How I thought my way out of $60,000 in debt

By Colleen Oakley, LearnVest

This article is from our partner LearnVest, a site dedicated to helping women improve their finances.

Six years ago, Carrie Rocha and her husband Marco were $60,000 in debt – and steadily accumulating more.

But a vacation to Brazil stopped them in their tracks. “We were reminded that we really want to move there at some point,” says Rocha. “The only problem? Brazil is a cash-based society where people pay in cash for big stuff, like cars and houses. We couldn’t even get to the end of the month without overdrawing.”

From that moment on, the couple decided to get out of debt – and stay out. Three years later, they wrote their last check to a creditor, and Rocha is now a financial expert with a popular blog.

In her new book, “Pocket Your Dollars,” she shares her key to financial freedom, which according to her, actually has very little to do with money.

LearnVest: $60,000 is a lot of debt to pay off in three years! How did you do it? What’s your secret?

Rocha: ”When Marco and I first sat down to track what we were really spending, we were in the red by over $1,000 a month. It was no wonder we were in debt! So we drastically cut expenses in every conceivable area. I cut Marco’s hair. We went on a prepaid cellphone plan for $9 a month.

But above and beyond all of that – and this may sound overly philosophical – the big difference between this time and the dozens of other times that we tried to get out of debt is that we changed the way we thought about money. Every other time that we had attempted to do the right thing (sit down, make a budget and live by it), we couldn’t make it more than a few days before falling off the wagon because we were just trying to cram new behavior on top of faulty thinking.”

In the book, you discuss basic attitudes people have about money that need to be changed in order to have financial freedom. Which one did you and your husband suffer from?

“We had them all, but the one that really affected us the most: If only I had more money. When we tell ourselves, “When I get my next pay raise, I’ll be better off financially” or “When the tax refund comes, then I’ll get out of debt,” we’re pushing change into the future.

I lived that way for a long time. But that day in 2006 was the first time that I said, ‘Today we’re going to change. The money we have now has to be enough for us. How are we going to make it work?’ Taking ownership and personal responsibility for my situation was powerful.”

Debt can feel overwhelming. What’s the first step to digging your way out?

“Open all of your bills, write down everything you have and really assess your financial situation. Then you can start to get a plan together. When you can plot a road map out of your situation, you have hope, but you can’t do that until you know where you’re starting from.

It’s also important to have a goal — one bigger than just “getting out of debt.” Marco and I dreamed of living abroad. That allowed us to buffer the ups and downs of our journey. Without a goal or passion or something you want to gain out of it in the end – besides just getting the creditors to stop calling – you’re more likely to fall by the wayside when times get tough.”

So let’s say you’ve got a goal, you’ve assessed your financial situation and you’re changing your attitudes about money. How do you start to put together a workable budget?

“The number one thing about budgeting: You have to be honest. Putting a budget on paper does not change your life. Living a budget changes your life. You can lie to yourself and say these are the budget numbers I’ll put on paper because this is what makes it work on paper, but in the end, you need to be honest.

For example, my husband has trouble with impulse shopping. Even though money was tight, we always built in a little bit of free and clear spending money for him, since we knew he’d spend it anyway. That way, his purchases wouldn’t derail us, and we wouldn’t argue about it. We could have said no, he’s just not going to spend extra money anymore, but the reality was that it was never going to happen. You have to put in honest numbers – and build the rest of your plan around it.”

What about people who have a budget, but still feel like they’re living paycheck to paycheck? What can they do to save?

“Go back again and look for more ways to reduce expenses. Even if you’ve already cut out lattes and cable, and don’t have a bunch of fluff, look again. Every time that Marco and I went back to figure out how we could do it for less, we found another way. You have to find money to save for future expenses because that’s the only way to prevent future debt. If you don’t have savings to spend when you need it, you’ll continue in a cycle of debt.

And if you’ve looked and looked, and there’s no way to squeeze out an extra dime, you have to increase income. Look for ways to pick up side money. If you put your mind to it, you can figure it out. I believe that everybody can do it because I did.”

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