A woman who wiped out almost $24,000 of debt in 15 months shares the 3 things that helped her do it (2024)

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1. She crushed autopilot spending habits bycreating areverse budget.

The first,keychoice she made to eliminateher debtwas to makewhat she calls areverse budget: "a detailed document listingall of your purchases from the last three months."

To create your own reverse budget, start by getting your bank and credit card statements from the last three months. Make a list of categories of where your spending is going and be sure to record everything.

Get the totals for each category, and divide themby three (one for each month) to find the average monthly spending per category.

"What you're looking for are your unskewed, unabridged, undoctored spending habits," writes Newell Jones. "What do you buy when no one is looking? This process will help you narrow down where you money is going and will reveal patterns and problem areas."

Creating a reverse budget will help you figure out "problem areas," which according to Newell Jones, are"unnecessary expenditure that appeared in [her] reverse budget multiple times." After figuring out your problem areas, Newell Jones suggeststackling them by:

Identifying triggers—thepeople and places that "put you in temptation's way."

Making a diversion plan by having a backup activity for time when you're tempted to go to a place you know will trigger your autopilot spending. For instance,instead of going shopping as she usually did during her lunch break, Newell Jones kept busy at work: She asked for more tasks and organized everything, which kept her engaged.

Creating a "commitment device" such as a "punishment" for the times you do fall back intoyour spending habits. Punishment ideasNewell Jones suggests are putting aside money for each slipup and sending an extra payment to your credit card company.

After creating a reverse budget, Newell Jonescould now see patterns that shewas unable to recognize before," she writes. "I saw the sad details about where my money was going, and how much I was wasting. The bottom line: I was buying stuff I didn't need with money I didn't have."

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2. She modified priorities by making a wants and needs list.

After figuring out her reverse budget, Newell Jones used it tocreatea wants and needs list.

According to Newell Jones, needs can be defined as "the fixed expenses you are required to pay each month, as well as the essential items or activities that make you a happy, healthy, and unique individual."

Everything else is a want.

Everyperson will have alist, unique to his or her lifestyle. "Only you can deem what's important in your life, and your wants and needs list should be a reflection of your personal priorities and lifestyle needs," writes Newell Jones.

But even so, it may be hard for those who can't differentiate between the two.

She writes:

Not being able to differentiate between wants and needs is one of the biggest reasons people aren't able to direct more money toward paying down their debt ... It's easy to find things you want, and if you're confusing Wants and Needs, you can easily keep spending money you don't have forever.

Newell Jones also suggests the following alternatives for when you are stuck in a "gray area,"onthe things you're not sure you can go without but can't easily label as needs.

Do it cheaper:Try to find the things you want/need at a cheaper price. Newell Jones kept her gym membership as a need, but opted to ask for a lower rate and was able to save $15 a month, totaling $180 a year.

Almost anything can be returned:While ideallysticking to your needs lists you might slip and buy a want item — but that doesn't mean you have to keep it, writes Newell Jones. Find out the return policy before you buy an item and remember to save all the receipts.

Just cancel it:Canceling an order you regret after purchasing can and should be done, especially if it's not a need. "Once I started returning stuff with no remorse, essentially eliminating all the guiltI'd get from a purchase, I decided I would go even further and cancel things before they even arrive," writes Newell Jones.

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3. She pared down expenses by making a debt hit list andpayback plan.

List your debts in order of highest interest rate to the lowest.If two debts have the same interest rate, put the smaller amount on the line above the higher. This will be the order for your debt hit list, according to Newell Jones.

"The longer you have an outstanding debt with any interest accruing, the higher your final payoff amount will be, which can also mean it will take much longer to eliminate that debt," she writes. "It's best to avoid adding more debt to the stack by taking longer to pay it off."

She continues, "While it would feel nice to list the debts from smallest to biggest — and it would feel deceptively good to pay off the small debts quickly — you'd be screwing yourself over by doing so."

With the needs and wants list and the debt hit list, you can begin your payback plan. Newell Jones suggests using this method:

Address the bills that are due, based on your needs list. Pay off your rent or mortgage, utilities, cell phone, cable, and other services.

Get out the debt hit list. Pay the minimum amount due for all your debts except for the one at the top.

Write the check for your top debt.Since this is the biggest debt, Newell Jones suggestspaying offall you can afford for each month, so you can wipe it out faster.