Welcome to Fix My Finances, a Yahoo Finance personal finance series. Each episode, we take a look at one viewer’s financial state of affairs and offer advice, insight and information on a variety of issues, including how to save more, spend less and pay off lingering debt.
In today’s episode, we meet Tynissa, a 25-year-old recent college graduate who lives in Michigan. Tynissa works full time as a catering manager in the health care industry. She loves her job and is happy with her salary but says her finances stress her out. In addition to having student loans, Tynissa is an impulsive shopper and has racked up credit card debt.
Living paycheck to paycheck
Tynissa has about $14,000 in student loan debt at an 11.76% interest rate and thinks it will take her about 12 years to pay off. She also has about $8,000 in credit card debt. She says it’s her goal is to pay it all off, but she feels overwhelmed. She says tends to rely on “retail therapy” after a long week of work and knows she needs to change her ways.
“The [credit card] debt is adding to the stress,” says New York–based certified financial planner Stephanie Genkin. Tynissa needs “to break the cycle,” Genkin says.
Curb the impulse to shop
According to a recent survey by Northwestern Mutual, 45% of Americans with debt spend up to half their monthly income on debt repayment.
But paying off Tynissa’s debt is only part of the equation, says Genkin. She needs to stop accumulating more debt. Of course, Tynissa should keep plugging away at paying her debt, Genkin says. A good way to do this is to automate credit card payments the day after she gets paid. “This way [she] won’t see the cash in the account and be tempted to run out and spend it,” Genkin says.
As for shopping, Genkin says Tynissa can curb her desire to spend by making some subtle changes.
Genkin suggests she remove any credit card information stored with online retail sites. Having to physically take out a card and enter in the information at the checkout may give her a moment to rethink her purchases.
Genkin also recommends shopping only with cash—and when possible do not even keep credit cards in your wallet. “Think of them as an emergency back-up plan only,” she says.
Another tip? Calculate the cost of an item versus your hourly pay. “Next time you are tempted to buy a handbag that costs $150,” Genkin advises, “calculate how many hours it took you to earn that amount of money and think about whether it was worth, say, working eight hours to buy it.”
Another key tip: Don’t shop when you are emotional. And don’t shop with friends. “They are enablers,” Genkin says.
Do something else!
Shopping isn’t the only way to blow off steam after a long week of work. Genkin suggests Tynissa make a list of other low-cost ways to treat herself for days she needs a pick-me-up, such as going to the movies, meeting a friend for ice cream, getting a manicure or buying a bouquet of flowers.
“They are all low-cost mood enhancers and can lift your spirits without breaking the bank,” says Genkin.
Want to be a part of this series? We are looking for people in their 20s and 30s who need a money makeover. Apply here.