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Bernadette Joy never expected to find herself $300,000 in debt.
Throughout her 20s, she’d partaken in the standard vices that came with living in New York, like shopping on Fifth Avenue and buying extra rounds of drinks, but she hadn’t incurred debt in the process.
But entering her 30s in Charlotte, North Carolina, Joy and her husband found themselves owing $72,000 in student loans from her MBA, $180,000 from their home’s mortgage, and $57,000 from their rental property’s mortgage.
On top of that, she was toiling away at the dress rental service she founded. As a new entrepreneur, she knew the debt would get in the way of her pursuit of financial security. “I had so much shame around money. Outwardly, it looked like I had my s**t together, then inside I was slowly dying,” she says.
After some personal low points (her first step was “crying my eyeballs out,” she says) and self-reflection, Joy, now 35, rallied and looked at her total debt amount. She pored over the terms of her student loan debt, evaluated her budget, and started striking through the line items that didn’t matter.
She and her husband paid down more than $25,000 of her student loan debt three months after her April 2016 graduation from grad school. Excited by the win, she turned to Instagram. She took a leap and shared an update on the debt she’d paid off so far.
“I knew if I said I was going to finish this goal of mine and I told people about it, it would force me to do it. What I did not expect is that my DMs would get flooded with acquaintances, friends, [and] family members who I thought would be the ones judging me. Instead they were supportive and asking for advice so they could do what I do.”
Using a strategy later defined under the acronym “CRUSH,” Joy found additional income streams (for example, renting out a room in her home to a family member), cut out all discretionary expenses she didn’t love, and funneled those savings into a self-directed debt payoff plan that erased all $300,000 of debt in three years.
Joy’s story is an extreme example, but her concrete advice and refreshing transparency about money offers valuable takeaways for how creative debt management can be.
Inspired by her success, she said, her friends and family now refer to their own money wins as “pulling a Bernadette.” Joy now runs a company, Crush Your Money Goals, where she helps others get out of debt through classes and community accountability.
If you’ve found yourself in a mound of debt, you’re not alone. The average American carries about $38,000 in personal debt (not including mortgages), according to a 2018 study from Northwestern Mutual. And especially since the COVID-19 pandemic started, debt has been a significant source of anxiety for Americans.
Compounding this is a deep shame around talking about money in the United States. It’s important to note that having debt — no matter how it was incurred — is not a moral or social failing. It is a stressful part of life, but it can be managed. Those who’ve managed to pay down their debt describe a profound sense of financial security and ownership.
We asked Joy and two other debt management experts about their advice for people pursuing their own debt-free future.
Build an Emergency Fund
The first step to paying off debt is putting yourself on firmer financial ground.
Without a backstop of emergency savings, you’ll fall behind on debt payments whenever unexpected expenses arise.
Every financial expert seems to have a different opinion on how much should be saved in an emergency fund. Joy advises people who are starting from nothing to save one month’s worth of expenses, before beginning to pay down their debt. “I consider it a severance package to myself. I know I have 30 days for mental clarity,” she says.
One helpful exercise is to identify what you consider to be a financial emergency, says Kimberly Zimmerman Rand, principal at Boston financial counseling firm Dragonfly Financial Solutions LLC. For one person, it could be their car breaking down on the way to work; for another, it could be an allergy flare-up that lands them in the ER. “Once they’ve identified that keep-you-up-at-night emergency, assign a dollar amount to that. I recommend that be the foundational level of savings before aggressively paying down debt.”
Change Your Mindset
Next, you’ll need to get honest about how you got into debt.
To expect any drastic change in spending habits, you must first change your relationship to spending in the first place. Jackie Beck, debt expert and creator of the money app Pay Off Debt by Jackie Beck, suggests reframing debt as a problem you want to solve, rather than a way to fund your life.
“As a society of borrowers, we’re so used to meeting wants and needs with debt that it’s easy to see it as a solution,” Beck says. “But if you want to be debt free, it helps to realize that debt is literally costing you money in the form of interest, and time in the form of your future. You’re working to earn money to pay for what you’ve already spent. To reverse that trend, you’ve got to stop borrowing and only spend money you already have.”
Joy calls this strategy “reverse-engineering your life goals.” Look at the full amount you owe and figure out how and when you want it paid off. It won’t just happen without a good plan in place. Looking at the how and when can help you determine how aggressively you’ll need to save and earn money.
For example, if you and a spouse want to pay off $20,000 in debt two years’ time, that will require carving out $833.33 per month for 24 months. Is this an amount that can be realistically budgeted for paying down debt? These are the questions you must ask yourself to find balance between challenging yourself and running yourself ragged.
Pick a Strategy
How do you go about paying down debt? Rand suggests picking between two common strategies: the avalanche and snowball method. The avalanche method requires tackling the debt with the highest interest rate first, paying only the minimum balance due on all other debt. Then, when that debt is paid off, you move your focus to the card or loan with the next highest interest rate. Mathematically, this method will save you the most money in the long run.
However, the snowball method is compelling for its psychological value. It requires paying down the smallest balance first, offering a quicker win. Then, you take the payment you were making on that debt and roll it over to the debt with the next biggest balance. “People I work with really responded to that feeling of accomplishment,” Rand says.
Whatever your strategy, discipline and consistency are key to succeeding in paying down your debt.
Spend On What You Love, Minimize the Rest
If you have some wiggle room in your budget, it’s useful to keep some money dedicated to hobbies, treats, and vices. Otherwise, the journey to debt freedom will feel more like a slog.
Joy found that once she was able to pinpoint what she loved spending money on, paring back on other categories didn’t feel like much of a sacrifice. “What I don’t like about debt-free rhetoric is, ‘You just have to eat rice and beans and cut out everything you love. Don’t have fun and never see your friend.’ I’m not about that. You’ll burn out fast. I tell people to balance out their resources — money, time, and energy. There’s no point in having tons of money if you have no time to enjoy it and you’re exhausted.”
Find Your Community
Joy credits much of her own money success to virtual connections and resources. “Everyone thinks you have to go to a financial advisor, but you can go to Instagram,” she says.
The finance industry has historically been a male-dominated industry, so the Instagram personal finance community is a bright spot, offering a platform for women to share personal stories, provide community accountability, and dispense advice free of inaccessible jargon. Joy cites a few different sources of inspiration, such as Amanda Williams, who paid off $133,763 in 43 months; Clever Girl Finance, a series of books and e-courses dedicated to financial empowerment; and Chris from @the.everyday.millennial, who dispenses daily personal finance tips.
It’s important to follow only credible sources, as not everyone with a platform in personal finance is looking out for your best interests. But whether you’re paying down $3,000 or $300,000 in debt, finding people who can relate to your situation can make a huge difference in your own debt management journey.