Hello! Today I have an inspiring debt payoff story from Davina (author of Davinas Finance Corner). Here’s how she went from being trapped in payday loan debt for 1.5 years to becoming debt-free, saving over $50,000, and building a five-figure investment portfolio. Enjoy!
In this article, I’ll share how a period of payday loan dependence changed my relationship with money. I’ll explain how I paid off debt, saved more than $50,000, and built a substantial investment portfolio. I’ll outline the mistakes I made, the lessons I learned, and the practical changes that helped me transform my finances.
I know many people struggle with money, and I hope my story encourages you. No matter how tough your situation seems, you can take steps to improve your financial life without completely depriving yourself. It’s possible to design a plan that works and still enjoy life.
My Story
I grew up in a single-parent household with my mum and older brother. We had what we needed, but finances were tight. I remember wanting a life without financial restrictions: seeing classmates with brand-name clothes and shoes left me feeling the pressure of FOMO at school.
When I was young I was actually disciplined with money — my mum emphasized saving, and with my first part-time retail job during college I planned my spending around weekly pay. Despite that, somewhere along the way my good habits slipped.
How I Got Into Debt
I got my first credit card at 18 mostly because it was offered to me. After a redundancy, I activated it to maintain my lifestyle while unemployed. That was mistake number one. When I found another job, I ignored the card balance instead of paying it off.
At 21 I financed a used car with a personal loan instead of saving up. Less than a year later I was made redundant again. Without savings, I was back where I started and carrying $6,200 in debt (about $2,000 on a credit card, $1,200 overdraft and $3,000 car loan). I ignored calls from creditors and avoided making payments.
Later, with a decent job and low living costs, I still lived lavishly — nights out, concerts, festivals and holidays. I lived paycheck to paycheck and borrowed from friends or family when cash ran out. During the week between Christmas and New Year one year, I took a payday loan so I could go out. The loan was repaid the next month with interest, leaving me broke again, and the pattern repeated. Over the next 1.5 years I cycled through payday loans each month to get by.
Eventually I felt the heavy weight of these choices — embarrassment, stress, and disappointment in myself. I decided I needed to stop digging the hole and find a way out.
I Got Help
I searched for support and found a debt charity. We reviewed my debts and agreed a debt management plan would be best: I would pay what I could each month to the charity, and they would distribute it to my creditors. It didn’t rapidly reduce the principal, but it stopped the aggressive calls and eased my stress — progress, even if slow.
A Lucky Break
The next year I was made redundant again, but this time I received a redundancy payout. Initially I considered using it for a car, but after a few months of thinking, I chose to pay down debt and save the rest. That decision was pivotal.
With the redundancy payment, I cleared payday loans and the overdraft, and put money into savings. This reduced my immediate stress and gave me a cushion. I returned to the workforce and began consistently contributing to savings while learning about personal finance to avoid repeating past mistakes.
Debt Recap
Credit card – $2,000
Car loan – $3,000
Overdraft – $1,200
Payday loans – $3,600
Total debt = $9,800
Redundancy payment = $7,000 — $4,800 towards debt, $2,000 to savings, $200 to spend on myself.
Remaining debt = $5,000
Although I wasn’t fully debt-free then, I had reduced my debt and established savings. I soon found another job, stuck to saving each month, and committed to learning about money. Applying what I learned allowed me to clear the rest of my debt and eventually save over $50,000.
How I Paid Off Debt and Saved Over $50,000
To be clear, I work in finance and earn a reasonable salary, but I’m not wealthy. The redundancy payout helped, but it wasn’t enough alone — it took me about three years of disciplined saving, learning, and consistent action to reach my goals.
The three pillars of my turnaround were: changing my mindset, educating myself about money, and creating a realistic plan that I could stick to. Below are the concrete steps I followed.
Changed My Mindset
I admitted I had been living beyond my means and accepted responsibility. No one was going to fix my finances for me. Recognising that I earned enough to build savings and still enjoy life pushed me to learn how to manage money rather than letting money manage me.
This meant making lifestyle adjustments and sometimes saying no to social events. Understanding what led me into debt was the first step toward lasting change.
I Educated Myself About Money
I consumed personal finance podcasts, YouTube channels, and books to learn practical habits from people who had rebuilt their finances. Key lessons I absorbed were:
- Stick to a budget
- Live below your means
- Avoid spending on liabilities
- Find ways to grow your money
- Invest in yourself
I tailored these ideas to fit my life instead of copying everything I heard. For example, I wasn’t ready to invest immediately, so I focused on saving in a high-yield account first so my money could start working for me.
I Got My Priorities in Order
My main priority became building savings. Realising lack of an emergency buffer had led me into debt, I started saving consistently. Initially small, my contributions grew, and after clearing debts I was saving up to 50% of my income.
Examined My Spending Habits
I reviewed bank statements and categorized spending in a spreadsheet. I was shocked at how much I spent on eating out, takeaways and socialising — over $300 a month on food alone. Seeing the exact numbers provided the wake-up call I needed.
I started planning meals and doing weekly grocery shopping, which reduced takeaways. I cut back on dinners out and focused on changing the biggest cost drivers first, rather than everything at once. Small, consistent changes compounded into meaningful savings.
Created a Realistic Budget
I designed a flexible budget that allowed me to keep the activities I valued—travel, theatre, dinners with friends—while cutting unnecessary costs. I tracked everything in a spreadsheet and made adjustments until the numbers worked.
Practical Changes
I canceled unused subscriptions and expensive services (for example, a $90 gym membership) and switched to cheaper TV and mobile plans after contracts ended. I paid some annual bills upfront to take advantage of discounts and reduce monthly outflows.
I optimized groceries by switching stores and using loyalty cards, saving over $100 a month. I gave myself a modest monthly fun allowance on a separate card to maintain accountability. I also created a sinking fund for holidays and treated savings contributions like a recurring bill.
To increase income, I started working as an independent contractor, adding about $20,000 a year. Rather than increasing spending, I funneled that extra income into savings to avoid lifestyle inflation.
With improved habits and discipline, I contacted debt collectors and negotiated to repay the remaining balances in equal payments over six months. Making that final payment was an immense relief.
I Put My Money to Work
After clearing debt and saving roughly $20,000, I researched investment options and chose to invest regularly in index funds with a long-term perspective. I also kept part of my cash in a high-yield savings account so it continued to grow while remaining accessible.
It Worked
By mid-2023 I was debt-free, had $54,000 in savings, and had built a five-figure investment portfolio. The journey wasn’t easy, but the results were worth it. I now prioritise spending on experiences I value rather than material things.
I love travel and can now afford at least two trips a year without financial stress. The process taught me that less can be more: buying fewer things left me feeling lighter and financially freer.
Future Plans
I plan to use some savings toward an investment property because I want to buy assets that generate wealth. I’ll continue contributing to the stock market and I’m working to grow my blog, Davinas Finance Corner, with hopes of monetising it. Financial stability has given me options and the freedom to explore possibilities like becoming a digital nomad.
Do you have debt? Do you have a plan to pay it off?
Author Bio: Hi, I’m Davina. I’ve worked in accounting and finance for over a decade, applying practical budgeting, saving, and earning strategies to change my own life. I experienced the stress of debt and living paycheck to paycheck, so I’m passionate about helping others break that cycle. Through my blog, Davinas Finance Corner, I aim to empower women to take control of their finances, build wealth, and focus on personal growth. Whether you want to save more, earn extra income, or improve yourself, I share actionable information to help you on your journey.