How I’m Making Consistent Payments Toward My Credit-Card Debt—And Planning for My Financial Future—Even Though My Income Fluctuates

Photo: Stocksy/Luis Herrera
So you want to have a healthy relationship with your finances and prepare for retirement, but you’re not sure where to start or how to get there. With Money Talks, three people in different life stages outline their experience of working with a financial professional for the very first time. As it turns out, it’s never too early or late to chat through your goals with someone who can help.

As a self-employed therapist, my monthly variability in my income has long made me feel like I couldn’t effectively budget or save (much less plan for retirement). Add in my fast-growing credit-card debt, and my finances were feeling particularly out of control. I didn’t even want to take the first budgeting step of assessing my monthly take-home pay compared to my personal expenses, because I was afraid of what I would find. But after I recently had the chance to discuss my finances with Fidelity Investments financial professionals who encouraged me to map out exactly where my money was really going each month, I was able to do something that I didn’t think was within my reach: develop a consistent plan to pay off my credit-card debt and work toward my financial goals.

Consistency has never been my forte when it comes to money. Again, my changing income has made it tough to know how much money I’d be able to reasonably contribute each month toward paying off debt and growing my savings.

I was surprised to find that, if I made a couple adjustments to my personal expenses, I could have a relatively consistent amount leftover for paying off debt.

But in turning a non-judgmental eye toward my money-in, money-out reality over the past couple months, I was surprised to find that, if I made a couple adjustments, I could have a relatively consistent amount leftover for paying down debts. And that felt like a particular relief given that Fidelity Investments Vice President Financial Consultant Ryan Viktorin, CFP, suggested I devote a chunk of every paycheck to my credit-card debt, since it's high-interest and can amass faster than other debts.

How I trimmed my regular expenses

For starters, I found that I could save substantially on food expenses by driving a little bit farther and shopping at Trader Joe’s for about two week’s worth of items, rather than popping into a nearby organic market whenever I need this or that thing—which I’ve been known to do. Also, in focusing on the numbers, I realized I could save on my personal expenses by buying home and personal-care items in bulk at Target, where I get 5 percent cash back on my credit card, rather than buying online (where I often wind up buying more things just to hit a minimum to get free shipping).

Because I typically pay off my business credit card each month before addressing my personal cards, I also took a look at those expenses over the past two months. I learned that I was paying for a few different therapy listings, so I decided to cancel one of those. That left me with one less business expense each month—meaning extra funds to devote toward my personal card.

Trimming my regular expenses in these ways has allowed me to feel comfortable committing to paying $300 a week toward my credit-card debt and sticking with that, even with my fluctuating income. While, before, that number was my weekly goal, I would rarely hit it. On one week, I might think, Oh, I’ll just pay $100 because I have this other thing that’s more important. On another, I might justify a lower payment by telling myself that I'd just make up for the difference the following week, but then that wouldn’t happen.

It was a bit all over the place, and though I had that $300-per-week goal in place, I was also spending in a way that didn’t allow me to reach it.

I’m not deviating from that monthly payment goal, and I don’t feel like I’m depriving myself either.

Now, I’m not deviating from that monthly payment goal, and I don’t feel like I’m depriving myself either. It just feels natural to be able to put that much money toward the debt each week, and the regularity of the payments makes me feel like I’m putting a meaningful a dent in it. There’s also a rewarding sense of control that comes along with making these consistent payments—and the constant stress my credit-card debt once caused feels like it’s beginning to lift.

How I'm applying my consistent plan for financial goals to my retirement planning strategy

Seeing how this strategy has helped me harness my short-term goal of paying down credit-card debt and saving has also illuminated to me the power of applying a similar plan to retirement. In our session, Viktorin explained how a SEP IRA might benefit me as a self-employed person. In addition to having a higher contribution limit than a Roth IRA, a SEP IRA allows me to make tax-deductible contributions that grow tax-deferred, helping me reduce my taxable income.

After looking further into it, I’m planning to switch my savings from a Roth to a SEP IRA. And though I’m not yet able to contribute the maximum annual amount based on my income, I plan to identify a number that works for me and stick to it each week, just like with my credit-card debt payments.

Once I get that debt down, I’ll increase the size of my monthly retirement contributions—but if there’s one thing I’ve learned from the past couple weeks of reviewing my financial habits, it’s that a doable plan I can consistently follow always beats an overly ambitious one I can’t.

As told to Erica Sloan.

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