If you have ever paid off your credit card balance and watched it creep right back up within a few months, you already know that paying off debt and getting out of debt are two completely different things. In this episode I am sharing my own debt story because I think it is important for you to hear that the cycle you are in right now is one I have lived myself, and I want you to understand exactly what it took to break it.
For years I carried a credit card balance of $5,000 to $6,000 that would come down with my tax refund and climb right back up before the next April. It was not because I was not trying. It was because I was using fake math. I was leaving expenses out of my budget that I did not want to look at, things like car repairs and flights home, and telling myself I would figure it out later. The figuring it out was always just me waiting for the tax refund and hoping something would finally change. Nothing changed until I got honest about what I was actually spending money on and started building a budget that told the truth about my real life.
In this episode I walk you through my full debt story, from $70,000 to $80,000 in student loans to a revolving credit card balance that followed me year after year, and the specific mindset shift that finally broke the cycle for me. Because the thing I want you to hear more than anything else is that however fast you pay down your debt is also how fast you get back into debt if you have not investigated what is actually causing it.
In this episode you’ll learn…
[00:04:15] Why Keina accepted her student loan debt and used it as motivation to earn more money instead of letting it paralyze her, and what that decision looked like practically as a teacher making $30,000 a year in St. Louis
[00:09:30] How a $5,000 credit card limit changed everything and how a revolving balance of $5,000 to $6,000 became a pattern that showed up year after year no matter how many times the tax refund brought it down
[00:14:45] What was actually going on underneath the credit card balance, the expenses that never made it into the budget, the fake math that kept the cycle going, and why the list of bills was never going to be enough to break it
[00:19:20] Why paying off debt with a lump sum almost always leads to getting right back into debt, and what has to happen in your budget first before any payoff strategy is actually going to work long term
[00:24:10] The shift that finally broke Keina’s debt cycle, getting honest about every expense, building a budget that reflected her real life, and using extra income from math tutoring to pay down her balance while also fixing what was causing it
[00:28:45] Why it does not matter how much debt you are in right now, whether it is $2,000 or $100,000, and what it actually means to become someone who pays off debt and stays out of debt instead of just feeling better for a few months
Tune in to this episode of Money Files to hear Keina’s full debt story and understand what it actually takes to break the revolving debt cycle so you can stop paying off the same balance over and over and finally build the financial life you keep saying you want.
Are you ready to start asking for help with your finances? Apply to work with me, and let’s start working towards your financial goals.
If you loved this episode on paying off debt, check out “Automatic Money Thoughts”: The Sneaky Scripts Keeping You in Fake Math
Transcript for “My Debt Story: From a Revolving Credit Card Balance to Finally Breaking the Cycle”
Intro: Hi, and welcome to Money Files. I’m Keina Newell from Wealth Over Now. I work everyday with professional women and solopreneurs to help them get out of financial overwhelm and shame so they can experience more flexibility and ease with their finances. Are you ready to gain confidence and learn to manage your finances intentionally? Tune in and grab financial tips that will help you master the way you think about and manage your finances.
Keina: Hello and welcome back to another episode of Money Files. I actually had a completely different episode ready to record and I thought that I would actually get on here and I’m going to talk about my debt story. You probably know some parts of my debt story, maybe not all of it, but I wanted to talk a little bit more about debt because I feel like it’s one of the number one things that people come to me for. It’s the number one thing that I hear when I’m on consults is like people are telling me how much debt they’re in. It may be debt that they’ve never shared with anyone else. It may be feeling like they’re in debt for the first time and how did I get here?
If you actually go, I have to link it in the show notes, but if you go back to, they were like my December episodes, I did an entire debt identity series because I think it’s really important how you talk to yourself about your debt because that changes how you feel about the experience you’re going to have as you pay off debt. But one of the things that I was thinking about when I was reflecting on my own debt story is that it bumped up against my identity, if you will, and it wasn’t my student loan debt. The only thought that I really had about my student loan debt was like I just kind of embraced my student loan debt.
I had about somewhere in between $70,000 to $80,000. It’s funny because I don’t really remember the number anymore because I did pay it off. I have paid it off. But with my student loan debt, it just kind of accepted the fact that I was going to have student loan payments and not from like, oh my goodness, I’m defeated and this is going to be my life forever, but more so an acceptance of the debt because it was, I’m going to at least have to pay this off for 10 years. If that is true and it is going to be a known entity in my life, then how do I make more money? Like I don’t want to get caught up in the fact that I need to make $500, $700 payments and let that be something that paralyzes me. I don’t have time to be paralyzed by that and I need to go and seek out more money.
So my student loan debt, I compartmentalized and I started to see it as just a payment that was always going to be there. And even so much the fact that I was like, okay, if it’s not a student loan payment, if I have kids, it’s going to be something that would be for a child. If I need to get a new car, it’s going to be a car payment. So I need to assume that I’m always going to have this like $500 to $700 payment. If that is true, then what else do I want to be true about my finances?
So it didn’t rock my identity, if you will, in a way that was overwhelming or paralyzing. I used it as a way to think about how I wanted to increase my income. And if you know my origin story, if you know me, then you know that I was actually in education. I did teach for America. I was making like $30,000 a year. At the time I was living in St. Louis, making $30,000 a year. And then one of the intentional decisions I made after I decided I was going to not go to grad school and like get an MBA, but that I was going to stay in education, is that I was like, I have to make more money as a teacher. And one of my friends was interviewing at a charter school called KIPP.
And then there were some other charter schools that I was interviewing for like across the nation where I knew the income was higher. So even as a teacher and being in this non-profit space, I was like, I need to make more money if I want to stay in a field and in a position where I feel like I can help people, but the money needs to be, it’s not going to be the same as if I had gone into the oil and gas industry, but I need the money to make sense. So that’s how I actually got out to DC.
I was working for an organization called KIPP and I went from making like $30,000 a year to like $50,000 a year. There are other parts of that story where the rent also increases and the cost of living increases, but overall moving to DC, it was a strategic decision to earn more money. And I knew that educators in DC could make six figures. So that’s why I made the decision to move to DC. I also knew that I was going to have to start paying my student loans back. And so I was going to need to make more money in order to meet my financial obligations. And my student loans were just a part of my budget and I knew I needed to make the money to be able to pay off the student loans.
So I would say like that area of my life when it came to debt, I accepted the number, I figured out how am I going to make this number work on my budget? My solution was I want to earn more money. And then the other part of my debt story would be credit card debt. So I got a credit card. I think I actually got my first credit card at 18 because I applied for it. And I grew up in a family where my parents pay off their credit cards every single month. Like they don’t leverage debt in that way. It is very much like credit card debt is bad. And I know a lot of my clients and listeners, you can probably relate to somebody in your family saying your credit card debt is bad and that if you can’t afford it, then you don’t need to be buying it.
And so that’s the household that I grew up in. Like I watched my parents make sacrifices and budget. And I took out that credit card to start building credit. I think my first limit was like $500. Then my second limit was $800. My next limit was about a thousand dollars. So that was my first experience with credit cards. And it wasn’t a big limit. I feel like I could manage it. Then at some point, I got a credit card with a $5,000 limit. And that’s where things started to change for me. And I was no longer the person paying off the credit card debt at the end of every single month. I was holding and carrying a balance. And I know I didn’t have the words for it at the time, but I had shame about having a credit card balance. I was the person that eventually I was holding a credit card balance of anywhere from like 5 to $6,000.
Being in education and not always making enough money, if you will, I was putting things on my credit card. And some of it like thinking back was, yes, I’m not making enough money. But even though I was budgeting, I wasn’t planning my spending correctly. I was leaving out categories that I felt like I couldn’t afford. So then why put it in the budget if I can’t afford it? And I see this all the time for the people that I work with, which is one of the reasons that I encourage people, let’s put it in the budget. Even if you feel like you can’t afford it, I want you to put everything out there because your brain is going to tell you, well, if you can’t afford it, then you just figure it out as it pops up.
And that’s generally what I find credit card debt to be, is your credit card debt are the expenses that you are just trying to figure out. And you don’t necessarily push yourself to figure it out. You just sweep it under the rug. And that’s how your credit card debt shifts over time where you can be like me where your $800 was your credit card limit. And then once it goes to $5,000 or $10,000 or even $25,000, where you start to have more credit card debt over time because you’re giving yourself permission to spend and figure it out, but the figuring it out never really comes. So with my like $5,000 to $6,000 credit card balance, that would come in and out every single year or it may get down to $2,000 and then creep back up to $6,000.
I was paying off my credit card debt with my tax refund. So like when April came and I got a $2,000, $3,000 tax refund, it was going towards my credit card debt. At some point, I just really got fed up with myself because it was like every single year I’m using my tax refund to pay down my debt, but then my debt is creeping back up. Like I can’t use my tax refund. Like I wasn’t able to use my tax refund to actually save money. I was using my tax refund to just pretty much get my head above water. And I didn’t like that feeling. In addition to, it butted up against my identity or an identity that I wanted, which was to be someone who didn’t carry debt, who paid off their credit card every single month because that was the home that I grew up in.
And I very much out of my parents three kids, I probably have the most like people-pleasing personality where I wanted to do the right things and take all the lessons that my parents taught. So one of the lessons they were teaching, is that credit card debt is bad. Like you shouldn’t carry credit card balance if you don’t have to carry credit card balance. Like you need to budget and do the right thing with your money. So there was some version of feeling like a fraud because I had this credit card debt and I didn’t want to have the credit card debt. In order to get out of the credit card debt, I had to look at what I was actually putting on my credit card and the things that were going on my credit card.
So at the time I had a Honda Civic and if anything happened to my car, it was going on my credit card. And I was in my twenties. So I was like learning what it meant to take care of a car. So that wasn’t really in my budget in the beginning. I was learning that, oh, you have to get tires. Oh, things can happen outside of just an oil change. So when things would happen to my car, it might be a $1,500 and I’d be like, okay, I’m going to put it on my credit card and I’ll figure out how to pay it off. And that figuring it out usually came from the tax refund because I wasn’t going back to my budget and making space for auto maintenance or it was not enough money to make space for the auto maintenance. Like maybe I had $25 in there for auto maintenance per month and I wasn’t really being thoughtful about how my budget needed to shift and having a really transparent conversation with myself.
The other thing that was going on there was flights to go home. I was living in DC when I’d go to Oklahoma, like my flight was going on my credit card. And so I didn’t have space for travel. I didn’t put holidays on there. There were all of these expenses that I was just figuring out and it wasn’t true that I was figuring it out. Like me telling myself I was figuring it out was really me just ignoring it until I got that tax refund and was hoping something that was going to change. So the biggest shift that I had to make was what I talk about on this podcast all the time was like, how do you actually spend money, Keina? What do you need to spend money on? What do you want to spend money on? And being real with myself, like I needed to use real math.
I was using fake math and that fake math was keeping me in this revolving debt cycle. Although I was using a lump sum of money to pay off my credit card, my credit card balance was going right back up because I wasn’t adjusting my budget for the things that I was actually spending money on. And I find that anytime I’ve had a credit card balance, it means that I need to go and look at what are the things that I’m putting on my credit card? What patterns am I seeing? And how are those reflected in my budget? Have I actually corrected my budget? If you don’t correct the budget, it doesn’t matter whether or not you can pay off the credit card. So you taking a bonus and paying off your credit card isn’t going to do anything for you if you don’t actually adjust your budget.
We need to get your budget into a place where it takes care of the expenses that you’re putting on your credit card. Even if you’re like, Keina, I just put my groceries on my credit card and eating out like my day to day. I want to take advantage of points. Okay, you can do that, but you still have to have a number for what that looks like. Even if you feel like, well, my groceries always fluctuate. They do, but we can still find an average of what that looks like. So that you aren’t lying to yourself. You’re not being dishonest with yourself about how you actually need and want to spend money. And I’m saying need because I understand there are things that you do need.
You need gas, you need groceries. And there are other things you need besides gas and groceries. But when I’m thinking about what needs to happen in your life, there are things that you need and then there are things that you want. And so we want to make sure that both your needs and your wants are in your budget. And that’s why we have to get away from the list of bills. Because if we’re only looking at our list of bills, we are going to miss the other ways that we spend money that cause us to use debt and get in and stay in. Look, I’m paying off my debt. My debt’s right back up. I’m paying off my debt. My debt’s right back up.
And so as your debt increases over time, the other thing that I see is that you just end up having like a higher tolerance for how much debt you’re in because you start to believe that you are just somebody who’s in debt. That you can’t be the person that pays off the debt. And that’s not true. It is fundamentally not true. And I know that because I’ve walked myself through this cycle. And regardless of how much credit card debt you have, maybe you have, some people come to me and they have $2,000 of credit card debt and it feels like $20,000 of credit card debt. But you can have $2,000 of credit card debt. Maybe you have $20,000 of credit card debt. Maybe you have $50,000 or even $100,000 of credit card debt. Wherever you are, you can pay down your credit card debt. It does start with a budget.
It starts with a budget. You got to be real with yourself about what’s actually happening. That is that sobering moment that you need that allows you to change everything. And you’ve probably heard me talk about it on other podcasts. If you’re on my email list, you’ve seen me even email about it. I’ve had clients, central clients ask me, they’re like, Keina, does it make sense to work with you if I’m in debt? I’m like, absolutely, it makes sense to work with me if you are in debt because you can’t see what you can’t see. And I’ve had clients put their coaching on a credit card. I’m like, yup, we’re going to pay it off but we’re not just paying off your credit card debt.
You are gaining a skill that is going to help you pay down your debt and keep you out of debt. So in the past, you’ve been just paying off your debt. You paying off your debt hasn’t kept you out of debt. It’s just made you feel better for a month, three months, maybe even six months. And then that debt pops right back up. We want the debt to come down steadily. And we want you not to have to rely on your credit card as your backup system. I want you to be somebody who knows, like I can actually pay down my debt. I can tell myself the appropriate story about my debt. And I can be the person that pays down my debt and also can live out whatever my financial dreams were. So my debt, I wanted to get a handle on it definitely before I went into business for myself.
I want to say when I opened my business and started working for myself full time, I had that 5 to $6,000 worth of credit card debt that was still following me. It would follow me year to year. And it was cleaning up my budget and making space for the things that I actually knew that I wanted to spend money on, the things that I don’t want to spend money on like getting my car fixed. But those things had to be in my budget. And as I was building my business, I was taking some payments for my business to pay myself. But then I was also putting the extra money towards my credit card debt. I also at one point in time was doing math tutoring. So I had extra income that was helping me pay down my debt. But I adopted a new approach.
And my new approach was to be honest about my expenses. That honesty is the thing that you really need if you want to be able to pay down your debt once and for all. If you’re not willing to be honest, then you’re not going to get out of debt. And sometimes we’re worried about how fast we get out of debt. But however fast you pay down your debt is also how fast you get back into debt. So if you’re paying it down in one lump sum, you’re going to get right back into debt because you haven’t actually investigated what’s happening. When I’m working with clients, sometimes we may not start like a full debt payoff plan until three months into when we’re working together. And that’s simply because I want to make sure that we know the reasons that you’re in debt and that we’ve watched your habits, that we’ve watched what’s going on because you are going to be a more confident person in this debt payoff experience than if you just pay off your debt in one click with a bonus.
I want you to have the experience of someone who can pay off your debt and stay out of your debt. So if you’re listening to this podcast, you’re like, Keina, I relate to you and I have the same $10,000 balance that pops up, the same $2,000, $3,000 that I pay off, it comes right back. I really would invite you to apply to work with me. I don’t care how much debt you’re in. I have a client right now, they have $100,000 worth of debt and I’ve helped them reorganize how they’re paying it, where their payments are more manageable and we’re paying that off. I’ve helped people pay off $30,000 worth of debt. No matter where you are, you can pay off debt.
What I don’t want is that you are in a space where you are staying in your shame, where you’re staying in your overwhelm and you’re not giving yourself permission to do something different. No matter how much debt you’re in, there is a way out of debt. And I would invite you to apply to work with me and let’s get a system in place to help you manage your money and then make a plan to help you pay down your debt so you can fully experience the life that you want to experience. So go to the show notes, you can apply to work with me there or you can go to wealthovernow.com and there’s a button that says book a call. But until next time, have a great week.
Outro: Thank you so much for listening to Money Files. If you’re ready to take the next step to reach your financial goals, head to www.wealthovernow.com/appointment and let’s get started.
