From Debt to Wealth

How I went From $50k Debt To Wealth

Lifestyle-Driven Wealth™
Ivy, LyfStyled

Ever wondered why it is that, no matter what you do, you it seems impossible to get out of debt? Which then means you are not able to start building wealth?

In this post, I share how I went from being over $50k in debt as a single person in my 20’s to clearing off the debt within 1 year and saving up & investing over $100k within 1 year.

Young & In Debt

Let me start by giving some context. The way I accumulated debt was somewhat out of my hands. I had a series of unfortunate life events.

This all started when I had a car accident with the first car I had purchased. Luckily I survived the accident without major injuries. However the car was a complete write off. This meant I had to buy a new car. I had no emergency saving at this point, thus I ended up taking an autoloan.

Then Took out a personal loan in order to borrowed money out to family members

Relocated to another country thus had relocation costs
New country adjusted cost of living
- Lease a new car for work purposes

My journey to $0 Debt

There are a few steps I took in order to clear off my debt. I believe that if you apply the same steps, you will also be able to clear off your debt.

Increase the income to expense gap: I took up modelling (in RSA) to increase my passive income. Took higher paying job in the NL to increase my earnings vs my monthly expense. But was not strict on myself and made no progress in paying off my debts.
Created budget: cut off comfort expenses (wants) & started prioritising paying off my debts
Pay off debt with highest interest rate: It would take months to repay all my debt, but I didn’t need to repay everything all at once. I just needed to repay some of it so that I could have some money left to use for investing.
That month, I used a large portion of my income to pay my credit card because it had the highest Interest rate. I repaid smaller portions to other debts. This meant that I was partially behind with my monthly payments but I could catch up within the agreed period.
- Credit card was hardest debt to pay off,
- Personal loan – Received less than 5% of the loan back from the family members I borrowed the money to. So had to pay it all on my own.
- Auto loan (was fixed)

“Create a ladder of values and priorities in your life, reminding yourself of what really matters to you.”

Lessons Learned

Learn new skills so I can continue making money to increase my income.
Don’t borrow money to family nor friends. This places a strain on relationships
Don’t buy a car on auto loan. Also don’t buy a car unless really necessary
Repay credit card debt within the same month
Maintain a budget, provides clear overview of what I’m actually spending money on.
Check all interest rates before using any debt. Credit card, auto loan, mortgage

My journey to $100k savings and investments

In order to get out of debt and start building by wealth, I became methodical in the approaches I used. I become strick in following up with the promises I made to myself and kept a record of each move I made to achieve those goals.

I started of by paying 100% of the debt I had.
I reduced my monthly expenses, so I was able to mantain a positive income to expense gap using my budget
I saved more than 65% of my after tax income
Luck: When the pandemic hit, alot of the shares values went down. During this period, I could buy a lot of shares while they were still very very cheap to start my investment portfolio.

Lessons Learned

Define my optimal income to expense ratio for myself and continue to live way below my means so that income to expense ratio is maintained
Keep track of all income, debt and expenses so as to not fall back into the debt trap.

I recently learned when it comes to money decisions we make, none of us are crazy, we all have different circumstances and make our decision about money are based on what we are experiencing. So even after I’ve shared my experience with you, you may still be living paycheck to paycheck, facing different circumstances and not able to get out of debt. Luckily, you can read this post to get actionable tips to stop living paycheck to paycheck and start building your wealth.