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Nearly $40,000 in debt and living paycheck to paycheck, Katia Chesnok reached a breaking point in 2017.
She says she accrued much of the debt by using credit cards and living above her means. “If my friends had this cellphone or this car or were traveling from place to place, I was doing the same. But I didn’t have the money to do that,” says Chesnok, now 32.
“I didn’t know how to handle finances, I didn’t know how to handle credit cards. I was living in this situation [where] I was always feeling really broke.”
She looked for guidance online, but was discouraged when she couldn’t find anyone who looked like her or who could relate to her experiences.
“Not many women, and Latinas especially, or women of color, were actually talking about personal finance with their communities,” Chesnok says.
So she taught herself how to reach her money goals—and paid off her debt in 18 months, all while documenting her journey on a platform that became @economikat. Two years and over 20,000 followers later, Chesnok has not only conquered her debt but built a six-figure side hustle that generated enough income for her to quit her full-time job. Now she uses the knowledge she gained through that experience to inspire other women to win with their money.
Here are five lessons she learned along the way.
1. Diversify Your Income — and Invest It
It’s easy to get stressed out by your finances, but if you have balance and a plan, you can take some pressure off yourself.
For some people, that might look like additional income streams. “Find passive income,” Chesknok says. “Find a side hustle, so you don’t depend on the one job.”
Chesnok’s side hustles eventually allowed her to quit her full-time corporate job and focus on teaching people about money instead. She makes passive income through those side hustles, which include online courses and partnerships through her blog.
Adding income streams was a game changer for Chesnok, because it allowed her to start investing for her future—a topic she never heard about growing up.
“My family’s from the Dominican Republic. We didn’t really talk about investing at all,” Chesnok says. “Investing for my family growing up was buying property. Buying a house, or even buying a car, was considered an investment.”
She’d never heard of things like 401(k)s, Roth IRAs, or stocks. Now, Chesnok contributes to ETFs and index funds to prepare for retirement. While she won’t be able to access the money she invests until she retires and starts living off of it, she’s learned the power of compounding interest on her investments, and what it means for her future.
“Investing has been such a powerful tool for me and has changed my life,” Chesnok says.
2. Always Have an Emergency Fund
After the challenges of the past year, Chesnok says she’s seen too many people lose their jobs without having any savings.
Now, adding to her emergency fund is her top priority for 2021.
“I’ve been saving much more in my emergency funds. Before [the pandemic] I had only six to eight months [of expenses],” she says. “Now I’m aiming for nine to twelve months.”
Emergency funds can be a lifeline during an unexpected emergency, like the loss of a job or unexpected medical expense. Chesnok recommends trying to build up your emergency fund even while paying off debt.
No matter your final savings goal, any small contributions you can make will help you get on the right track and build the habit of saving regularly. Keep your emergency fund in a high-yield savings account to earn some interest along the way.
3. Make a Bare Bones Budget
Having a budget will put you in the driver’s seat of your finances, and give you a clear view of where your dollars are going.
“Try to always keep a budget and keep control of your money,” Chesnok says. “Know what is going in and out at all times.”
She recommends starting with a bare bones budget. Cut your budget down to your basic living expenses: housing, transportation, food, and utilities. Once you know what’s essential, you can start adding back in the “extras,” knowing exactly what you could cut from your budget and still survive in case of emergency.
4. Join a Community
“Money is a taboo, but it shouldn’t be a taboo, especially in our communities,” Chesnok says. “Talk more about salary negotiation, talk more about investing, passive income, everything that’s related to personal finance.”
Many experts agree that community can be an integral part of your financial journey. NextAdvisor recently hosted an event called Latina Women on FIRE which highlighted the importance of community within the personal finance space.
“We’re going to uplift our communities by sharing this knowledge and sharing our experiences, because if we’re not putting ourselves out there, people are going to believe [building wealth] is a rare phenomenon that is an exception to the rule,” Delyanne Barros, a personal finance expert, said at the event.
Start by seeking out people you can relate to who are sharing their personal finance journeys and have goals similar to yours. Start building community by jumping into conversations with them and like-minded people who follow them and share your goals.
5. Know Your ‘Why’
It’s easier to stick to a goal if you’re passionate about it. Stay motivated to accomplish your savings goal or pay down debt by regularly reminding yourself why you’re doing it.
“Finding your ‘why’ is your number one priority,” Chesnok says. “ Make sure you find that ‘why’ and you’re very powerful about that ‘why’.”
Chesnok recommends envisioning what your life will look like when you’ve accomplished your goal, and let that be your why.
Your goal might be to own a house, pay for school, or become debt-free. Maybe you want to retire early and get serious about investing. Determine your top priorities and why you want to accomplish them, then set realistic goals and milestones along the way.
Chesnok’s own ‘why’ comes back to family. “In my case, I also have to budget for my parents; I have to take into consideration the help that I want to give them,” she says. “So that’s an extra challenge, but if I organize myself, if I live below my means, if I increase my income with side hustles and passive income streams, then I’m able to achieve that.”