When Kumiko Love, 33, got divorced in 2015, she was left with thousands in debt between student loans, credit card spending and car payments.
But once she decided to get serious about her finances and create a plan that worked for her, she was able to pay off $77,281 in just eight months and declare herself debt-free in January 2019.
Love, who is a single mom to a 6-year-old son, started her blog, The Budget Mom, in 2016 to document her debt journey. Since then, she's built a community of around 400,000 unique monthly blog visitors and 238,000 Instagram followers by walking her readers through user-friendly strategies for tackling debt, setting a budget, tracking expenses and more.
"My mission is to inspire women and people to live a life they love on a budget they can understand and afford," Love tells CNBC Make It.
But prior to starting The Budget Mom, Love didn't know much about personal finance, despite eight years worth of experience as a financial counselor. Back in 2011, when Love landed her first finance job, she remembers her boss sitting her down on her first day and making her create a personal budget.
"It's funny. Here I was, a graduate with a finance degree, but I knew nothing about personal finance," Love says. "No one in my life had ever asked me to do something like that."
Love now helps her readers create personal budgets. Her signature method, which helped her pay off her own debt, rolls three budgeting techniques into one: the calendar method, the cash envelope system and the paycheck method.
Here's how she uses each:
- Calendar method: List out all of your expenses on a calendar, plus the date you get paid, and use it to set a plan for how to use your income that month.
- Cash envelope system: Divide your cash among several envelopes that are each labeled for different spending categories, such as groceries, gas and dining out. Because you only have a set amount allocated for each category, you can avoid overspending in certain areas.
- Paycheck method: Create a plan for how you spend your income each month, based on when you get paid. "Instead of boxing yourself in using a monthly format, [this method] allows you to pay bills, plan for upcoming holidays and events and appointments based on your paycheck date," Love says.
But Love learned that paying off debt is about more than creating a budget. For her, it took years' worth of discipline: "I was able to pay off a majority of that debt in eight months because I had built up a successful company over three years, and worked two full-time jobs while also raising my son by myself."
"It's not something that you just snap your fingers and happens," Love adds.
Read on for the five steps that helped her actually stick to her plan.
"With debt, it's a matter of getting over being scared," Love says. "And not only that, it's about looking at the big picture."
That means being honest enough to get all of your numbers out in front you, including every little thing you owe. "The main reason I did not get serious about tackling my debt is because I didn't want to know," Love says. "I knew it was bad, but I didn't want to know how bad. I was scared to death of the actual number."
Love recognizes that this step is usually easier said than done. "This is the No. 1 thing that I have noticed as to why budgets have failed," she says. "At the very beginning, people will sit down and create a budget based on what they want to spend, not [based on] what's realistically happening and what they are realistically spending."
Instead, Love says it's important to write down your "true, true balance." That means recording every single bit of debt or money you owe, including interest and due dates.
This exercise creates a sense of urgency, rather than fear, which is what "typically hinders our ability to really have a passion to tackle [debt]," Love says.
The next step to reaching your financial goals is to get motivated. For Love, it's all about mindset.
"You have to get to a place where you finally say 'No more. I'm done just making minimum payments,'" she says. "You have to feel that anger. You have to get mad at your debt. You have to have those feelings and that passion to truly be motivated to pay it off."
But Love doesn't want people to focus on the specific amount they owe. Instead, think about why you want to pay off your debt. "I only share my numbers with readers because I want them to know what's possible," Love says. "It's more important that they understand that there was a method and a process behind paying off my debt."
For added motivation, Love recommends organizing your finances in a way you find inspiring. Because she is "100% a visual learner," that means writing everything down. "My method and steps are all truly based around awareness and using visual things, like the things you see on my Instagram," Love says.
In order to create a budget that works, you should first track your expenses, Love says. "I always tell my readers to not even think about creating a budget until you have tracked your spending and have that full awareness," she explains.
That's because, "if you're tracking your spending, realistically tracking every dollar, and you're creating that plan for your money every single time you get paid, you are then aware of where you can cut expenses and throw more money toward your debt or financial goals," Love says.
Love's expense tracking method takes one month. The first step is to document everything you spend for a full 30 days. Once you've done that, it's time to reflect on your spending habits.
Love finds it helpful to highlight her expenses by category using colored pens. For example, dining might be highlighted in orange and travel in blue. Each month, she totals up the amount for each color to see how her budget is breaking down overall. She is able to quickly see where her money is going, which helps her set realistic category limits.
"It's easier for me to digest data using pictures, graphs and colors," Love writes on her blog. "Having a bunch of data on a page wasn't helpful, even though all of the information I needed was there, so I decided to create a system using colors."
As you create a budget that makes sense for you, think about how to pay your bills in a logical order. Rather than acting out of stress and handling your bills at random, Love says it's better to step back and create a purposeful payment plan.
"Often, when we want to get out of debt, we start throwing all of our extra income to all of these different debt buckets, whether it's a car payment, student loan, mortgage, credit cards, personal loans," she says.
Instead, Loves says to start by drafting up a step-by-step plan for all of your bills. Then, begin making decisions about where your money should go and when.
To determine which debt is most important, ask yourself whether you want to pay off the debt with the highest interest rate first, or start with the smallest account balance.
When Love tackled her own debt, she decided to first pay off all of her bills with the smallest balances first. This approach to debt recovery is commonly referred to as the snowball method, and is backed by researchers at the Harvard Business Review because of how motivating it can be for people to tick off debts as they go.
Another approach to debt repayment is the avalanche method, which involves paying down you debt with the highest interest rate first. While it may not be as motivating as the snowball effect, it arguably makes better financial sense because it cuts down on the total amount of interest you'll end up paying.
Once you've created a plan for tackling your existing debt, it's important to address the root of the problem.
Love's debt started back in college. "I was one of those students that accepted more financial aid than I needed, and with that, came student loan debt," she writes on her blog.
Her situation got even worse following her divorce. Love struggled with low self-esteem and found herself overspending on superficial things. "I compared myself to others and I didn't truly love who I was," she says. "It was causing me to make really bad spending decisions and things never truly fixed the inside, and it caused a lot of the credit card debt."
In paying off her debt, Love learned that if you ever find yourself emotionally spending, it's helpful to pause and think about your budget, needs and why you are really spending.
"You have to ask yourselves the hard questions," Love says. "I was spending because I didn't genuinely like myself, but that took me years to figure out."
Love tells readers to take a deep breath before making any purchase that may seem frivolous: "Ask yourself, 'Why am I standing at this checkout right now knowing full well that I can't pay it off?' There is an underlying reason, a deep down emotional reason why you are spending that way."
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