How I'm digging myself out of $80,000 in debt
It's not easy, but I've made a plan and I'm sticking to it
For the last eight years, every time I've made a purchase, I've done so knowing I have a huge weight hanging over me to the tune of an $80,000 tax debt. There were a few years I didn't file (something I don't in any way recommend) and all that untaxed income added up to a very scary figure I was content to largely ignore, because it seemed so insurmountable.
When I turned 40 in 2015, I finally started to get serious about tackling the debt and set up a payment plan. That lessened the specter of menacing letters from the IRS, but going solely by that plan, which requires me to pay just $400 per month, would take me decades. So I've revised my strategy and taken a much more aggressive stance, knowing that any economic sacrifices I make now will lead me that much closer to the freedom of being debt free. I realized that there is a light at the end of the tunnel — I just have to focus on it, rather than feel sorry for myself. Here are five things I'm doing to pay off my debt:
1. Look at what I owe, including interest rates
For most of those eight years, I cringed whenever I opened the envelopes from the IRS, quickly filing them away without scrutinizing them closely. I knew I couldn't pay it off in the next few months, so I told myself there was no point in trying to lower my total. Sending a small amount like $50 felt like such a pittance I might as well not even bother.
As it turns out, there is a point to taking stock. The earliest years I owe have the highest interest rates, so every payment toward those helps knock them out that much sooner. Setting smaller goals to pay off each year's debt feels far more feasible than the whole, haunting total. When I crunched the numbers, I decided I would take an aggressive approach and pay off the full amount by the end of 2019. Even if I wind up a few months past my self-imposed deadline, I'll still be far closer than if I stuck to the $400/month.
2. Write down a specific payoff plan
With that end goal in mind, I worked backwards, breaking down how much I need to pay each month. Then I wrote those planned monthly payments down in a physical notebook dedicated to my finances, where I also track the ongoing total I owe and confirm when I've paid each installment. Seeing the numbers moving in the right direction has made it easier to fork over an extra hundred dollars here or there. If I want to pay $1,000 in a given month, I allocate $250 each week and make sure I record each payment. If I come into some extra cash, the first thing I do is pay some toward my debt, so I feel okay about whatever I do with the rest.
3. Talk about it
For many years, I didn't tell a single soul. Then, I found an accountant who was helpful and understanding. Rather than berating me, as I feared, he helped me get caught up on filing so I wasn't accruing new fees. Telling other people didn't go over as well. One friend was aghast, asking again and again, "How could you let that happen?" It took me a while to reveal my secret to anyone else, lest they judge me too. I worried that potential life partners would balk at my carrying such substantial debt. But my boyfriend of five years has helped me focus on fixing the problem at hand, rather than living in the land of what-ifs and self-blame. Having someone I can unload about it to has made a world of difference.
4. Visualize each big purchase as a down payment on debt
Though I'm aiming to pay $25,000-$30,000 per year toward my debt, I still allow myself indulgences such as the occasional vacation or a beloved pair of Fluevog shoes (on sale). I know myself well enough to be sure that if every single penny I had after paying for rent, utilities, and food went toward my debt, I'd be so miserable I'd eventually break down and waste money on something I don't need for a temporary fix. However, now when I make purchases, I also visualize my debt total being lowered by the same amount. Sometimes I make a matching payment, or just pay $10 to feel like I'm contributing something rather than simply being indulgent.
5. Find new income streams
The one upside to being so deeply indebted is that it's forced me to get more creative about how I earn a living. Let's face it: The small sums I earn for most of my articles won't solve my debt. So I'm venturing into self-publishing and teaching online writing classes. Both endeavors require some up-front investments, but have the potential to bring in passive income long into the future. Just as scrutinizing my monthly statements rather than stashing them away in the hope that my financial ignorance will lead to bliss, being proactive about my career has made me feel less helpless. Rather than being at the mercy of my debt, I now feel more in control of it.