How to Free Myself from Debt

Two years ago, Ari, 28, went through the difficult process of breaking free from debt.

It started when, due to the easily available credit card facilities and her own lack of awareness, Ari used her card without thinking of the long-term consequences. “I paid, in installments, for goods such as television, mobile phone and laptop. Besides that, I also used the credit card for shopping. Without me realizing it, the bills started piling up!” Ari said to LiveOlive.

This escalated after her spending limit was increased. “It was as if I had a lot of money, but it wasn’t real,” she said. With a limit that was almost three times her salary, Ari felt she had a license to spend much more than her income and got herself into a debt that she could not repay.

Ari also realized, to her dismay, that interest payments are larger that she originally thought. “After adding it up, it turns out that the credit card interest is not as small as they make it out to be. The calculation is actually very complicated. It was then and there that I felt cheated and wanted out of the debt,” she said.

Here's how Ari did it.

Pay it Off Slowly with Savings

The first thing that Ari did was to refrain from shopping with her card.

“In the beginning, I decided to first pay off my existing bill. Some of them were of a zero-percent nature, so I didn’t mind,” she said. Fortunately she had some savings that she could use to pay off her debt that amounted to millions. “Yes, there must be sacrifice. My savings is my sacrifice for getting out of debt,” she said.

Gradually, she began to leave her credit card at home. Instead of using her credit card, she switched to using her debit card. “At least, with a debit card, I know my real limit regarding shopping. So it’s easier (to control herself),” she added.

Record All Expenses

Determined not to get into debt again, Ari began to write down all of her credit card expenses in her diary. “It helps me to track what I buy and how much I’ve spent,” she explained.

However, she admits that she won’t completely let go of her credit card. She thinks that a credit card is still required for certain important transactions such as buying plane tickets. “As long as we know how to manage our credit cards… it will get easier,” she said.

Ari realized that the trick is to pay off the debt in full once the bill comes. “So there are no more installments with high interest,” she said.

Lana, 29, also shared valuable lessons about getting out of debt when she took unsecured loan (KTA) worth Rp 30 million to purchase a piece of land in Bandung. Realizing that the interest rate for the unsecured personal loan is a very high was enough for her to want to immediately pay off the debt, according to Lana.

Pay Off Debt with Your Bonus

“The terms and conditions for KTA are easy to meet, so that time I was tempted to take it. But after I added it up again, I found out that the interest amounted to 21% per year,” Lana explained.

Lana used her bonus to pay off her debt. “I paid the rest of my debt with my bonus (THR). This is because I thought that once the debt has been paid off, I won’t have any more burden” she said. 

Although people say that experience is an expensive teacher, it is also wise to learn from other people’s mistakes so that we don’t need to pay similar consequences with our hard-earned money.

Read also: Five Money Mistakes to Avoid

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