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How I Went From Payday Loan Debt To Being Debt Free And Saving $50,000

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Hello! Today, I have a great debt payoff story to share from Davina (from the blog Davinas Finance Corner). Here’s how Davina went from being in payday loan debt for 1.5 years to being debt-free, saving over $50,000 and building a five-figure investment portfolio. Enjoy! In this post, I will share how being stuck in…

Hello! Today, I have a great debt payoff story to share from Davina (from the blog Davinas Finance Corner). Here’s how Davina went from being in payday loan debt for 1.5 years to being debt-free, saving over $50,000 and building a five-figure investment portfolio. Enjoy!

In this post, I will share how being stuck in payday loan debt for 1.5 years completely changed my relationship with money. I will detail how I saved over $50,000, became debt free and built a five-figure investment portfolio.

I’ll talk about the mistakes I made, the lessons I learned, and the crucial changes that helped me turn my financial life around.

I understand that many people struggle with their finances and I want to share my story to inspire you. 

I want to show you that no matter how bad your situation may seem, you can make changes and achieve your goals. You don’t have to deprive yourself, it’s possible to create a plan that works for you and still enjoy life. 


My Story

I grew up in a single-parent household with my mum and older brother and we did ok. We had everything we needed but I was aware that we were a low-income household. 

My friends had the latest name-brand shoes and clothes, but my mum couldn’t afford to buy those things for us. FOMO is real when you’re in school so I felt it. 

I remember thinking when I get older I want to create a life for myself where I don’t have financial restrictions.

When I was younger I was actually good at managing my money. My mum drilled the importance of saving into my head, so when I got my first job that is what I did.

I had a part-time retail job while I was a college student and we were paid weekly. Each week I would calculate my hours to work out how much I would be paid and plan my spending. 

You would think that I was destined to have a good relationship with money but somewhere along the way, my good money habits got lost. 

How I got into debt

I got my first credit card when I was 18, I didn’t need it for any particular reason I just signed up because the bank offered it to me. When I received it in the mail I didn’t use it, it was just sitting there. 

Then a few months later I was made redundant from my job so I activated the credit card and used it to maintain my lifestyle. This was my first mistake.

I was unemployed so I had no money to repay the balance, but I wasn’t thinking about that. All I cared about was maintaining my lifestyle which consisted of socialising with friends. 

Eventually, I got another job and was back on my feet but I didn’t pay off the credit card I just ignored it. For a very long time!

A few years later I turned 21 and wanted to buy a car but instead of saving up for it, I decided to get a loan. So I took out the loan, bought a second-hand car and less than a year later I was made redundant again! 

I didn’t have any savings (clearly I didn’t learn from the past) so I was back to square one. I was unemployed, but this time I had $6,200 debt ($2,000 credit card, $1,200 overdraft and $3,000 loan). The banks were chasing me for payment but I told them I wasn’t working and ignored the payment demands. 

The final debt I incurred was the worst. It was a few years later and I had a good job. I was making decent money for someone in their 20s who still lived at home and my expenses were low. 

I was living life and having fun, but that fun was expensive. Every weekend I was out with friends. We were going out to clubs, dinners, concerts, festivals and going on holidays. 

I was living paycheck to paycheck and still didn’t have any savings so if I ran out of money I had to borrow it from family or friends. Some months were ok and I could get by, but it was tight. Then one month I made a terrible mistake. 

It was the week between Christmas and New Year’s and I was broke. We were paid a week early and I had spent all my money on Christmas presents and festivities. 

My cousin asked me to go out, I had no money so I should have said no. But instead, I said yes and I took out a payday loan. I received the money instantly so I got ready and went out. 

The next month the company took the loan repayment plus a lot of interest from my account so I was broke again. But it was my birthday month so I got another payday loan so I could fund my celebrations.

The next month, the same thing happens. The loan repayment was taken so I took out another loan to get by and this cycle continued for the next 1.5 years! 

Every month once I repaid the loan I was left with no money. I had no savings to fall back on and I had debts that I had ignored for years so I was stuck. 

At this point, I started to feel the weight of the mistakes I had made (finally). Every month I was worried about how I would get by. I felt embarrassed and stressed. I also felt disappointed with myself because I was making decent money and I knew better. 

So I finally decided to do something about it. I needed to figure out a way to get out of the hole I had been digging myself over the past few years.

I Got Help

I did a Google search to try and find some resources. I found a debt charity that could help so I called them up and explained my situation. 

We went through all of my debts explored my options and agreed the best option would be to go on a debt management plan.

The way this worked is I would make a monthly payment of what I could afford to the charity and they would distribute it among all of my creditors. 

This wasn’t going to pay off my debt fast, in fact, it barely made a dent in the balance. But it was a step in the right direction and it would stop the creditors from chasing me and ease my stress.  

A Lucky Break 

Side note: Have you read The Alchemist? If you haven’t I highly recommend you do. In the book, there is a quote that says “When you want something the universe conspires in helping you achieve it.” That is what this lucky break felt like. 

The following year I found out I was being made redundant again! (Clearly, I have bad luck with jobs lol) But this time I was going to receive a payout. Initially, I was excited and thought yes big payout I can use the money to buy a new car. 

But the whole process took about three months and during that period I had time to think. And I decided to use the money to pay off some of my debt and save the rest. 

At this point, I didn’t want to make the same mistakes and I knew that I needed to build up my savings and change my spending habits. 

Once I received the redundancy payment I stuck to my plan and repaid the payday loans and the overdraft and I put the rest in my savings account. 

Debt recap:

Credit card – $2,000

Loan for the car – $3,000

Overdraft $1,200

Payday loans – $3,600

Total debt = $9,800

Redundancy payment = $7,000 – $4,800 towards debt and – $2,000 in savings – $200 to spend on myself. 

Remaining debt = $5,000

I wasn’t completely debt-free at this point, but I reduced my debts and finally had some money in savings. I got a new job shortly after and every month I made sure I contributed to my savings. 

I was determined to change my relationship with money so I tried to learn as much as I could about personal finance. Once I applied my learnings I was able to pay off all my debt, completely change my relationship with money and save over $50,000.

How I paid off my debt and saved over $50k

To put things in perspective, I work in Finance and make decent money but I’m not well off. I did get a lucky break with the redundancy payout which I am very grateful for. But it wasn’t enough to pay off all my debts. And it took me about 3 years to save this money. 

The most important thing I did to help me was to educate myself about money, change my money mindset and create a plan that worked for me. 

Below, I will share the steps I took to get there.

Changed My Mindset

Before I received the redundancy payment I had a reality check. I had to admit to myself that I was living above my means and I had to take responsibility. No one was going to save me I had to make changes to get out of this mess.

I looked at the facts and thought to myself I make decent money so there is no reason I can’t build up my savings and spend money on things I enjoy. But I needed to learn how to manage my money and stop letting my money manage me. 

This meant making changes to my lifestyle and sometimes saying no to social invitations. I didn’t like the way I felt when I was stuck in the payday loan cycle so I was committed to this new journey. 

If you’re in a similar situation the first step is to understand what got you to where you are. Once you understand this you can put things in place to help you improve.

I Educated Myself About Money

Now that I was committed to making changes I started to research how money really works. I wanted to understand how people manage their money, learn healthy money habits and implement them into my life. 

I started to listen to podcasts and watch finance YouTube videos and came across a lot of people who were once in debt but managed to create financial freedom. 

This was super helpful for me because they were regular people who managed to change their circumstances and they were sharing the blueprint.

I also started reading books about money. I read the classic personal finance book Rich Dad Poor Dad I also read The Psychology of Money and The Millionaire Next Door. Here is what I learned from all of the information I consumed.

To create financial stability or financial freedom you need to do the following.

  • Stick to a budget
  • Live below your means
  • Avoid spending money on liabilities
  • Find ways to grow your money
  • Invest in yourself

One thing I did and I recommend others do the same is I took the information I learned and adjusted it to fit my lifestyle. I didn’t take everything I heard and copy it. Instead, I used it as inspiration. Personal finance is personal so always do what works best for you. 

For example, investing in the stock market was highly recommended, but I wasn’t ready at the time. So I focused on saving instead but I made sure I used a high-yield savings account. This way I could earn interest so money was still growing.  

Here are the YouTube channels that I learned the most from:

  • Nischa
  • Jennifer Thompson
  • Earn Your Leisure

I Got My Priorities In Order

My number one priority on this journey was to build up my savings. I understood that aside from my poor spending habits not having money set aside led me to get into debt. So that is what I focused on. 

I didn’t have a specific amount I wanted to save, I just wanted to have a cushion to fall back on. So every month when I got paid I made sure I contributed to my savings. I started off small but once I changed my spending habits and cleared all my debt I was saving about 50% of my income. 

Looked at My Spending Habits 

My spending habits were the biggest factor for me so once I committed to repaying my debt through the charity I knew that I needed to make some changes and get my spending under control. 

I got my bank statements, looked at my spending over the last few months and used an Excel spreadsheet to categorise everything. 

Most of my money was being spent on eating out, takeaways, shopping and socialising. The most shocking part for me was the amount of money I was spending on food. 

I was spending over $300 a month on eating out with friends and takeaways! I knew I was spending too much, but seeing the actual number was the wake-up call I needed. 

This was something I could change so I started planning my meals and doing weekly grocery shopping. Having my meals planned saved me so much money because at meal times I didn’t have to overthink about what to eat. And it helped me reduce the amount of takeaways I was eating. I also cut back on going to dinner with friends. 

I didn’t change everything at once, I focused on the areas that made the biggest difference and over time I made more changes. It can be overwhelming to change everything at once so you can start small and build up over time.

Once I started to see improvements like having money left over in my account before payday and seeing my savings build up I was hooked and wanted to keep going. 

Created a budget

I knew that I needed to create a budget to help me manage my spending. But it had to be the right budget for me.

I didn’t want to be rigid and stop doing the things I enjoy. I believe in balance and knew that if I restricted myself I wouldn’t stick to it.  

So I thought about the things that I valued and found a way to include them in my budget. For me, those things were travelling, going to the theatre and having dinner with friends.

I sat down at my laptop and put all of my numbers in an Excel sheet. It looked a bit tight but I knew if I made some changes I could make it work.

I Made Some Changes

I looked at my monthly direct debits and subscriptions and got rid of what I didn’t need. I was paying $90 for a gym membership that I was hardly using so I cancelled it. 

I had cable for over a decade but I found a cheaper TV alternative so I made the switch. 

Once my phone contract expired I switched to a SIM-only contract and saved $50 a month. 

To optimise my budget, I paid any bills I could upfront instead of on a monthly basis. This included bills like car tax and insurance and Amazon Prime. By doing so I was able to take advantage of discounts offered by providers as an incentive for full payment. And it meant I had fewer expenses every month. 

Doing weekly grocery shopping was working well for me, but I was spending about $250 a month which is a lot for one person. So I fined-tuned my grocery items and switched to a cheaper grocery store which saved me over $100 a month. 

I also signed up for a loyalty card at the grocery store so I would get discounts and collect points when I was shopping.  

I gave myself a monthly personal allowance to spend on fun so I was still able to do the things I enjoyed, I just did it within a budget. And once that allowance was finished so was my fun for that month lol I used a separate bank card for this allowance to help me stay accountable. 

I created a sinking fund for my holidays and I made sure I saved a portion of my paycheck every month no matter what. I treated it like a bill. 

Another change I made was I started working as an independent contractor which increased my income by about $20,000 a year. I was doing the same job, I just figured out a way to work smarter. 

Even though I was making more money, I didn’t increase my spending, instead, I increased my savings. This is one of the best tips I can give to avoid lifestyle creep. 

Once I started seeing the impact of these changes I became obsessed. I turned into a savvy spender and was always looking for ways to spend smarter and save money. 

At this point, I was managing my money well and my spending habits were under control. So I finally called up the debt collectors and agreed to repay the rest of my debt in equal payments over 6 months. I was so happy and relieved when I made the final payment!

I put my money in places to grow

Once I paid off the rest of my debt and had saved up about $20,000 I knew the next step was to invest my money. So I did more research and decided the best option for me was to invest in index funds. 

I am risk averse so I took a long-term approach and committed to investing an amount I could afford consistently every month. I also put my savings in a high-yield account so I was earning interest on my savings. 

I was able to do this because I finally had some room to breathe in my budget. I wasn’t living paycheck to paycheck. Also, my mindset and my priorities had changed.

It Worked

By the middle of 2023, I was completely debt-free, had $54,000 in savings and had built a five-figure investment portfolio. It wasn’t easy, but I am proud of myself because I came a long way. 

Upon reflection, I am grateful for the lessons I learned because they completely changed my relationship with money. It also helped me learn to prioritise spending money on things I value instead of material things. 

I love to travel and now I can afford to travel at least twice a year. I have been on some amazing trips and I am looking forward to many more. 

This money journey also taught me that sometimes less is more. Now I buy less stuff because I am content with what I have. I only buy what I need and I feel lighter and more free.   

Here is a picture of me in Thailand. I felt so happy on this trip because I could afford to do the things I enjoy and wasn’t stressing about money. 

Future Plans

I plan to use some of the money I have saved to buy an investment property because I understand the importance of buying assets. And I will continue to invest in the stock market. I am also working on my blog davinasfinancecorner and hope to monetise it this year. 

Having financial stability is priceless and it has given me more options. I am intrigued by digital nomads at the moment so we’ll see where the future takes me 🙂 

Do you have debt? Do you have a plan to pay it off?

Author Bio: Hey there! I’m Davina. I have worked in accounting and finance for over a decade and have learned the best ways to budget, save and make more money. Now I have created Davinas Finance Corner to help you do the same. I have experienced first-hand the struggle of being in debt, living paycheck to paycheck and not having enough money to do the things I enjoy.

I didn’t like that feeling so I was determined to break free from that cycle and change my circumstances. Once I applied the principles I learned from my career in accounting and personal finance I was able to pay off my debt, save my first $50,000 and build an investment portfolio.

Through my blog, I aim to empower women to take control of their finances, build wealth and work on their personal growth. Whether it is finding ways to save more, make extra money or improve yourself I am here to provide information to help you on your journey.

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