How The Budget Fashionista Got Out of Debt


The Budget Fashionista’s Annual “Being Broke Ain’t Cute” Series features tips and advice to help you improve your personal financial health. For more personal finance information, please visit our Financial Health Series.

The #1 question I get asked the most is how I was able to get my financial house in order and get out of deep debt.

First, how I DID NOT get out of debt:

No fairy godmother with a magic wand that magically erases credit bureau databases.
No Hedge-fund sugar daddy (I wish )
No publishing clearinghouse folks showing up at my door with a bouquet of grocery store bought flowers and a five foot check for $100k.
No, quick easy fixes. Just lots of hard work and honesty.

Here’s how I got out of debt:

1. Stop Spending. I know this sounds simple, but it’s probably the most effective thing you can do to. I mean, don’t spend a thing. Don’t make excuses for spending. Just stop. Cut up or freeze your credit cards and give yourself a cash allowance. Take that tax refund check and SAVE IT. Vacation in your local state park instead of the Bahamas.

2. Admit You have a problem. Admitting that I was broke was the hardest thing for me to do. Here I was, an Ivy League educated professional woman, unable to pay my bills. But the first step was not only admitting I had a problem to myself, but to my family and friends. Rather than spending thousands of dollars on plane tickets to visit our hometowns, the hubby and I made everyone come visit us. We held gatherings in our home, rather than going out to restaurants. We called our families on weekends using our cell phones (see #7 below), rather than using a home phone.

3. Realize Money, most likely, IS NOT the issue. In college and grad school I had a safety net, so frankly I spent without thinking. Very stupid. VEEERRRY STUPID.  Later, I was a newlywed living in a city I didn’t like, without any friends or a support system, and dealing with the death of my father. I was stressed, depressed, and obsessed- and all of this came out in my spending habits. You must gain clarity in your life first, before you can gain clarity in your finances.

4. Face the Facts. Gather 3 months of bank statements AND credit card statements and record everything you’ve spent for the past three months in a basic Excel spreadsheet. Don’t have a computer? Use a notebook. Don’t have MS Office? Then use the very free Google Docs Spreadsheet. When I first did this exercise, I was shocked to discover how much I spent on stuff like 411 calls on my cell phone and pomegranate juice ($45 a month!!).

5. Let go of the Princess Myth. Look, so many of us have bought into what I call the “princess myth”- that we all deserve to have every material thing we’ve ever wanted- a luxury car, designer clothes, a rich husband, etc, etc, etc. I blame the media for shoving this down our throats through shows like MTV’s Sweet Sixteen. Really think about what really makes you happy. Most likely it’s something that doesn’t cost you a penny financially.

6. Create a Needs vs. Wants list. Take your sheet with want you spent during the past three months and place them in either the Needs- things you need to survive, like your car, electricity, gas, and food or Wants- things you could eliminate immediately and still be able to survive like- cable TV, trips to the hair dresser, your BMW, and in my case, pomegranate juice. Get rid of everything, but one or two small things on the wants list. Why get rid of everything but one? You do need to have some fun in your life and I found when I tried to get rid of everything, I became very depressed, which made me spend even more.

7. Move. No seriously. The hubby  and I moved to a “questionable” neighborhood in Newark, NJ. Yes, THAT Newark. The result? Our living expenses was cut by almost 2/3rd. So, we used that 2/3rds to pay stuff down and save. When we decided to move to New York City, we spent months looking for a place that was below our means. The result was a 2 bedroom rent stabilized apartment, 2 blocks from Central Park that costs about $500 less per month than comparable apartments.

8. Live below your means. This is the reason why so many of us are in trouble. Keeping up with the Jones, means you may end up as broke as the Jones. You don’t need a luxury car and in some places you might not need a car period. You don’t need a flat screen TV or, unless you work from home and/or work in a field that requires one, you don’t need a computer- most local libraries have computer rooms with free internet. Take a peek at that needs list and see if there’s a way you can change or reduce the level of the needs. For example, we had two cars and we got rid of the one with the higher insurance and monthly payment. The result? Over $700 month saved in gas, monthly payments, insurance, even though we can afford a luxury car. We got rid of the home phone we never use and make all of our phone calls after 7pm on the weekdays and during the weekends.

9. Become financially literate. I mean read EVERYTHING you can get your hands on. Suze Orman books, Motley Fools newsletters, you name it.  Read, read, read, and then read some more. Watch CNBC, especially shows like Donny Deustch’s the “Big Idea” and, if you can stand it, Jim Cramer’s show.  Learn the difference between good debt (student loans and a mortgage you can afford) and bad debt (credit cards and crazy mortgages).

10. Remember This Too Shall Pass. Being broke isn’t the end of the world, especially if you’re actively addressing the issue. It’s often in times of great adversity, that great ideas are developed. Like The Budget Fashionista.

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  1. Tenacious says

    Excellent advice! I had to work my way out of $30,000 in unsecured debt because I wanted it all NOW! (Nice apartment with nice furniture, dining out daily, clothes,shoes, purses, jewelry, vacations,etc.) I wanted the life my parents had…for myself, NOW! I had a good college education, a good job with a company vehicle and I was BROKE! I was literally robbing Peter to pay Paul monthly and I was STRESSED! I ended up working with CCC to get my head above water and it took 6 looooong years but I did it. The Aha! moment was when I literally had a $1 to my name (not enough to buy a newspaper) AND I got, really got, for the first time Romans 13:8 – Owe no man NOTHING but to love him. Powerful! I could write a book…

  2. mountaingirl says

    The best way to get out of debt was not to get in it. 14 years ago we bought a house, nothing fancy but OK. Our house payment is modest and despite economic ups and downs, we’ve always been able to afford it and have money left over to enjoy life. We’ve also dumped little expenses that don’t add much, like having 2 land lines, pay services on our cable TV.

  3. Dale says

    Actually, in this economy, ALL debt is pretty much ‘bad’ debt. With credit card companies and banks sneaking in fees on the most mundane transactions even a mortgage has become a cash cow for lending institutions.

    There are some institutions that box you in for paying by phone or online – they’ll only ‘let’ you pay for free by check through the mail. Then they can claim your payment is past the deadline! Be extremely careful with this!

    I rent and was told I could pay rent with my rewards debit card. Sure – if I wanted to pay a $40.00/mo. fee along with the inflated rent! Watch your backs, people!

  4. Amy says

    Awesome post! I got out of debt last year and it is such freedom to not be in bondage to lenders! I have completely stopped using credit cards and I don’t want any type of financing, especially for things that I should be saving up to pay for. Dave Ramsey has some great books as well on this topic. You should check him out!

  5. Unemployed with MS says

    I have been divorced for over 12 years. It was the best thing that could have happened to me financially. I was flush, even, no consumer debt. Then I fell back into the same bad habbits of buying what my kids wanted. I guess I have trouble saying no to them. My dad tells me that I am a push over. (I now understand why my mom never tried to take us with her when she shopped)I lost my job and had to put things on credit card. I became reemployed and cut up the credit cards. I again got on the stick and had no consumer debt. At the age of 50 I lost my job and got Multiple Sclerosis so again I find my self in credit card debt. I have yet to go into remission. My unemployment benefits are due to run out this months, which was how I was paying for the expensive medication. Without insurance it would be 3700 per month. I worked with the company to get them to pay the 800 copay per month. The worst part about the disease is the uncertainty. I want to work but find it difficult to walk fast or far. I have been told that Disability will take 2 years and everyone is denied the first time around. I have been making my house payment to date. So I know how to get out of debt if I have a job. But how do you do it if you don’t have a job? I am certain the situation will resolve itself. I would like ideas of how others have done it. Thank you and God bless. Worried in Iowa.

  6. Hareiana says

    For those not wanting to give out personal identity and access to bank accounts while realizing the power of personal budgeting and smart money management with the ease and convenience of an online web app, Out Of The Dark (OOTD) Budgeting is one little website gem to check out. In addition to side by side budgeting and cash tracking, you can manage monthly put-aside amounts, transaction accounts for loans, credit card debt management and personal assets tracking, all for free on the web in total anonymity. Google OOTD Budgeting or go to

  7. Pauline says

    I live in Europe where credit card use is much less the standard that it seems to be in the US. Why spend money you don’t actually have? How can buying something like that ever feel good? I’m 31, I’ve never been into debt and I have a nice little savings account. I buy my clothes from normal, quite low-budget retailers, and then mostly on sale. If you know what to look for, there’s always good items to be found amidst the lower quality stuff (I recently bagged a woollen coat for just 25 euros). I buy my furniture and decorative items for my -small, cheap, but very cosy- apartment mostly from auction sites and charity shops. I never liked the modern Ikea-style anyway, and I like to give my own twist to things so 2nd hand will do fine for me. You wouldn’t believe the bargains I’ve found online, from a brand new sofa for only 50 euro’s to handmade hardwood furniture like teak tables, wardrobes and handcarved chairs. Quality stuff for mostly less then a quarter of the original retail value.

    Just be creative (sew your own pillow-cases, or rev up a piece of 2nd hand furniture with a bit of paint or some new handles), use the internet to look for bargains, learn to love the simple life and the little things that are free, and DON’T use any creditcards! Ever!

  8. says

    This is great advice, and I have to tell it was really what I needed to hear today! I have The Budget Fashionista’s book, and I’ve been trying to live debt free, but something always seems to trip me up, mainly living beyond my means, and spending too much on “wants” that seem like “needs” (iTunes, anyone?). I joke with my friends that my life story could be titled, “Heiress to Bare-A$$ in 3 (Not So) Easy Years.”

  9. Corri says

    This was helpful. The willingness to live with one car is a big one. I am hoping that my partner will consider this. I have a problem at 40-something living with the idea that I am not supposed to have exactly what I deserve . I’m trying to pay back debt for the 3rd time. You would have thought that I would have learned the first two times I was in debt.

    • TBF says

      It is amazing how much you save by using one car (just think about how much you use in gas). It’s hard to really, really think about what makes you happy in life, it’s much easier to go for instant gratification ( I still slip myself).

  10. Ceecee says

    We own our home, so moving to a place with less rental costs was not a option. We have found aquired a lower mortgage, and that has helped us with our budget now that my husband has lost his job.

    I like point number 1. I’ve started not buying any clothes this month until my savings go up to a certain point. This means I’ve had to toss catalogs without looking at them and not opening email from fashion websites. What I’d like to be able to do is look at these fashion sites for ways to put what I have together without being tempted to get one more thing!

  11. Elizabeth says

    Perfect, just perfect. This list captures it all on getting out of debt. Thank you so much for sharing your wisdom and thank you for sharing your courage! To move into a smaller, more affordable residence (#7 “Move”), so many people don’t even consider moving, let alone actually move, with a significant other in order to improve their finances. I also love that you both worked together to find an upgrade actually in NYC below your means. You can have what you want, sometimes, it comes at different timing that you’d expect.

    Lastly, #5, Let Go of the Princess Myth, is genius. If only we read personal finance articles as much as our culture has indoctrinated us since childhood with fancy thick women’s magazines full of ads and delicious perfume samples. It’s unfortunate that we’re pressured to spend at such an impressionable age, but on the plus side, we can use this clever marketing to trick ourselves into better habits. Read fun finance material like is helpful like this blog…or….write the successful personal finance content you wish you COULD read but CAN’T seem to find.

    Keep on rocking it–you’re an inspiration!

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