How I Paid Off $10K of Debt in One Year

Moving to the U.S. quickly taught Ronald Rauga two financial lessons: College is expensive, and credit cards are easy to get.

At least, that’s how it was for him when he left Kenya for Orange County, Calif., in 1998. He came to the U.S. to go to college, and during his first week in the country, he got a credit card. It took him many years, but he was able to finish his bachelor’s degree without taking on student loan debt. Still, by 2014, his life in the U.S. had put him $15,000 in debt.

Working Hard, But Still in Debt

Ronnie Rauga admits he didn’t understand how credit cards worked when he got one in 1998. For years, he charged expenses without thinking too much about how much it really cost him, and he focused on building a career and getting an education.

Things didn’t go as planned, but they went relatively well. Rauga had hoped to earn his bachelor’s degree quickly and start life as an entrepreneur, but his mother could only afford his first year of tuition at a community college, and he worked his way through to get his associate’s degree. It wasn’t until 2010 he had saved enough money and had enough income to go to a four-year college and complete his bachelor’s degree in business administration. Part of what paid for school was the business he started: Driving people in a company car, which he bought with the help of an auto loan. He worked multiple jobs for many years, before and during college, including working at a bank, where he helped people consolidate and repay their debt.

“That’s the irony — I was helping people with their debt, but I was in debt at the same time,” Rauga said. “Last year, in 2014, was really when I sat down and said, ‘Wow, I’m really in debt.’ I just needed to change my approach.”

When he finally assessed the damage, Rauga determined he had about $15,000 in debt, from credit cards, an auto loan and a personal loan. Within a year, he paid off $10,000 of it. As of the end of March, he had a final car payment of about $350 to make in April, and he’d be debt-free. (Getting out of debt can have a big impact on your credit scores. You can track your credit score progress for free on Credit.com.)

Discovering a New Lifestyle

Rauga started reading about minimalism when he began making his plan to pay off debt. Part of the process required him to come to terms with the fact that he was living beyond his means — that tends to get a lot of people in debt — and he had to stop that behavior. He went beyond just reducing his expenses, though. He redefined his needs.

At first, when you’re making lifestyle changes, you can make some huge cuts. Rauga, for example, sold his second car, which he used as personal transportation, and dedicated the effort to maintaining his company car as both a personal and professional vehicle. That alone saved him about $150 a month. Then come the smaller reductions, which are sometimes harder to make but can be very effective.

As many people do these days, Rauga cut out cable. He reduced his Internet service to one that limited him to 10GB of data a month for $20. He stopped eating out and reduced his grocery bill to $50 a week for home-cooked meals. He stopped shopping. Ultimately, he distanced himself from the social life he previously had (and the people involved in it), because it had played a large role in his descent into debt.

“I really had to get myself not completely away from them but spend less time with them and embrace people of the same lifestyle as me,” he said. Rauga found other minimalists online and enjoys having friends with shared values. “It’s still challenging.”

Rauga is still experimenting with minimalism. He’s not sure how long he can go without needing to buy new clothes or things for his home, but he’s been able to eliminate those expenses as a way to balance his budget, and he thinks he’ll go for quality over quantity when the time comes for replacements. When he thinks about buying something, he asks himself two questions: “Do I need it?” and “Will it add value to my life?” That last question really keeps him in check, and the answer, more often than not, is “no.”