Thanks to student loans, a car loan and credit card debt, Guen Garrido found herself in a $68,600 hole at the end of 2014. But three years and three months later, the San Diego-based millennial had paid off every cent.
After making the conscious decision to tackle her debt at the start of 2015, Garrido picked up a side hustle to generate more income, but she also focused on slashing her day-to-day expenses. "I only gave myself $300 per paycheck for everything besides fixed costs, so groceries, gas, food, going out to eat and entertainment," Garrido tells CNBC Make It.
And she came up with a brilliant strategy that forced her to stick to her strict budget: She opened a separate checking account with a separate debit card and moved $300 from each paycheck into that account. Once she went through the $300, she couldn't spend any more until her next paycheck hit. It was like she put herself on a "cash diet."
While Garrido was spending significantly less than she was used to, she didn't feel deprived: She viewed her situation as having the freedom to spend $300 per paycheck. As she puts it, "It was like a diet where you could do whatever you want within a certain amount of calories."
Plus, she changed her mindset around spending and focused on "being grateful for what I already had," she says. "Especially in this day and age, with social media, you compare yourself to other people — you see where they are traveling and what they have, so you are tempted to compete with them and have the same things and buy more things. But I found that when you put yourself in a place of gratitude, you feel content and you don't have to have all that stuff and then you just work on yourself."
Her discipline paid off. Over the three years and three months she spent paying off her debt, she put an average of $1,800 a month towards her debt. Garrido, who meticulously tracked her income and expenses, says her biggest monthly payment was $3,418.
Garrido made her final payment in March 2018. And she made sure to celebrate. She took the day off from work, got a massage and then went to Party City, she says: "I got a giant black balloon — the ones you would see for a gender reveal — and filled it up with green confetti. At home, I painted the word debt on it in silver, popped the balloon and the confetti came down on me."
While the 32-year-old is officially debt-free, her spending habits haven't changed much. "Now, I give myself $350 per paycheck to spend," she says.
Don't miss: We looked at the 25 most popular cash back credit cards—here's our pick for No. 1
Like this story? Subscribe to CNBC Make It on YouTube!
