Julia is a 26-year-old account coordinator. This is her financial checkup, to see how we can help her improve her debt situation and general finances.

Julia is a single, 26-year old account coordinator for an ad agency living in a suburb of Washington, D.C. Here’s her situation:

I have $8,000 in credit card debt that I’ve been burdened by for almost eight years. I can’t seem to get rid of it. I only make $35,000 from my day job and am always doing odd jobs (house sitting, pet sitting, selling stuff, tutoring) to make extra money but it all ends up going towards necessities like food and gas.

I try to stick to a pretty strict budget of less than $25 a week for groceries and don’t allow myself to go out and have fun very much. There always seem to be extra expenses that I don’t plan for that take up all or most of my extra income. I am not saving as much as I would like nor am I contributing as much as I would like to retirement (currently eight percent). I would love to get rid of this debt so I can move on with my life and enjoy the rest of my twenties in financial peace.

I’ll bet you can relate to Julia if you:

  • Are not earning a ton
  • Have some debt, but it doesn’t seem like that big of a deal
  • Are not making progress with your money

So, before we go anywhere, let’s point out that Julia’s had that credit card debt for eight years! And whether she realizes it or not, here’s why:

The balance [on my Chase card] is about $5,000 with a minimum monthly payment of $100. I ALWAYS pay more than that but then it seems to creep back up and stay around $5,000; maybe because I get overzealous and pay too much and then have not enough cash left over to buy necessities.

Bingo. I used to do this for years. When it comes time to make that credit card payment, you think “I’m gonna be good and pay $200 extra.” But then something comes up (it always does) and you want to spend $200 later in the month, so you charge it back to the card. This is what credit card companies hope for, and it’s what keeps them making profits and what keeps you in debt.

Before we jump into some potential solutions for Julia, let’s take a look at the rest of her finances.

Julia’s finances

Here’s a breakdown of Julias’ income, expenses, assets, and debts:

Julia's Income and Expenses

*In her take-home income, I’ve included the $250-300 she makes on top of her day job. For simplicity, I haven’t asked Julia for a detailed breakdown of “other expenses”. But based upon what she’s told me, she’s spending most of (if not a bit more than) her remaining income each month.

Julia’s net worth

Julia's Net Worth


  • With only $300 in the bank, Julia’s living paycheck to paycheck. If any big expenses come up, she’ll need to use a credit card to bail herself out. And if she lost her job, she’d really be in trouble.
  • The credit card debt has to go.
  • In the plus column, Julia doesn’t have any student loan debt and she has started contributing eight percent of her salary to her 401(k) at work.
  • It’s also great she’s earning extra money, but still Julia’s debt isn’t going anywhere which means she’s spending it as she earns it.

My recommendations 

I think Julia needs to tackle her finances one thing at a time. Julia’s margins are thin. This is going to be about little wins every couple of months that over time will add up.

When I asked her about her financial goals, Julia listed many:

  • Increase 401(k)/Roth contributions.
  • Pay off debt (mostly just credit card).
  • Have a fun fund (for vacations, nice clothes, toys etc.)
  • Have an emergency fund (in case I end up with no job or something terrible happens).
  • Buy a house/condo by the time I’m 30 (27 now) or at the very least be renting a place on my own.

I’m going to recommend she reprioritize that list and then focus on one thing at a time.

First, get a bank account buffer™

I think Julia should increase the amount of cash she has on hand so when life’s small emergencies come up, she doesn’t have to turn to credit.

So, I’d like to see her start a savings account if she doesn’t already have one and put about $800 in there. I would even stop paying extra on the credit cards for a couple months until this is done.

Attack the credit card debt

The next step (or a simultaneous one), is to pay off the credit card debt. I’m going to recommend Julia put off all other goals, like increasing retirement contributions or other saving, until the credit card debt is gone.

Given the credit card market right now, she may be able to save some money by transferring balances (at least the Nordstrom card at 18.9 percent APR) to a card with 0 percent APR for 12 months or more.

She’ll pay a fee to do the transfer, but given how long it will take her to pay off the balances the fee is worth it. Here are our favorite balance transfer cards.

Now, assuming at least a partial balance transfer was successful, two rules:

  • Do not use the new credit card—it’s just for the balance transfer.
  • Cut up the other old credit cards.

Given that Julia’s credit card debt has been around for eight years, this might be time to ditch the credit cards altogether in favor of a debit card until the debt is gone.

But Julia, if want to keep using your Chase card for everyday purchases, here’s a new rule for you: Your monthly payment should be at least the total of the new charges you put on the card plus the minimum payment. This will get you in the habit of paying for your monthly charges in full while still whittling away at your debt.

Make a plan to earn more

Julia’s already doing a good job of supplementing her income with odd jobs, but even with this extra cash she’s still coming up short. She needs to get out of this credit card debt and save more for the future, but I get the sense she doesn’t want to take a vow of poverty for two years to do it.

So, in addition to getting out of debt her long term goal should be to stabilize her expenses and earn more money so that the extra income can go to saving.

In our email exchanges she hints at lots of ideas for earning more, both freelance and in her career. She says:

I earn between $250 and $300/month being a personal assistant for a VP of a large, well-known company. (This amounts to about 5-10 hours of work per month which I think is AWESOME).

This is very cool, my question would be…can you do more of it? Can you expand your services and charge more? Are there things you do really well. Specific things? Can you offer these to new clients. VPs of large companies will pay big bucks for stuff they don’t want to/have time to do.

Occasionally I babysit and charge $15-20/hour but this is sporadic and I don’t count on the income.

A nice income booster but as you said, sporadic, and you’re never going to earn much more than that per hour. I’d take it when convenient but focus on other opportunities.

I have a tutoring gig for the summer which is $20/hour but only one hour per week.

This one is better. Can you advertise and take on new clients? If you specialize in tutoring for one particular subject/test, etc., I’ll bet you could charge them more, too…even double that rate.

I’ve been spending time teaching myself design programs in the hopes to get freelance design work or maybe eventually start a blog (no idea what it should be about yet though…TOO many ideas to nail down).

Beware there are lots and lots and lots of hungry designers with MFAs and big portfolios and lots and lots and lots of bloggers. If either is your passion, charge ahead, but be careful if you’re thinking you’ll teach yourself Photoshop and overnight end up with $100s of dollars of freelance work.

Career Ideas

As for Julia’s day job, she hints in her emails that she doesn’t hate her job, but doesn’t sound confident about long-term growth or stability. She says that, based upon friends’ salaries, she thinks she could be making significantly more. She’s applied to some jobs in the past couple of months but finds it hard to keep the momentum of job searching up with everything else going on.

We could write another post about career planning, but to keep it short I think you’d described that it’s time to start looking for the job you really want (and hopefully it’ll pay more). You’ve got something a lot of people would kill for these days—a job in your field that pays the bills—but you know you’re capable of more. This first step is to define what you want, then make a plan to go after it. This means making lists of companies you’d like to work for and setting up lunches with people you know who work there. If you chip away at it, the right job may come around when you least expect it.


Here’s how I think Julia’s situation stacks up, right now.

Julia's Financial Report Card

Julia may find this assessment harsh, but the reality is Julia is an illness or lost job away from financial disaster. The good news is it won’t take much to improve this picture. The keys for Julia are to:

  • Get some more cash saved so a small emergency doesn’t ruin you.
  • Get rid of the credit card debt.
  • Focus on ways to stabilize expenses and increase your income so over time you can put more and more to debt repayment and saving.

On the plus side, Julia’s housing costs are controlled (the upside to roommates), she has an idea of where she wants to go, and she’s working on getting there. I think the biggest thing she can do is to focus her efforts on knocking down one goal at a time.

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