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Episode Seven: Meet Jennifer
She used to buy every gadget that crossed her path. Now, her cousin calls her “the Queen of Cheap.”—learn how Jennifer paid off all of her student loans and most of her credit card debt, and purchased her very first home in Chicago proper.
Jesse: Welcome, everyone. This is Episode 7 of Debt Stories: Real People Beating Debt & Winning Financially.
Today, we’ll meet Jennifer, a born-and-raised Chicagoan in her late 20s, who’s budgeting philosophy boils down to “You’ve gotta live a little.”
For most of us, the “living” part is easy. It’s the “little” part that can get us into trouble.
So, let’s dive in and hear how Jennifer went from dropping cash on every gadget that crossed her path to earning the nickname “the Queen of Cheap.”—a title lovingly bestowed upon her by a cousin after she started budgeting, not that Jennifer minds. As of this interview, she’s paid off all of her student loans and most of her credit card debt, and purchased her very first home in Chicago …
Jennifer: Yeah. I closed on the house in December, so I got it at the end of 2016. Still trying to navigate and figure things out in terms of what, like, what month to month can be like, but I think I have a decent handle on things for now.
I work as an IT analyst for a hospitality company. … I’ve been doing IT work for the last seven years. My mom lives with me. I’m single so it’s just myself and her, and we have a townhome.
Jesse: Jennifer’s still feeling out the true costs of her new home.
Jennifer: The property tax was just raised twice this year, so it’s pretty expensive. The tricky part is I bought new construction so you don’t even know the actual property tax until your bill comes out in 2018 for this year’s tax.
Jesse: Home ownership in Chicago proper is relatively expensive and, apparently, streamed TV is, too.
Jennifer: Cost of living is actually pretty high. We have strange taxes that probably other places in the country doesn’t have. We have a tax on Netflix and Hulu, so instead of paying $7.99 like everybody else, I actually pay $8.70.
Jesse: Living in a high-cost city doesn’t help if you’ve got money worries, of course, but that’s not where Jennifer’s debt story began …
Jennifer: It kinda started when I was in college. You go to the fairs and you see someone offer you ice cream and a tee shirt and you’re like, what do I have to do? Sign your name on a dotted line, get a credit card. Then I joined a sorority, so you just keep spending and spending and spending, so when you graduated and I sat down and I looked at my debt, it was like, I don’t want to look at that — out of sight, out of mind — so I just kept spending. And then I ended up one day really sitting down and looking at my debts. I plugged things into Mint and I saw that my net worth was, like, I want to say 40 grand in the hole.
That’s including student loan, credit card debts. Then you’re like, okay, so what do I do?
Jesse: For Jennifer, like with so many people who realize they’re in deep, the answer wasn’t clear. Facing $40,000 of debt can be a bit overwhelming (especially in your mid-20s).
Jennifer: That was my first attempt to try and get myself on track. I mean, I just saw the app Mint, and I was like let’s just plug it in and see how things go and see how it works out.
There was no serious attempt to try get anything down.
Jesse: She had the cold, hard numbers … but what Jennifer really needed was a plan to pay it all off. Instead, she decided to do what all of her friends seemed to be doing: buy a house. Flashback to 2013:
Jennifer: I think the first, like, real hit-home call was when I’m going through the numbers with the banker about buying homes and she’s like, “I can’t approve you for your loan.” And that knocks you flat.
Jennifer: The second thing that got me to really sit down and think about everything was my company announced that they were closing our division down. So then it’s like, you have no emergency fund. You’re thinking of buying a house and you’re still in debt. You’re like, alright, now it’s getting serious.
Jesse: Getting declined for the home loan and possible job loss were stressful, but not nearly as worrisome as what happened next.
Jennifer: The final thing that got me to really sit down and figure out my situation was my mom had to have open heart surgery. I was home one night and as I’m driving back from the hospital and my mom was recovering but it’s still a long road recovery ahead of her so I was trying to help her.
Jesse: The realization that she needed to be there for her mom was the final straw. Jennifer knew it was time to get out of debt and whip her finances into shape, so she started Googling.
Jennifer: I sat down and I was like budget apps. Then I came across You Need A Budget signed up for the trial and I really started watching the videos. And this was the time I tried it and I stayed through with it from 2015 until now; so it’s been almost two years.
Really that was the night I sat down, punched everything in. Let’s attack this, let’s come up with a game plan, a strategy of how to undo this. If you plan on getting a house, this is the way to go. No one can say, “You’re rejected.” There’s been embarrassing situations in the years prior to that, that you try to get a credit card and they actually say your credit card score out loud and you’re like, that’s embarrassing.
Jesse: Today, Jennifer has nothing to be embarrassed about. What a 180!
Jennifer: I paid off all of my student loans. And I owed 28 grand!
I paid off my credit card debts. Actually, I was slowly making the payments but then I’m looking at my debts, and I’m like, why isn’t that going down? I had some money saved aside and I actually took all my debts and basically ranked them by interest rate and then attacked the highest interest rate first, while still paying the minimum.
It was hard, but I had to tell myself “short term pain, long term gain.”
Jesse: Jennifer scrutinized her lifestyle and cut back in meaningful, doable ways. And her work didn’t go unnoticed …
Jennifer: I realized I ate out almost $500, $600. And then one month was $1,000, and I don’t even remember eating out that much that month! I really cut back on eating out.
I would actually drive my car to work every day and paid, I want to say $20 a day to park my car. So I stopped doing that. And I stopped just buying random electronics, anything I fancy.
So, I literally had cut myself off to the point where some family members were actually, “Are you okay?” They didn’t know about my debt thing, so now they see a 180 of the person who can’t seem to stop spending has basically been, as my cousin calls me, queen of the cheap.
She was like, “Okay, you don’t do this and you don’t do that” and she’s like, “You’re always looking for deals and bargains now, what’s going on?” I explained to her what I was doing. She’s like, “You’ve got to live a little.” I was like, yeah, I can live a little but I know my limits now. I think the biggest thing I’ve learnt during this whole process is that since I never gave myself boundaries, I just went all over the place. That didn’t help. It just increased my debt, you look at your numbers, you look at everything and you’re like, “oh my God what do I do?”
Jesse: Everyone wants to ‘live a little’ but ‘live a little’ and ‘live without limits at all’—those are very, very different things. And, as it turns out, setting those limits helped Jennifer get more enjoyment from her spending.
Jennifer: When I moved to my new townhome really drove up another point home that I spent a lot of my money on material things but I never spent it on experiences. I was throwing away things… like I didn’t even realize why did you buy this, why did you get this, why did you have four copies of the same movie.I’m like why do I have this movie lying around. I realized that material things don’t go with you if one day you leave this world. Experiences, unique experiences are the ones you take forever and no one can take away from you.
I’m going on a vacation now. I get to see the world. That’s what that really drove home for me.
The best trip I went on was I went to Toronto last year.
It’s amazing, the more I have to plan for it, the more I had to look at, okay, how much are plane tickets, how much… it forces me to sit down and evaluate what’s my budget. What do I have to spend on this versus before I was just like I would walk in the store I can buy this new iPhone. Itt forces me to make sure I live within my means. I find myself sometimes wanting to buy something but I always catch myself in time.
Jesse: Now, when Jennifer turns to her credit card, she’s in control.
Jennifer: I do have a balance but the balance is always paid in full by the due date.
Jesse: And her friends and family are impressed.
Jennifer: When I told people that I eliminated my student loan, they’re like, “Oh my God, how did you do it?” They see my application of discipline.
Jesse: So, what helped her stay the course?
Jennifer: The reason I was able to stay on track as long as I have is just really making sure I was well within my means. There’s no perfect month. If someone says “I had the perfect budgeted month,” they’re lying … because it’s impossible. I did seek out a financial adviser halfway through it, to make sure I’m not going crazy here. I think that was actually money not well spent because everything he told me, I already knew.
Jesse: Jennifer also listens to podcasts and reads to keep herself motivated.
Jennifer: I think just really diving deep into the personal finance and really listening to different podcasts, trying to keep myself motivated and challenging myself. I didn’t want to slip. That was the one thing, I did not want to go back into debt because my biggest fear is if I slip this time I think that was it.
Some of the podcasts I like, one of them was Stacking Benjamin was pretty good. It helped me to learn about investing. YNAB, I listen to you in the morning. The book I think that got to me is Jason Vitug-He released a book last year, You Only Live Once. That really helped reinforce some things. Also it’s about balancing because you can’t just go 100% in. You find what works for you. That’s the one thing that really helped.
Jesse: The key to living within her budget has been allowing herself some fun money—we all need some—and Jennifer watches herself closely on this front.
Jennifer: Sometimes, I get close to the border where it’s like, okay, you’re cutting it close this month with entertainment. That’s my guilty pleasure. I make sure I have fun a little bit but I do it in moderation instead of in excess. I was going out a lot, just to hang out with friends and stuff. That’s one of those things where it’s still my guilty pleasure, non-negotiable, but, hey, you’ve got to live a little.
Jesse: There it is. You’ve got to live … a little—wise words. Jennifer also shared this:
Jennifer: I think the biggest thing that kept me from achieving my goals earlier was the truth was in front of me for many years and I wasn’t honest with myself.In this whole debt journey process, I learnt a lot about myself I think because I had to face things head on, even when I didn’t want to.
Something that Sun Tzu says in The Art of War is “To know thy enemy is to know thyself.” To know your debt is to understand, how are you as a person, … what are your vices and your weakness and your weak points,
Jesse: Interesting, “If you know your debt, you know yourself.”
Money truly is a magnifying glass for our inclinations—it really does accentuate what you already are, most of the time.
If you’re struggling with money, Jennifer stresses the importance of taking it one day (or dollar) at a time …
Jennifer: Be realistic. There’ll be months where you have to choose between certain things. It’s just … you can’t be too hard on yourself.
Episode Eight: Meet Megan
This is a story of $9 salads and a $12,000 C-Section—and it’s proof that you can fix five-figure debt by paying attention to the little things. It all adds up!
Welcome, everyone, to another episode of Debt Stories: Real People Beating Debt & Winning Financially.
Today, we meet Megan, 33, who lives in Salt Lake City with her husband and two young children. She’s a full-time hospice nurse working nights, and her husband is a graduate student studying clinical psychology (he’s not allowed to work).
Their debt story includes the usual cast of characters—student loans, credit cards, a house—but the plot really thickened when their first son was born …
Megan: My husband and I got married and we both had some credit card debt. Nothing too serious, and really high student loans to us. … together we had about $50,000 in student loans.
Jesse: Next came the mortgage …
Megan: We bought a house about two months after we got married … And we just started living the normal life. We weren’t really worried about debt, paying minimums on things.
Jesse: So they cruised along, making those minimum payments on their debts, until the birth of their first son.
Megan: My insurance was pretty poor at the time. That birth cost 12,000 dollars. He was a C-section and he was in the NICU for a week, and it was just very unexpected. And then, so I worked extra. I worked really hard and we paid that off. And then when I got pregnant again with my second child, I did not want to have that happen. So I actually looked online and I said, “I’m going to figure out a way to be totally prepared and I want to have a maternity leave without concern.” And I thought, “YNAB.”
Jesse: And then Megan got busy …
Megan: It hasn’t been that long, but since finding it we really discovered all the leaks in our finances and started working really hard at paying off debt.
Jesse: And she means “working really hard” in the literal sense.
Megan: I started picking up extra shifts, I let the other nurses know that they can call me any time … If they don’t want to go on a visit, we get paid per visit, after hours … And so that’s been incredibly helpful to make extra money.
Jesse: It’s always a huge milestone for new budgeters when they’re able to break the paycheck-to-paycheck cycle by getting one month ahead of their bills. But Megan did not stop there …
Megan: I just started putting the money in. And I was able to get three months ahead, so that when I did have my son I did have maternity leave, totally paid.
It was there and I could see it in YNAB. … So there was no stress. I knew we were covered and I had a different insurance at that time, and the max was $6,000. And so I actually had $6,000 set aside as well.
Jesse: With their insurance covering $6,000 of hospital expenses and $6,000 plus money for her maternity leave saved, they were ready for baby #2 to arrive.
Megan was working more, a lot more, but she and her husband also cut back, as you do, in order to meet their savings goal—and that meant reining in their dating life …
Megan: Because we work opposite each other I think part of it was we want to go on dates when we get the time, so a lot of eating out. … We didn’t realize that 30 dollars here, 30 dollars there, 30 dollars there. It actually adds up to hundreds of dollars.
Jesse: And then there were her husband’s lunches …
Megan: Yeah and I didn’t realize that my husband was eating lunch at the cafeteria every day. I mean I knew he was, but I didn’t realize that it was between 9 and 11 dollars every day. … And that really adds up super fast.
Jesse: When she pointed out that on-campus lunches were costing them hundreds of dollars per month, Megan’s husband agreed that it just wasn’t worth it.
Megan: He was incredible. I just showed it to him and I said, “Look this is honestly over 200 dollars just for you to eat lunch.” We can make a salad for a lot less money. And so I got a really good meal keeper, and I make dinner at night and we pack it right then, right after dinner when I’m putting leftovers away. He just grabs that in the morning. And that’s worked incredibly well. He actually says it’s a lot better than the salad. … So he’s thrilled, and so am I.
Jesse: Packed lunches were a win-win. As for their dates …
Megan: We’ve just tried to be a little bit smarter about how much we spend when we go on a date. So occasionally we will go to a nicer restaurant. … But if, you know we might want to go and get a picnic and go somewhere, or go grab something that’s a lot less expensive, maybe 15 dollars versus 30.
And we just have a set aside amount that we’re okay spending, and that’s what we stick to. … And then if we want to go out again, the money’s not there that it can come from our fun money.
Jesse: Before YNAB, they’d been spending 300 to 350 dollars per month on dates, now Megan says they keep it to between 50 and 100 dollars. Do they feel deprived?
Megan: Not at all. … I couldn’t be happier.
Jesse: We see it all the time, folks … control over your money feels good! And with her husband’s lunches in check and their dating budget slashed, naturally, Megan turned an eye towards groceries …
Megan: I’m still working on them. … But yeah, that’s definitely my biggest struggle. But I found that we were definitely having food waste, and a lot of the issue was I would buy something and then discover that I wanted something else. So I’d go to the grocery store again. And I’m working on just saying, “You know you have food here. Cook what you have, and you can get that other thing next week.”
Jesse: Even though they saved enough to cover the birth of their second child and her maternity leave, Megan continued to take on extra work. She saved up so much that when her husband’s stipend checks came in during her maternity leave, they didn’t even need them!
Megan: So that’s actually when I started paying him his student loans. And it was really cool that every two weeks I was able to send a check to student loans when I wasn’t making any money. To actually be able to pay so much on student loans when I’m not even making a penny through my work, that’s incredible.
Jesse: Things were looking good.
… and that’s when Megan’s insurance policy changed. Just a week before her scheduled C-section, Megan was notified that she was responsible for paying her coverage premiums.
Megan: It was the same company. They paid them when I had my first kid when I was on maternity leave, but they had changed their policy and they didn’t tell me about it. So a week before I’m going in to have my second, I found out that I was going to have to pay about 300 dollars a month. I was pretty stressed about that so I went home and moved some things around.
And then I talked to my boss. And I just said, “Look if I can do some work a few hours from home on the computer.” This is one of the things I had asked them to do so I could save up for this, is to audit charts. They said, “Yeah, you can still do that as much as you want.” And so I said, “Yeah, I’ll do that while I’m on maternity leave.” And so when my kiddo’s were asleep I would pop in and work a little bit. And I actually was able to work a little bit more to cover even more than my premiums. And so I asked them to hold all of that check and just put it towards my HSA, which was new.
Jesse: Now, what I love about this is that Megan had more money in her budget that she could have moved to cover the unexpected premiums … but she didn’t want to empty her car fund so, she got creative. Instead of settling for the obvious—depleting the budget or cutting her maternity leave short—Megan negotiated a third option that brought in more money without taking her away from her newborn!
Megan’s husband has another year and a half left in school so, for now, they’re living on his stipend and her paychecks. She continues to pick up extra hours from work to boost her income … and it’s paying off.
Megan: Every penny that I have extra at the end of the month I send to my husband’s student loans, mine are now paid off. I feel like we’re killing it. … I am so excited, I can hardly stand it.
Okay, so as of today we have paid off $17,000 of his. In the past year.
Jesse: That’s well over a thousand bucks a month, and they’ll be in even better shape when her husband begins working.
Megan: It’ll be great, if I can continue the way that we have been each month and I see no reason why we won’t be able to. It’ll either be between summer and Christmas of next year that we’ll be out of all debt except for mortgage.
Jesse: Well, almost.
Megan: We have two car loans and they add up to about 5,000 dollars together. Yeah, they’re such low APR that I’m not worried about them. I want to get the student loan.
Jesse: She’s got her priorities straight! Amazing—in just a little over a year from now, they’ll be totally free of student loans.
When it comes to sharing financial responsibility, Megan says:
Megan: Well one of the things that I feel grateful for, and I don’t know what it is, but my husband is phenomenal, and he has been my partner in this. I definitely am the one that does it like 95% of the way. He puts in his spending and he trusts me to do the rest. … I’m really grateful that he’s been on board
Jesse: And they’ve worked together to find room in the budget for the important things …
Megan: He wanted to do a podcast so he’s getting stuff together for that. And he said, “Hey I don’t have enough money in here, in YNAB for this microphone. So do you want me to just put it on a different category?” And I said, “No, that’s not how it works.”
So what he did is, he took a bunch of his school books. … So he put them up online and sold them so he could get his microphone. He was thrilled and I think it meant more to him, because he could – it’s not like he just bought it. He worked for it and then he was so happy when they arrived. It was really cool.
Jesse: Another creative maneuver—this time, trading in books for podcast equipment, which is apropos … dispensing the wisdom he learned from those books through the new microphone and sharing that knowledge with the world. Very cool.
And then there’s the family activity budget:
Megan: I think the non-negotiable was just the stuff that we do together as a family. Our quality of life section is still more than I think most people would put, when I look on the blogs and the Facebook group. But our family time is worth more to me than anything else. I mean that’s why we’re doing this. And so when I want to take my kids to the children’s museum, or the zoo, or whatever it is I have several memberships throughout the Valley. And they are really expensive and initially I thought, “We shouldn’t spend that kind of money.” But I am at home all day with my kids. And I want to be able to take them and play, and give them those kinds of experiences. And that’s one place that I definitely could have been more reserved. And we talked about it and yeah, it’s worth it.
Jesse: One particularly memorable purchase was tickets to see Martin Short and Steve Martin …
Megan: Those two are my father-in-laws favorite comedians.
Jesse: Megan’s husband really wanted to surprise his dad …
Megan: he went on YNAB and he’s like, “Okay babe, it’s like 300 dollars, the tickets that I can see them online.” It was front row when he logged in and he said, “This is worth it to me.” … he went through his fun money, and his podcast money, and like Christmas for him and he rolled up all of these things together so he could get these for his Dad.
It was totally worth it, I mean he could not have been happier and he still talks about it. And my husband was so thrilled. And before I would have been really stressed about buying that kind of high ticket item. But we could see that it was totally doable.
Jesse: Guilt-free indulgence – the best kind.
Megan: YNAB has helped me see that your money can be… It is there to serve you. You are not a slave to your money.
And I felt, before this, I felt like I was working, working, working and I didn’t really know where my money went. And I’d get stressed when big bills would come up. I’d get, “Oh my auto insurance,” or “Oh dang it, it’s time to renew my registration on my car.” And I never saw them coming. Now I know, in November I have three or four things, big ticket money items that all of a sudden come up in the same month, and no big deal this year. It’s really, really nice to not have those little heart attacks.
In the previous years, everything else would just go on our credit card because, “Oops, I just spent my paycheck on all those other things. And we still have to eat and have gas, and all of the things we still need to do.” But now it’s all there and now I just don’t have those stresses. Money used to stress me out, and now it makes me just happy and secure in my life. And it really is thanks to YNAB, it’s an incredible program.
Jesse: What I find remarkable about Megan’s story is that she had the big emergency—a $12,000 medical bill—but she didn’t blame her money worries on that.
She dug deeper and realized that it was just as critical to mind the smaller details—the $9 salads and extra hours here and there at work (even selling her husband’s old text books!) … it all adds up, and we have more control than we think.
If you’re struggling with your own debt story, I hope this story inspires you to get creative and take control. If Megan can do it, so can you.
Episode Nine: Meet Chelsea
Chelsea and her husband had the wedding of their dreams in Hawaii … then reality hit. They were $215,000 in debt! Find out how they teamed up to fix their finances.
Jesse: Welcome, everyone, to another episode of Debt Stories: Real People Beating Debt & Winning Financially.
Today, we meet Chelsea who lives in Tri-Cities, Washington, with her husband and their two dogs—a German shepherd and a chihuaha.
Chelsea’s job is in marketing …
Chelsea: I work at the visitor center in our community. It’s a non-profit. It’s a destination marketing organization and I work to bring corporate and government groups to our community.
Jesse: And her husband is a mechanic and a teacher …
Chelsea: My husband, has two full-time jobs, which plays into the whole debt payoff strategy. He is a mechanic at our local transit agency and he does that in the evenings. Then in the day time, he actually teaches local high school students how to work on diesel engines. He works 75 hours a week. Yeah, we’re always ready for the weekend by the time that comes around.
Jesse: And this is the tale of how they said “Aloha” to a whole lotta debt …
Chelsea: We were married in June of 2013 and I guess most of our debt really did come from the wedding. We got married on the beach in Hawaii. It was a beautiful ceremony and we were super happy.
Jesse: They were super happy but, Chelsea admits, their life at the time was also super pricey …
Chelsea: I was a little on the high maintenance side where I needed my reception dress and I needed my different pairs of shoes and that sort of thing. Then at the same time, my husband, he’s really into outdoor stuff and hunting and that’s a really expensive hobby. So kind of a mix of, I guess, life being a little out of control is what really started our debt.
We got married when I was 21. My husband, he’s a little bit older; I think he was 27 or 28. But he was always really good with finances and he had never had any sort of credit card debt. But he abides by the “happy wife, happy life” and that’s how we got to where we were, if that makes sense.
We had a really nice wedding ceremony. We had about 15 people from our family that came over and it was a beautiful day on the beach. So total we had it was about $29,000 in credit card debt. It wasn’t all our wedding, but a lot of it was from the transportation, I guess. Getting over to Hawaii and paying for our officiant and paying for everything that goes along with that. Then we also had about $28,000 in vehicle loans as well.
Jesse: While they don’t regret their Hawaiian wedding, Chelsea says that, if she had it all to do over:
Chelsea: I wouldn’t have necessarily changed a lot of the details. But I think that at that point we were young and we liked to go out, and I’m sure that we would have been able to cash flow a lot of this stuff if we would have just got our priorities right.
That and then the reception dress just didn’t quite work out the way that I thought it was going to. It never actually made it out to Hawaii. Then eventually one day, as a part of our debt repayment strategy, we had a yard sale and we sold it. So I would change that. I would have left that at the store and I would have worked on cash flowing.
Jesse: I won’t argue with her, there. Paying cash is always the way to go. Not only do you enjoy your splurges (big and small), completely guilt-free, cash also helps you side-step disasters …
Chelsea: We actually had a couple of those. The first one came when we got back to our community. We had a reception for our friends and family that weren’t able to make it to Hawaii. And as we were getting ready to pay the caterer, it became apparent that we didn’t even have enough available credit to pay this caterer.
Jesse: Yikes. Reality check, #1.
Chelsea: Yeah … a couple of those wedding cards got opened a little early, if you know what I mean! So we made it happen. We got it taken care of. We had a really nice reception, but I probably would do that a little different.
Jesse: So, Chelsea, then 21 and her husband 27 were married. Importantly, the reception caterer got paid. And then it was back to reality … beginning life as a newly married couple.
Chelsea: After our wedding reception happened, I remember it was either that weekend or it was the following weekend. We were sitting on our patio talking about what a nice couple of weeks we’d had. It had been one of those things where the financial part of it was just always looming. It was just always hanging out there and we didn’t really talk about it and we didn’t really think about it.
I said, what do you think about having to open our wedding cards early and spending that to feed our guests? He said, “It scared me.” And I did not like that at all. I said, I’ve looked at what we owe and to be honest with you, it’s really scary. It’s terrifying in fact because this is the kind of thing that ruins relationships. I’m sitting here looking at my husband of two or three weeks at this point and it scared me.
We had a really good conversation and we talked about exactly what we should do differently, and that’s when we really worked to outline all of our goals and exactly what we needed to do to get out from underneath those.
Jesse: That’s was an important first step—acknowledging their debt problem and deciding to do something about it, as a team. Next, they took action.
Cheslea: We downloaded this debt snowball Excel document where I outlined all of our debts. That was scary because there were… On this website that I used to download this, there were two different editions of the snowball calculator. The one, it was for ten creditors or less and the other was for 25 or more. Luckily, I have to tell you, we had 11 creditors, so I didn’t feel as bad as the people that needed 25. But still I as I was looking at this massive amount of debt, especially when you consider that we were young and our incomes were a lot less than they are now, it was really scary. But I’m totally an Excel nerd and I made some changes to the spreadsheet.
At that point, we were paying $1200 in interest per month. That was terrifying. Our monthly payment was $3,000 and that included $100 worth of a snowball. Including our house, our total debt, it was about $215,000. And that’s terrifying, too!
Jesse: Ouch. $1,200 in interest payments on $215,000 of debt when, at the time, Chelsea and her husband were only earning about $70,000 per year, combined.
Chelsea: A big breakthrough for us came when we took a lot of our credit card debt and we did a balance transfer to a 0% credit card. One of our cards, it was almost 20% interest, and we had $12,000 on that card. Were paying a lot in interest. Once we figured out what the 0% interest period was for, we actually basically did the math and backed it up from there. So if it was an 18-month interest period, then we took our balance and we divided it by 18. Once we did the balance transfers, we didn’t pay any additional interest at that point.
Jesse: So, good. They’d faced their debt, come up with a plan and they were sticking to it. Of course, even the best laid plans have a wrinkle or two.
Chelsea: I had a car that was totally paid for, I paid cash for it, and it needed more work than it was worth, even with my husband doing all of the work as a mechanic. Yeah. So we actually ended up in this time, since June of 2013 to now, we ended up paying cash for a car for me. total was about $15,000.
Then in that time, we also did our kitchen renovation and our bathroom renovation.
Jesse: Not bad. They’re paying down the debt and, even though they bought a car and did some work on their home, they didn’t backslide—they paid cash. And they were putting a lot more thought into their choices …
Chelsea: As we were looking through some of our poor financial decisions of the past, I figured out that my husband’s truck was at a really high interest rate and so we ended up because we had extra room in our snowball, we sold that truck and we purchased a new truck with zero percent interest.
With that now, we owe about $120,000 on our house and then we owe about $18,000 on my husband’s truck and that’s all of our debt.
Jesse: Phenomenal. They’re completely free from credit card debt.
Chelsea: With YNAB, we actually do use a rewards card for our everyday purchases and then just pay that off. But for now, we’re working to pay off our truck and then we’ll probably take a really cool vacation or something like that.
Jesse: As for their biggest outstanding debt, the mortgage, Chelsea says:
Chelsea: We did a refinance on our house when the interest rates were lower. The interest rates had gone down quite a bit so we refinanced last November. we took it from a 30-year mortgage down to 15. I think we make about $100 extra in principal right now.
Jesse: With so much to celebrate, Chelsea and her husband are considering a trip back to The Aloha State to renew their vows, except this time, they’ve tacked on an extra vow …
Chelsea: Well we’re talking about it for our five-year anniversary, and I think it’d be really cool to renew our vows. We haven’t exactly figured it out just yet but we know that if we do it, it’ll be cash-flowed for sure because we are never doing that again.
Jesse: “Always pay in cash.” … now that’s a vow that can help your marriage stand the test of time!
Through their debt-payoff journey, Chelsea and her husband have become quite discriminating … eliminating unnecessary spending and unnecessary clutter.
Chelsea: We cut our cable. We put our internet down to a lower package. And when we got back from our wedding, we had a bunch of really nice gifts that we had received from our wedding guests. We ended up selling a lot of the things that we had just hanging out around the house. I learned the art of Craigslist. I learned the art of the yard sale, and we got rid of a lot of things that we thought were necessary that we found truly were not necessary.
Jesse: They also watch their entertainment budget:
Chelsea: We really liked to go out and have a good time and we still do that. But rather than it being just a Tuesday night, now it’s more of like a planned date night type of thing. We cook at home a lot more and we just do whatever we can to be resourceful with what we have. Especially as my husband works so many hours, and I work full-time too, but focusing on him here, working 75 hours a week it’s important that because of the time that we’re giving up so that we can work, it’s important that we’re good stewards of the money that we’re getting in return for the time.
We’re watching every single transaction as it’s hitting our account. And we’re managing everything against the budget that we’ve set at the beginning of the month, or beginning of the week in fact. With that, we’re able to make good decisions that really align with our goals and where we want to see ourselves in the future.
Jesse: I can’t argue with that. They’ve put in some serious work hours to dig themselves out of the hole, remodel their home and pay cash for Chelsea’s car. It sounds like they’re truly appreciating every dollar.
Looking back, Chelsea is grateful for their beautiful wedding day. And, even though they faced a frightening amount of debt, they’ve come out on top. Their secret?
Chelsea: We just made it a point that if we were making the decision to spend money that we were on the same page with it and that has never steered us wrong.
Jesse: In money and in married life, you really can’t go wrong with teamwork.
Episode Ten: Meet Erin
Erin thought that she’d never be able to retire, much less do it comfortably on half of the amount than she previously thought … but then she found YNAB.
Jesse: Welcome, everyone, to another episode of Debt Stories: Real People Beating Debt & Winning Financially.
Today, we meet Erin, a 59-year-old living in Flagstaff, Arizona. By day, she manages an IT support team at Northern Arizona University and, in her spare time, she teaches business communication—something she really enjoys (which is handy, considering the cost of living in Flagstaff) …
Erin: Flagstaff, it’s a higher cost of living. The median home price right now is somewhere in the 300,000’s—higher than Phoenix and Tucson. A lot of people with second homes. Not a lot of industry or jobs. You live here you’re going to be working a couple of jobs.
Jesse: And that’s exactly what she does.
… now, let’s go back to the beginning of Erin’s debt story:
Erin: Let me tell how I got into debt. For years and years I didn’t make enough money. But you don’t realize that. You go, oh things get bad. You don’t have any money in savings. Something happens, oh dear, I’ve got to, you know, credit cards. Then you buckle down and you try to really limit your costs but it’s always really hard when you realize you’re just not making enough money and there’s not a lot of side jobs you can do. It’s just taken for granted that of course you’re going to have debt.
Jesse: Erin was experiencing the all-too-common phenomenon: too much month at the end of the money and, bit by bit, her debt was accumulating.
Erin: Hey, I like to eat out. I like to buy a book. I like to go to the movies or see a show or something along that line. I just never have been really good with money, but I think part of it was just trying to ignore the real issue that I just wasn’t making enough.
Jesse: Erin’s income has climbed—something she’s grateful for—but, even as more money started coming in, she still struggled. In 2003, Erin took out a second mortgage on her house to consolidate her consumer debt …
Erin: And of course, you don’t change the behavior, you’re still doing it, and then you end up with new debt, new credit card debt and you’ve now got a second mortgage and the first mortgage. I actually sold that house because I knew that I was going to lose it, so I got out of it. So I went on Miss Frugal mode. My credit was wrecked and I really began to make a difference for a while, but it was just because I was forced to. During that time period, I also got some major raises and some good things happened. I got my master’s degree and then I started teaching part-time too.
Jesse: When she sold the house, Erin needed a dog-friendly rental to call home with her rescue pups. That’s when she settled into the little apartment that she affectionately refers to as the hillbilly shack … and she lived there for five years, until 2013 when she bought her second home.
Erin: I could finally afford something in this town. Looking at where my financial situation was, I shouldn’t have bought it. All the extra costs that they talk about having the house, oh yeah, there’s a lot. All these old trees, somebody has to come out and trim them and it’s going to cost $2,000. What?
Then of course, well I needed new furniture. I needed a new TV because I had an old one. I needed all these things.
Jesse: We all know how this goes. When it rains, it pours.
Erin: Then sometimes it was like other expenses. The vet, my dog ended up needing to, he had bloat and we did an operation, there’s $3,000 or $4,000. It was just a sequence of events and it’s like, I’m going to be fine. As long as my credit card is below whatever, I think I put $10,000, I was going to be fine. Then it gets over $10,000.
I want what I want and I got it and now I’m paying for it.
Jesse: Looking for a solution, Erin turned to a con-solidation loan.
Erin: What eventually ended up happening is I’ve got all this debt, let’s move it to something cheaper; let me get a loan. And it’s an installment loan and it was like, you know, to consolidate, I think I had two different credit cards at the time. Wasn’t that the smartest thing you could do!
I would never, I will never run up my credit card again. I will never, never, never, never, ever, ever do it again, and yeah, what happens. I run up my credit card again and I got the consolidation loan and new things happen. It’s just like, how can someone making my money, you know, I’m not super, super wealthy but it should be okay. You know. But when you’ve got that debt load, it just gets hard.
Jesse: Erin was standing in financial quicksand. The more she struggled to gain control, the deeper she sank.
Erin: So I had the installment loan. My credit card went higher. Then I think, well I’ll move some of that to a zero balance and then I ran up my credit card again. So now I had three different things going on. Just amazing! I mean, I’m not dumb.
It’s where your awareness is. YNAB makes you very aware and you see the picture.
Jesse: She hit the nail on the head. Erin isn’t dumb, not at all. She was just struggling—like so many of us do, at one point or another—to account for the big picture.
As she rightly pointed out, one of the most important ingredients to financial success is awareness! Of course, staying positive helps, too:
Erin: I was always negative, thinking this is how I’m always going to be. This is how it’s always going to be. Things will get better, then they’ll get worse. They’ll get better, they’ll get worse, and there will always be this debt load. I read about money. I love to read about personal finance and everything. I just couldn’t put it into sustainable action. I could do good a month, two months and then it was just too much work.
Jesse: But that all changed when Erin stumbled across some comments on the Internet …
Erin: One night, I was reading about people who lived on their last month’s income, and there’s that moment there of, oh God, that would be so nice.
Somebody recommended what they use something called You Need A Budget. I kind of scoffed at how enthusiastic they were. Then somebody else replied, yeah, I use it too. I was like, these people are crazy. You Need A Budget — I hate the word budget.
I absolutely hate that word, because I could never stick to one, it was restrictive, it made me unhappy, so people who were really into budgets were just weird.
But I was curious enough, I went to your…they mentioned it, so I went to the website and I read all the four steps. I’m going well God, it’s a free trial. What’s it going to hurt? In my brain I even said, this is going to last two weeks and then I’m going to get bored with it.
Jesse: Serendipitously, Erin had stumbled across YNAB just before one of those elusive “three paycheck” months, plus she had a little extra from a part-time teaching gig.
Erin: It was like a game then. What am I going to do with all this? I was able to put all this into place and I saw some immediate victories.
Jesse: She was off to a strong start.
Erin: I didn’t overdraft. You know. It was just a common thing, to get to the end of the month, I would just charge some stuff up and I’ll pay it off the next couple of months, not a problem. And I stopped doing the overdraft. And I used credit cards, but I didn’t add any new debt since I started with you guys.
And because Christmas was coming up and I had that extra money, instead of just going “Ooh, what do I want to buy for me with this paycheck,” it was like my true expenses, I’ve got this, I’ve got that, let me put this towards Christmas. Let me put this towards my prime accounts in January.
And, you know, paying debt down. I can see what I’m doing with my credit card, having the money set aside. The way the credit cards are handled in YNAB is I just think a miracle to me. So I can visually see it. Then seeing the numbers, it just really helps.
Jesse: Erin was looking at roughly $35,000 in consumer debt, not including her mortgage.
Erin: I had three debts basically. My credit card was about $16,000. My consolidation loan was about $9,000 and my other credit card that I had moved, was a balance transfer, was about $9,000. What I had to do was find a sustainable way. When I teach or when I have that extra paycheck, after the true expenses are filled up and my buffer is really in good shape, then I will put it towards debt, and that’s been working for me.
Jesse: Indeed. Within a year of starting to budget, Erin paid off $11,000 of that $35,000 total—driving her debt down by a whopping THIRD!
Erin: And I can see the light! My loan now is down below 5,000 and that’s now my focus.
Jesse: She’s focused, but she’s human. The urge to spend still strikes, the difference is how Erin handles that impulse:
Erin: If I am going to be selfish and go I want to do this and I don’t care. Alright, go ahead. What are you going to take it from? Where are you going to wham it from? Where are you going to move it from? Okay, you can still have it as long as you don’t create any new debt, yeah, fine, and you can pay your bills, fine. But then again, the car is going to need some work so you’d better go ahead and make sure you don’t take it from there. Christmas is getting closer; don’t want to take it from there. It becomes really like a game.
Jesse: And she’s not playing the game just to find loopholes to spend—she’s playing to win!
Erin: I think YNAB is really good for me, seeing numbers. Perfect example, I had some extra money I could throw at the loan, and I was going to go, I could throw 150, maybe 200 is what I was thinking I could do. It might pinch a little bit but it’d be fine. But then I looked, when you see the number right there, what was it at $5271 and it’s like, can I get $272, so now I’m down in the 4,000-range. … Yeah that is what motivates me.
Jesse: Looking at where she’s cut back to tackle all of that debt, Erin cited a common culprit: her food budget.
Erin: The month before I started, it’s always a crazy month right before the semester and I think my eating out, when I looked at it prior to YNAB, I went back to see how much should I budget, and it was $700, which is ridiculous. So my goal is to keep it in the $150.
Jesse: To keep her dining out budget down to $150, Erin only eats out about once per week, allows herself just one coffee-on-the-go per week, and springs for the spontaneous special meal out if she has friends in town. She’s also tapped into the art of adjusting her budget for times when life keeps her away from the kitchen.
Erin: What I have learned is next year. I’m definitely, in August and September, right at the start of the semester, budget more because with the long hours.
Jesse: Erin’s really mastered the art of awareness. She says …
Erin: I don’t import. I manually enter everything. Sometimes I’ll wait a couple of days and I’ll have to get on the bank’s website and make sure I’ve entered everything. It really does make you very aware of wow, do I really want to enter this? Maybe I shouldn’t buy it. And even if you say, okay, I want to go out and get something to eat, does it have to be the real fancier place and can you keep what’s acceptable as a lower price option.
Jesse: All of those little decisions have added up big:
Erin: I should be out of consumer debt not this year, not the coming year, then following year, end of the following year. Then, it’s plowing more into retirement and more paying down the house. I could see retiring. I really swear that by doing this and following the budget and seeing what’s happening with my money and seeing that yes, I could get out of debt, yeah. I was thinking, oh my God I was going to need a million or so dollars. It’s like no, no, I can get by with half of that.
Jesse: Through budgeting, Erin realized that she could comfortably retire on half of the amount that she previously thought. Retirement had seemed like an impossibility, but it’s well within her reach. Another example of awareness in action …
Things are looking pretty good for Erin, these days. She’s got a house she loves, the debt is shrinking by the day, and she’s on track for retirement. In the meantime, she totes her dogs around Flagstaff in her ‘94 pickup, minds her dining out budget (mostly), and enjoys the peace of mind that comes with a budget …
Erin: There’s nothing better than taking one of your books, going out to eat a breakfast and having somebody keep pouring you coffee. There’s nothing better on a Saturday.
Episode Eleven: Meet Siobhan
Siobhan came to YNAB looking for a solution to her debt—$60k+ in student loans and $16k+ in credit card debt. Flash forward, and she’s on track to pay the last $30k off by next year. What a difference a couple of years can make!
Jesse: Welcome, everyone, to another episode of Debt Stories: Real People Beating Debt & Winning Financially.
Today, we meet Siobhan who lives in Jacksonville, Florida, with her two kids, ages eight and 15.
Like so many other YNABers, Siobhan realized that she needed a budget when it was time to face her student debt …
Siobhan: After I finished my MBA, was just shocked at the amount of student loan debt I had got myself in to. I was totally terrified of looking to see what the final amount was. And then I saw it, and it ended being between $60,000 and $70,000, just the student loan debt.
Almost done with it; I’m not completely done with that but I am about…I’ve got about $30,000 left of that, which should be wrapped up next year.
I also had credit card debt too. And that was about $16,000, $17,000, and that’s all gone now. I’ve only been using YNAB since February 2017, so it’s been a little over a year.
Jesse: More than $46,000 of debt repaid in a little over a year?! Amazing. But how does someone so driven end up in so much debt to begin with?
Siobhan: It was mainly from after my divorce. The things that would just pop up, like car insurance that you might forget about. And then just trying to fit having the two kids with one income
I’m in my later 30s now but I have never had credit card debt. I always shied away from it. So it, kind of, piled on pretty fast. It was really scary.
Jesse: Big life changes often lead to big financial changes, and it can be tough to find your new baseline, even if you’re paying attention like Siobhan.
Siobhan: To be honest, it’s sad but I can’t even tell you exactly what it all was.
I’d always kept a budget so it was like, well how did I end up in this situation when I felt like I was doing everything right.
Jesse: That’s when Siobhan went looking for solutions and found YNAB.
Siobhan: I was researching another product and came across a blog that compared this other product and YNAB, and it ranked YNAB as being better. There was the trial and so I gave it the trial and within the 30 days, I was just absolutely hooked. Even my co-workers can tell you, I, seriously, just talk about YNAB all the time. But no, it helped so much. It has just helped me just get my finances more in line and helped me achieve the financial goals of getting out of debt.
Jesse: It was the reporting functionality that really hooked her …
Siobhan: When you first start YNAB, you don’t so much change your habits quite as much; it’s more of, how does this fit in with how I’m doing things. On the reporting, having it break down into the categories and then where my money was going, that was really what…I just realized I was spending money…you feel like, I’m making good money, I should be able to buy this or buy that and the money is in my checking account. So it was, kind of, like that. Not having the reality, not just the forecast, but the reality of what you’re spending on because the little bits, they end up being a lot.
Jesse: The proof is in the reporting—the small things really do add up!
Siobhan: One of the things that comes to mind would be dining out. You might think, well I’m going by that coffee shop; it’s going to be less than five bucks. That’s not bad, but when you multiply that by five for every day of the week, then it starts to really add up. Or even just going out to lunch every now and then, it’s 10 or 15 bucks for lunch. That turns into a pretty big bill over the month. I think that’s definitely one of the things that I saw with the reporting.
Then just also like little subscriptions too. Maybe you have a music subscription that you subscribe to. Then when you go through and you’re like, well I’m prioritizing my money and I’m looking at the reports of where my money is going and these little subscriptions, five or 10 bucks here or there.
Jesse: So, like so many new YNABers do, Siobhan rediscovered her taste for home-cooking; the obvious fix:
Siobhan: Just a lot more meal planning. Even then just looking at…what do I think is appropriate for my grocery bill? And planning ahead, so if I’m going to be out of the house all day, I need to make sure that I have a snack with me, just in case. I don’t want to spend my entire dining out budget in the first six days of the month. Then if you do, it happens, knowing just what money I have available within my budget to move to that category.
Jesse: And how much is her ‘Dining Out’ budget these days?
Siobhan: I try to keep it around just $50 for every two weeks.
Jesse: Of course, Rule Three is always there if they need to spend more—like during a sudden move last July …
Siobhan: It is a disaster. Yeah, my dining out budget was completely blown for that month. But when you go over and you look back and you see, oh my gosh, did I really need to spend $500 on dining out, especially when I’m trying to finish paying off my student loans. I would much rather put it towards the principal of my student loans.
Jesse: So, they’re eating at home a lot more, and Siobhan trimmed all of the unnecessary subscriptions from the budget … a great start. But she’s also throwing every extra dollar she gets at those debts:
Siobhan: Well I do get a bonus every year, so that went to it. Even beyond that, it’s really easy to see that money come in your account and just splurge, to go on a vacation and stuff. But logging it and then hurrying up and paying where you want to put it to. Hurrying up, it’s … no, it doesn’t spend more than a day in my checking account. But no, you’re right. There wasn’t really anything major that really happened. It was just adjusting priorities is what it came down to.
Jesse: Adjusting priorities. Simple, but sometimes so hard. And not always an easy sell when you’ve got kids …
Siobhan: they know that mom is really focused on, especially now, paying off student loan debt. They’re right behind me, rooting me on and wanting me to get it down. They’re actually really understanding. The nice thing is we can always put something towards the budget for entertainment or doing something, and I will give them an allowance. So once they spend that allowance, they know that that’s it; they can’t come back to me for more.
Yeah, no, I can’t say that they’ve really gone without or anything. It’s been a learning experience for them. I’ve been trying to use it as a learning experience on how to manage money. The end, not spending before it even hits your account.
Jesse: So the kids are on board and learning to manage their allowances—excellent. But no family budget is perfect … or is it? When it comes to life’s little luxuries—the non-negotiables—Siobhan said:
Siobhan: I guess I would say fitness-type stuff. I like to Pilates and yoga, so I will, every now and then, put some money aside in the budget, but with that said, it’s not something that I’m really treating myself to all the time. I would say I’ve even cut back on that. And I started running because running is free. Even for some of the luxuries, like if I really want coffee, I make it at home now instead of going out. I can’t really say that there’s any luxury that I’ve found that I can’t go without or adjust in some way.
Jesse: You might think that giving up yoga, pilates and switching to coffee at home would leave a bitter aftertaste, but quite the opposite:
Siobhan: It really helps put things into perspective on what you think you need and what you actually need. At least for me, it makes me feel really grateful for what I have. That’s been one great thing about going through this process is I’m just really grateful for what I have in my life, even the little things.
Jesse: Not only is she feeling grateful, now that she’s budgeting a weight has lifted …
Sibohan: I feel like it has actually made me a better parent because I’m not stressed out about finances. It’s not something that I have to worry about, so I can just focus on my kids. There’s not other things running through my head when I get home. Not that every day is a perfect day but I’m not stressed. For somebody who’s in debt and who might be struggling to make ends meet, that level of stress just really puts a damper over everything and it doesn’t really leave you. I definitely feel like I can be more present in the moment with my kids.
Jesse: The peace of mind that comes with freeing yourself of that much debt is huge. It’s hard to even fathom when you’re living on the financial edge, and that’s just where Siobhan started. She remembers thinking …
Siobhan: I make good money so why am I struggling, feeling like I’m living paycheck to paycheck. When I looked back, looking at my finances and with the reporting, I was making over $1,000 a month in debt payments at one point when I first started. And that was just…it literally took my breath away. I was like, I’m paying other people this money before I’ve even, pretty much, fed my kids, or paid for housing or put gas in my car. That money has already gone.
Jesse: It’s so true. Debt is an agreement to a future pay-cut. But she’s recovering and, next, Siobhan looks forward to buying a home.
Siobhan: After this debt is paid off, I would like to buy a house. In my previous home, when the market turned I owed way more than the house was worth, and just feeling stuck was just really awful. So I really want to make sure I can get into a house in a more financially sound way this next time. When the debt is done, it’ll be saving up for a down payment and then buying a house.
This whole process has taught me a lot about patience. We live in a society where you want it and you want it now and that’s why so many people have so much debt. By just teaching myself to be patient and just do this the right way. Pay off the debt so you’re not paying other people before you pay yourself, and then just save up and do it the right way. I feel like I’m creating a much better foundation for my future, and I feel super hopeful…I mean I can’t even explain just…even like my five to ten-year, future retirement, I feel so confident that I’m going to be in a really good place.
Jesse: What a transformation. Not just the debt, but her whole perspective. In addition to patience, Siobhan says …
Siobhan: It’s hard to say when you’re in the moment but you have to try to just be patient and stay calm and just keep looking forward. Don’t get so caught up in the here and now. Just keep looking forward and maybe write your goals out. Have an idea of what goals you want and don’t tell yourself that you can’t. You have to tell yourself that you can do it because you can do it. You’re going to do it, if that’s what your goal is. You just have to put those positive thoughts out there and just remain positive.
It’s really hard. You can really feel sometimes like the weight of the world is on your shoulders. Especially being a single parent, but even if you have to take something…maybe your kids can’t do dance or maybe they can’t go on that field trip or something, it’s not going to be the end of the world.
You’re a family unit and just keep your head up and just know that in the end, it’s going to be worth it and everybody is going to be better off.
Episode Twelve: Meet Tanya
When Tanya and her husband became parents for the first time, suddenly their financial priorities clicked into place – and, within just 12 months, they’d paid off $31,000 of debt so that they could truly enjoy life with their new son.
Jesse:Welcome, everyone, to another episode of Debt Stories: Real People Beating Debt & Winning Financially.
Today, we meet Tanya who lives in Akron, Ohio, with her husband and their two-and-a-half-year-old son.
Like so many of us, Tanya and her husband each grew up thinking that debt is just an unavoidable part of life. But, now, after paying off nearly $31,000 in just 12 months, their attitudes—and life—have completely changed. It just goes to show how powerful our thoughts are in shaping our reality.
… and Tanya has faced some difficult realities:
Tanya: My husband and I were both from families that debt was pretty common, so we just grew up thinking that was the norm. I had tons of student loan debt when I graduated college. We had credit card debt. We kept trying and trying, or thinking we were trying I guess, to get out of debt but we weren’t really ever making any headway. And then my husband ended up becoming disabled and not able to work anymore, so of course that was a big hit financially. And then we were dealing with his student loans, my student loans. We had fertility issues, his disability, just so many emotional things that got all tied with the money. So while we thought we were trying, we were never really making it as much of a focus as we should have, I think.
Jesse: The stress of so many big life events was a huge distraction from their growing debts.
Tanya: We had about $14,000 in credit cards, a $20,000 car loan and almost $9,000 home equity loan plus our mortgage. Thankfully our mortgage is small; it was only $47,000 when we really got focused on our debt. Pretty much [as we lived 08:30], we had debt for something. We even had to borrow money from family when I was on maternity leave because my company doesn’t have a great maternity package. We were just a mess!
Jesse: Add it all up, and they were looking at $190,000 of total debt. Plus interest. That’s quite a chunk of money.
… of course, they weren’t looking at it, yet. Tanya and her husband were avoiding it—they knew things weren’t pretty, and they felt helpless.
Tanya: We went through bankruptcy, thinking that that was going to be a fresh start, but of course that didn’t do anything to the student loans. We had some fertility issues and then in the summer of 2015, we, surprise, surprise, found out we were pregnant.
Amazing and exciting but we weren’t ready. We were still swimming in debt. We had no savings, nothing. It, kind of, blindsided us.
Jesse: And that’s when it clicked: they needed a budget … a budget that worked.
Tanya: At that point, we were trying to budget just using a spreadsheet and I used Quicken to track our expenses. So I always felt like I had a really good handle on things because I track everything, but we weren’t actually sticking to budgeted numbers. I would just track it after the fact and be like, oh well, we went over budget or we used the credit card again, oh well, and never really felt like we had a clear way to move forward.
Jesse: Realizing that her spreadsheet wasn’t doing the trick, Tanya went searching for a solution. She knew that, in order to stay on top of their finances, the budget needed to be as accessible as possible. (Life with a newborn isn’t easy, and neither is convincing your husband to hop on the budgeting bandwagon.)
Tanya: Since my husband can’t work, obviously I work full-time and so when I would get home from work, all I wanted to do was be with my baby. I didn’t care about do I have receipts or is something due or whatever. A friend of mine said, “You really need to find something that you can do from anywhere, not chained to your computer at home.” So that’s what got me started searching, like maybe if I could find something, I can do on my lunchbreak at work or even right at the store, if I enter my receipt right then. That’s how I came across YNAB and it just…honestly, it sounds corny, but it really completely changed our lives when I found it.
Jesse: The difference was dramatic. Before giving every dollar a job, Tanya recalls …
Tanya: There were times we were using our credit card simply because I didn’t know if our balance was accurate. I didn’t know what payments were still pending. I felt like I couldn’t trust our checking balance, so we were just using credit cards. Then there were a couple of times where I missed a payment for no reason other than not being on top of it. We had the money ready to pay the bill and I just was like, oh shoot that was due last week. Whoops!
I was like, something has to change. I’m stressed out at work; I’m emotional still from the pregnancy; our money is a mess; and I miss my baby all the time. I knew we had to do something if we were going to be responsible and give him the kind of life we wanted to give him.
Jesse: It turns out that the kind of life they wanted for their new son involved a lot less dining out …
Like so many YNABers that came before them, Tanya and her husband soon realized that food was eating their budget.
Tanya: It’s great to have the app on our phones because when we’re out somewhere we can easily pull it up and check our categories and say, no we don’t have money left to eat out. In the past, we always felt we were so drowning that we thought what’s one more meal or what’s one more purchase? We’re so far gone anyway, is this really going to make a difference in the grand scheme of things? But when you see those numbers in your face and you actually hold yourself accountable and check the numbers before you spend, that’s huge.
Probably the first time I think it really clicked for my husband and I, we were at home hanging out and he said something about let’s go grab a bite to eat and I said, have you checked YNAB? He looked at me and he was like, what do you mean? And I said, take a look at YNAB and see where you think we can pull the money from so we can go out to eat.
That was like magic. Ever since then, he and I are so much more on the same page. We’re both more involved in it. It was a lot more of a conscious choice of, okay if we go out to eat tonight that means that we either have to cut back on our groceries or we have to really watch our gas closely or whatever it is. To have that thought process and that discussion ahead of time that was huge. It used to be we’d just go spend and then “figure it out later”, which usually meant well we’re carrying more of a balance on our credit card because we can’t pay it off.
Jesse: When their son was born, they pivoted. “Figuring it out later” was a thing of the past. Suddenly, they had crystal-clear priorities.
Tanya: We don’t want Landon growing up with parents that are stressed out all the time and too worried about money to enjoy time with him.
I don’t want to be stressed out. I want to relax and have fun with my baby.
Jesse: So, they did the work. They followed The Four Rules. And it paid off …
Tanya: I don’t know exactly when, but there was a point and I remember saying wow is this what it’s like to not be stressed about money. I hadn’t thought about it for a week and I was just…the money’s there. When the bills come, the money’s there. Our discretionary spending, we have categories and we check the categories; I just suddenly stopped worrying about it.
Jesse: They’d turned a corner …
Tanya: We had talked with each other, oh we really need to do better at this or do better at that. But we would still rationalize purchases to each other and we would, oh we’ll figure that out next payday. There was always that giving ourselves an out. Once Landon came along, we were like, no there is no letting ourselves off the hook anymore because he needs us and he needs us to provide for him, so we’ve got to get it together.
Jesse: With their new habits, suddenly they had money waiting for bills, instead of the other way around. That can seem like the impossible dream when you’re just getting started. So, how did they do it?
Tanya: One of the biggest things, honestly, was our attitudes and really taking an honest look at needs versus wants and focusing on our goals. I know it sounds easier said than done, but when you decide that your family is more important than getting a Starbucks every day, or something, we just started at looking ways that we felt like we were spending more than we should have been, and YNAB really brought a lot of clarity to that.
A perfect example was early on into our YNAB journey, our Keurig died; it just quit. Pre-YNAB, I would have been at the store in my lunchbreak. There were no question; we are getting another Keurig, non-negotiable. I said to my husband, well that’s not really in the budget, what do you think about just going back to a plain old regular coffee pot. He said, I was thinking the same thing. To think about that now…there’s no way we would have ever made that decision two or three years ago. Even though we were drowning in debt, we just felt like that would have been a necessity and there is no way we could have told ourselves no.
Jesse: They weren’t just saying no to a $150 Keurig machine …
Tanya: When you buy the K-cups, that’s more expensive than just buying regular old coffee. So cumulatively, we thought that might be an expense we could do without, but like I said, we never would have even considered that before. It’s just a real big attitude shift.
Jesse: So, now they’re cutting down on the cost of their coffee. Then there’s food …
Tanya: Dining out was a big one for us because with my husband’s disability and he’s stuck in the house all day. For us that was a lot of entertainment and a change of scenery for him; we would go out to eat all the time and not really think about it. And we knew that we were spending more than we wanted to but like I said, we didn’t have the living, breathing, budget that we have with YNAB now so it was just in the back of our minds like, yeah, we probably don’t have enough but we’ll figure it out. Now we really do set a budget and he and I sat down and talked about what do you think is a reasonable amount? Do you want to go out to eat once a week, twice a week, whatever? And we worked through that together, whereas in the past it was always me saying well we don’t have the money for that.
Jesse: Being on the same page with your spouse is one of the best things you can do to make your budget really work for you! If you don’t have a budget meeting scheduled, put one on the calendar every month, at least. It’s amazing how much more effective you can be when you prioritize your dollars, together.
Tanya and her husband also cut back on a couple of their other bills …
Tanya: We also started attacking some of our expenses and switched our cellphone plans and we changed insurance companies.
We had Verizon. We switched from them to AT&T prepaid, which was cheaper, and then just in the past month or so, we switched over to Red Pocket.
I hadn’t either. A co-worker of mine suggested it. It was a special deal that you bought the SIM card through eBay and you have to pay for the whole year in advance but it worked out to only being $20 a month.
Prior, we were paying easily $150 to $200 a month total, just for the two of us and now we’re paying $40 a month, essentially. And that’s something we would never have done before YNAB because, honestly, we didn’t trust ourselves to save the money for the next year. We know okay in a year from now, we’re going to have to have that money again, we wouldn’t have had it. But now with YNAB, I’m like okay, from the money we’re saving, we’re just setting aside for a true expense and in 12 months we’ll do it again.
Jesse: Even though they’ve tightened things up, Tanya and her husband still make room in the budget to enjoy eating out. But now, instead of spending $300+ per month …
Tanya: We’ve been between 100 and 200 a month. When we get to the point where we think, okay, going out to eat means we’re stealing from our debt snowball, then it’s like, no, we’re going to eat peanut butter and jelly if we have to; we’re not doing that.
Jesse: PB&J tastes pretty good when your debt’s going down. And that one-to-two-hundred dollars makes it feel doable.
Tanya: We felt like some people maybe think that we shouldn’t be eating out at all when we have debt, but we know that we wouldn’t stick to it. If we had to be completely strict for three years straight, there’s no way we could stick to it.
Jesse: And their strategy is working …
Tanya: We’ve paid off almost 31,000 in the past 12 months.
Jesse: $31,000 in 12 months! How did they do it?
Tanya: We did have one tax return, and then I do get a bonus at work but the majority of it was not…I mean we’re not talking huge amounts of money, a couple of thousand here and there. The biggest part, honestly, has been realistic, budgeting, sticking to our budget, cutting expenses. Making those hard choices about, no we don’t need cable and no we don’t need the most expensive car insurance just because we’ve had it for 15 years. Once we got a handle on our money with YNAB and really wanted to get serious about the debt, I started questioning everything. Like why are we paying so much for this and could I get an extra 20 bucks out of this bill or that bill.
In the past, I would have thought oh it’s 20 bucks, it’s no big deal. But when you have the numbers in front of you and you can see, oh well, 10 from this bill, 20 from this bill, 10 from this bill, before you know it, you have a few hundred dollars that you can use towards just attacking the debt, it’s then crazy.
Jesse: Their plan is, within three years, to be completely debt-free ….
Tanya: It is. We want to move into a different school district before my son starts son, so that’s been our big push. As much as we can get paid off before he has to start school, then we can move and that’ll be our last house, hopefully. And we’ll do it a little bit smarter and not get ourselves back in the hole that we have been in for so long.
Jesse: If you feel trapped by your debt, Tanya says …
Tanya: Well absolutely don’t give up, and you have to give YNAB the time. In the beginning, it does take some time and really some commitment on your part to learn the system and really commit to doing it the way you should. And it will pay off. When we first started, I remember thinking I have to get all my accounts set up in YNAB and I’ve got to get a handle on all my balances and I blocked off maybe a couple of hours one Saturday morning and it was just the best thing I could have done.
It made such a difference and opened our eyes to how we were spending. It improved communication between me and my husband. He enters transactions on the go, so do I. It’s just so worth it.
Just keep at it. Take the classes. Reach out to customer support. I did in the beginning. I think literally the first day I signed up, I emailed customer support and they were amazing. The people there are so nice and so helpful. They don’t make you feel like you’re an idiot and they don’t give you a canned, cookie-cutter response. They actually talk to you and figure out your issue. I just can’t say enough about what YNAB had done for us. If people are willing to put in the time to learn it upfront, once you learn it there’s no looking back.
You can do this! Right now! For free!
Budgeting is not restrictive. You won’t be spending less, you’ll be spending right. So what do you have to lose? Except all that debt and stress?
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