn’t actually own anything of value. It’s not like I was in debt because of a mortgage. I had nothing to sacrifice at the altar of lending. I was in a debt death spiral.
After the moment of truth, what next?
Having arrived at my moment of truth, I had two options. Tackle it head on or sign up with a debt consolidation agency.
Despite my severely diminished financial confidence, I decided that taking ownership of my debt was the best option. I stopped lying to myself, acknowledged my dumbass decisions and enlisted the help of a financially successful mentor.
Her advice? Be ruthless and make becoming debt-free my mission.
The road to recovery
I started by selling my beloved car. I got less than what it was worth due to a quick sale, but it took a noticeable chunk out of my debt. The immediate relief was hugely satisfying and I was hooked.
Interest is a killer, so I began to pay lump sums off my debt whenever possible; I’d strategise where each payment should go to get the best result. My work bonuses (previously used for new shoes) didn’t even hit my bank account. I cut up every card and closed accounts as soon as possible. Before I knew it, my debt was halved!
Strangely enough, when it comes to lifestyle, I’ve barely noticed a difference. Sure, I don’t splurge every weekend and I often forsake expensive beauty treatments for at-home versions. But in reality, it’s been a little bit of a sacrifice for a lifetime of financial freedom. I still buy things. I just don’t buy three – every weekend.
Being honest is the key
I’ve learnt that being honest is the only way out of crippling debt. My biggest surprise was discovering that my credit lenders weren’t actually the trench coat wearing enemies I imagined. In fact, when I explained my situation, I was amazed by how helpful they were, offering low interest options and helping me claw back my credit rating.
Just three years after my moment of truth, I’ve cut my debt to a quarter of what it was and I can’t wait for it to be zero. It took me over a decade (and a heap of cute tops) to acquire, and surprisingly, just a couple of years to reduce.
And once it’s gone? It’s gone for good. If only we could say the same for low rise jeans.
Zoe Davis is a Sydney-based freelance writer, consultant and lecturer specialising in partnerships, marketing and music. Find her on Twitter and Instagram @agirlcalledzoe