Today I run a platform called The Avocado Toast Budget, which is dedicated to helping millennials feel confident about their money, and taking guilt and shame out of the equation. But it has taken some time for me to get to this place with my own finances.
Over the course of a year, I paid off $20,000 of credit card debt. It's a milestone that I'm proud of. And now I'm working my way towards my version of financial freedom. That includes the flexibility to spend my time on the things that bring me joy, like traveling and my fur babies, and never having to work at a desk again.
Here is what I've learned about paying off debt and my best advice for anyone who wants to do the same.
Growing up, money was a taboo topic. There was an unspoken message in my family that money struggles were not to be discussed. And while I left high school knowing that the mitochondria is the powerhouse of the cell, I had no idea how to budget or manage a credit card.
Then in college, my lack of financial literacy paired with my hesitation to be open and honest about my financial situation led me to spiral into credit card debt after my senior year of college.
When I graduated, I had $10,000 of credit card debt plus $40,000 in student loans. I had a psychology degree and no idea what I wanted to do with it. Adulthood was quickly approaching, and I felt extremely unprepared. At this point, I was keeping my credit card debt a well-hidden secret from the world. My hope was if I just kept pretending everything was OK, eventually it would be.
With few career prospects, I decided to go back to school to get my master's degree in psychology. With the combined stress of attending grad school, tackling a 40+ hour/week internship, and working full time to make ends meet, there wasn't much time or energy left to tackle the financial mess I was in.
In January 2020, I found myself stuck in a Michigan snowstorm with a broken down car, an empty bank account, and my third maxed-out credit card, which brought my credit card debt to a grand total of $20,000.
I was terrified. I had no idea how I would afford to pay my phone bill and get my car fixed, both of which were necessary for work. I knew that something had to change, and I started doing the work to pay off all of my credit card debt and get my finances back on track, starting with a budget.
I truly believe that the right budget is the foundation of any successful financial goal. At first, I thought budgets were inherently restrictive and meant I had to give up my $6 iced lattes once and for all. And I knew I wouldn't stick to that.
I needed a budgeting system that allowed room for me to mess up, overspend, change my goals, and splurge on iced coffee every once in a while. That's when I landed on a zero-based budget.
With zero-based budgeting, you take a look at the money you have right now (not tomorrow, next payday, or next year) and decide where that money needs to go, and what expenses it needs to cover first. Essentially, income - expenses = 0.
Video by Stephen Parkhurst
Since my income varied from paycheck to paycheck, traditional budgeting just hadn't worked for me. This strategy was a game changer for me.
With zero-based budgeting, every cent in your bank account has a purpose, which meant I had to be intentional with my money. I found myself canceling unused subscriptions, passing on takeout for a home-cooked meal, and truly enjoying when I did decide to splurge, knowing that I could afford it.
When I started paying off my debt, the idea of refinancing was somewhat new to me. The extent of my knowledge about refinancing came from radio ads I heard that claimed to help you "erase your credit card debt," which always sounded suspicious to me.
I started to do my research about how to legitimately refinance high interest credit debt to lower my APR (the amount you're paying in interest every month or year). By refinancing, I took out a personal loan through a bank for the amount I owed on my credit card. I then used the new bank loan to pay off my credit card debt in full.
Video by Ian Wolsten
This strategy, which typically works best if you have good or excellent credit, essentially transferred my debt from the credit card company, which charged high interest rates, to the bank, which offered lower interest rates.
I decreased my APR from over 20% on my credit card to less than 10% on my personal loan. This saved me a ton in interest, which helped me to pay off my debt faster.
When trying to pay off high interest debt, or reach a large savings goal, finding a way to make extra income can be a huge help. I made a promise to myself that any unexpected or extra income from my side hustles would go straight toward my credit card debt.
I dabbled in different side hustles but had the most luck with food delivery on DoorDash and Postmates, and selling my extra things online through Facebook Marketplace, Mercari, and Poshmark.
Video by Courtney Stith
Within a few months, I made $2,000 from selling off the items that I was no longer using and were taking up space in my apartment, and I averaged an extra $200 to $300 when I delivered food on the weekends. I still side hustle with DoorDash.
I didn't overwork myself, as I had learned from my time in grad school that overextending myself can do more harm than good. But over time I found a balance that gave me some extra income while still allowing me the freedom to live my life. This helped propel me even faster toward my goal.
For a long time, goal setting always seemed great in theory, but I couldn't nail it down in practice. That was until I learned about the SMART goals method in one of my master's program classes. SMART stands for specific, measurable, attainable, realistic, and timely. By following this goal-setting structure, I was finally able to create financial goals I could actually achieve.
Prior to this, if you had asked me what my biggest financial goal was, I would have said something like, "I want to be debt-free," with no idea how to get from point A to point B, or what point B even looked like.
Video by Helen Zhao
Using the SMART goals method, I changed that goal to, "I want to have my credit card debt paid off in full, and continue to pay off my credit card in full every following month. To pay off my debt, I will put $800 toward my credit card debt every month for two years."
That goal checked all of the SMART goal boxes and painted a clear picture of how I was going to fulfill my dream. And having that as a foundation, I was able to build on it, putting larger amounts in each month with my side hustles, a tax refund, and any unexpected income, like $50 for my birthday.
Many people, myself included, find ways to put off budgeting. One month there's a vacation, the next a job change, then the holidays roll around so we swear we'll start in January "when things go back to normal."
I learned quickly that the "normal" I was waiting for wasn't coming. And that remained true even during my debt payoff process.
There were times I would slip up, including a month early on when I accidentally paid my rent twice, leaving me with only enough to make the minimum payment on my credit card, and nearly overdrawing my account. I could have gotten frustrated, felt I ruined the plan, and quit entirely. Most likely, that would have ended me right back into the debt spiral I was working so hard to get out of.
Instead, I learned from my mistakes, adjusted the budget and debt payoff plan, and moved forward. And now I am credit card–debt-free and finally feel confident with my money.
Lexa VanDamme, creator of The Avocado Toast Budget (The ATB), is passionate about making personal finance education accessible. The ATB's mission is to help millennials save, pay off debt, invest, and finally feel more confident with their money by providing accessible and relatable personal finance content on TikTok, Instagram, and YouTube.
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