Recently, I decided to start a new series where I interview people who are doing extraordinary things with their lives. First up was JP Livingston, who retired with a net worth over $2,000,000 at the age of 28. Today’s post is about Aja McClanahan, who made big sacrifices to pay off $120,000 in debt! In…
Recently, I decided to start a new series where I interview people who are doing extraordinary things with their lives. First up was JP Livingston, who retired with a net worth over $2,000,000 at the age of 28. Today’s post is about Aja McClanahan, who made big sacrifices to pay off $120,000 in debt!
In this interview, you’ll learn:
- How she got out of debt
- How she kept up with her debt paying discipline
- The sacrifices she made to get out of debt
- Her tips for paying off debt when you feel like you have no money
- How she increased her income so that she could pay off debt
- What she would do differently, and more!
Her article, Hood Rich- How Living in the Hood Saved Our Finances, got me hooked. In it she says “We live in ‘Da ‘Hood.’ Corner stores, kids out late at night, gunshots, alley mechanics and all the glory of what the ‘hood life entails. Yes, this is where our home is located. A home on the next block is selling for $2,500.”
Yes, she paid off over $120,000 in debt, and none of their debt was even from a mortgage, and she did it all with a family to care for.
After reading about her story, I thought she would be great to interview for my series. Paying off that amount of debt and being debt free is no small feat.
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I asked you, my readers, what questions I should ask Aja, so below are your questions (and some of mine) about paying off debt. Make sure you’re following me on Facebook so you have the opportunity to submit your own questions for the next interview.
Here is how Aja paid off $120,000 in debt and is now debt free. You can follow her on her blog Principles of Increase.
1. Tell me your story. How much debt did you have and what was your debt from?
I was raised in the suburbs of Chicago and married my high school sweetheart at the age of 24. We did the best we could in tallying up all of our debt to have an established budget before getting married. The only problem was that we underestimated the student loan debt by the tune of $20,000 or so.
Once we were married, we started getting calls and letters about outstanding debt, which we did our best to pay down on one income. Soon after marrying, we had our first child. I knew that I wanted to stay home with her. The only way I could make the numbers work was to 1) pay off debt and 2) increase our income (but I’d have to do something flexible or from home).
Once we added everything up, we found out that we had $60,000 in student loans between the two of us. Later on, we would get a $30,000 loan for a luxury SUV, then I ran up about $30,000 in debt for my first crack at full-time business. In all, we were $120,000 in debt. We didn’t even own a home!
We decided, at one point, that we would pay off all our debt, no matter what it took. Through a combination of making more money and cutting down on expenses, we eventually became totally debt free in 2013.
2. Why did you want to get out of debt fast? What was your turning point that made you get serious about paying off your debt?
At one point, my husband’s paycheck was garnished to the tune of about $700 a month. Debt was dictating almost everything we could or could not do. There was no money to travel, have fun with our kids, or invest in building wealth for future generations. Debt was literally our boss and our master.
We knew that type of life was not for us.
The birth of our first child changed our perspective on money and debt. We knew that it would be difficult to raise our kids the way we wanted to if both of us had to work so hard just to pay debt.
The vision we had for our family was to raise kids that would receive as much of our attention as possible so they could be productive citizens of society. We wanted to train them to be money-savvy, creative, kind, and industrious. With both of us working full-time, it would be very difficult to do to the degree we had envisioned.
3. How long did it take you to pay off your debt and reach debt freedom?
This is always a hard question to answer. There were times that we made big progress in our debt only to take on more. It didn’t happen a lot, but it was a part of our story. Around 2008, we got really serious about our debt and began to pay the bulk of it down at that point. By that time, we probably had $100,000 of the $120,000 left to pay.
In December of 2013, we paid the last dime of our debt, which was my husband’s student loan. It was the most exhilarating feeling ever!
4. How on earth did you manage to keep up with the discipline on a consistent basis?
It was one of the hardest things we ever did. I saw my friends and family moving forward, having fun, and doing things on their terms. On the outside looking in, it seemed as though we were moving backwards: moving in with mom, driving old cars, and having to decline something as simple as a birthday dinner invitation (it just wasn’t in the budget).
One thing that helped me was keeping our family vision in front of me. I am a big fan of vision boards, and I would create a new one each year to remind me of our goals: debt freedom, family travel, owning investment properties, etc. I always kept my vision boards close by to remind me of what we were “struggling” for, especially when I was getting discouraged or tired of living so frugally.
The other thing I did was find others who were on the same path or even had finished their debt freedom journey. I listened to the Dave Ramsey podcast when I would work from home, instead of taking a nap like I really wanted to. Listening to the debt-free screams on the podcast would invigorate me each and every time. It also helped me log more hours to make more progress on our debt.
5. I struggle with the decision to a) start to pay off all debt now (mortgage on home, mortgage on rental property, car note) or b) start investing now. What should I consider when making this decision? What factors made you decide to pay off debt first before building wealth for retirement?
This was a tough decision for us too. I think the direction you’ll take depends on your situation. For us, we got great peace of mind knowing that we did not have debt. I do wish we had saved more because time = money. It can be difficult to get the money you lost from the time your investments would have been growing due to compound interest.
For us, we valued more the peace of mind that debt freedom would bring. We still have time to invest and save, and that is exactly what we are doing. It would have been nice to get the returns we missed while being in debt for the first 9 or 10 years of our marriage, but we are working very hard to make up for that lost time right now.
I would say it all depends on your risk tolerance. Living on one and a half income with little savings gave us a really thin margin to live and be prepared for emergencies, so getting out of debt was a way to reduce the risk of financial disaster for our family.
6. What’s the best way for a person to become debt free?
First and foremost find your “why.” I hate to sound cliche or corny, but it will help you in the tough times. If you don’t take time to find your why, it will be difficult to develop values that will tie you to your goal. If you are going to be on a 5,7 or 9-year journey to get out of debt, create some goals and even a well-stated vision as to why you need to accomplish your goal.
From here, you’ll need a plan to backup your vision. For us, Total Money Makeover was the book that laid everything out and helped us create a customized debt-destroying plan. All we had to do was stick to the plan. We weren’t perfect in it all, but we never quit.
To sum it up, find your purpose in obtaining debt freedom, then create an action plan to reach that place.
7. What sacrifices did you have to make in order to become debt free?
We made monetary sacrifices but also other sacrifices. On the money end, we curbed our spending and cut out things like cable, eating out a lot, and traveling. One time, we didn’t even get our air conditioning unit fixed that had been vandalized (during a record-breaking heat wave). We decided to keep paying off debt instead! There were times that I had to decline invitations for destination weddings, birthday outings, or doing things that would cost more money than we could afford. At times, this could be very isolating.
Other sacrifices were emotional. There were times we seriously questioned if we were doing the right thing. Everyone had credit cards. Who didn’t have a car note? The whole world was comfortable with a 30-year mortgage. It seemed insane to even shoot for this goal when everyone in the world seemed to be just fine staying in debt.
Then, there were people who thought we were exposing our children to danger by moving into the inner city. We’ve been called everything from idiotic to other extremely offensive words.
It was hard to explain what we were doing because we really didn’t know other people who had the same goals or were on the same path. That has changed since I’ve become more involved in the financial media community, but in the beginning, we felt very alone.
8. I’d like to ask a few things: 1) What did it feel like driving up to that bullet-riddled home in the inner city? Can you describe that moment? and 2) What did you say to each other to make it through and push on?
It was scary. The first night in our home we noticed the noise level was so much more pronounced than our suburban surroundings we were used to. There were dogs barking, sirens, and even people yelling in the alleys. My husband and I looked at each other and asked, “What have we done?”
At that point, we were too far in: we moved our things in and had spent money on the rehab. We stuck it out by plugging into the community. Instead of, “This is just a means to an end,” we began to get involved in the community and find friends in our neighbors.
It was a good decision because not only were we able to get out of debt, but we’ve made great friends and have been involved in some awesome causes that have helped uplift the community. Things are much better since we first moved in 7 years ago and they continue to improve in our neighborhood.
9. How can someone start paying off debt if they are not able to pay off the everyday bills?
If you have the option to cut your biggest expenses, do that. It might mean moving in with a relative or “house hacking” by taking on roommates or living with a friend. Some of the world’s greatest minds freed up their cash by living on the cheap and conserving their money for things that would really matter: investing, creating a startup company, etc. It won’t be easy, but it will be worth it.
Also, look at your other expenses. Be honest with what are wants versus needs. Can you cut back on things that are not necessary? You might also have to consider adding more income to the equation. For us, adding more income was a game changer. With a combination of more income and fewer expenses, you should be able to make headway on your debt.
Bottom line: you’ll have to be creative. You’ll have to make sacrifices. But you’ve got to know it can be done. Then start doing it!
10. In what ways did you increase your income, and what did you try that didn’t work?
I started really simple: selling things on Craigslist. Once, I tried to order toys wholesale and then resell on eBay, but that was a bust. I also had a company that I had incorporated when I was 24 year old. I used that company to do side hustles like Spanish tutoring as well as sales and marketing consulting. I even provided translation services for hospital documents.
I tried a few things out and eventually landed on database consulting due to my business and tech background.
I was able to run that business from home and had 3-4 people as subcontractors to help with my workload. At the height of that business, I was making $10k per month from home. It was great and enabled us to really make progress towards paying off our debt.
If you are looking for a side-hustle, just start with something. It might be delivering pizzas. But, that’s ok. Once you start, you’ll find that your hustle muscle is awakened and you’ll see opportunity everywhere. It will just be a matter of time until you land on something that will be uniquely suited for you.
11. Are your kids in any sports? How do you afford their extracurricular activities on a budget?
My youngest daughter was in a free baseball program once. My oldest has also participated in several music programs. At the moment, my kids are enrolled in a free STEM/entrepreneurship program where they study the intersection of science, technology, engineering, and math with business.
If they participate in paid programs or activities, they actually help cover it. Because we are a debt-free family, I can spend more time with my children. I get to homeschool them and support their careers in entertainment. Both my children have been paid to appear on TV and do voice over work for radio commercials. This allows them to earn extra money to cover things like activities, school tuition for their online coursework, snacks, and entertainment.
12. If you were starting back at the beginning, what would you do differently?
Firstly, I would not have gotten into so much debt. In college, I actually worked so much that I probably could have paid for my tuition. Not once did it ever occur to me to pay back the money that was given to me via financial aid and loans. Even though I had the money, I chose to do other things with it.
Also, I would have educated myself more on how to negotiate with creditors. There were many bills we paid outright because we didn’t know about negotiating a better deal. One bill we actually negotiated down from around $12,000 to $3,700, but I later found out that the statute of limitations had passed and we technically didn’t have to pay the bill!
13. What is the biggest lesson you learnt about debt?
I learned that debt, if used carefully, can be a tool to build wealth. The problem is that, as a society, we’ve used debt to finance a consumer driven lifestyle. This use of debt can cause us to abuse and misuse credit and debt, which is what we did initially.
For a long time, we had no credit cards and were really scared of using credit after we paid off all our bills. We recently got a couple of credit cards and pay the balance each month so as to not go into debt. So it is possible to use credit responsibly if you know better.
You can definitely use credit and not go into debt, but if you’ve not demonstrated the ability to do that, don’t tempt yourself. Cut up your cards if you have to. Take a break and commit to getting out of debt once and for all.
Remember, the same things you get with debt, you can save up and pay cash for. The best part is you forgo paying interest and get to keep more of your hard-earned money. Debt means you operate on the lender’s terms, not your own. We prefer freedom, so we stay out of debt for that very reason.
So far, it’s been a very stress-free lifestyle. We pay cash for things like cars, renovations, vacations, and other big-ticket items. It’s really a blessing, and I wouldn’t live any other way!
14. What is your very best tip (or two) that you have for someone who wants to reach the same success as you?
Just start. You may not be able to make huge payments at first, but that doesn’t matter. Pay something extra on your debt, no matter what. If it’s $15, start there. You’ll be surprised at how addicted to progress you become.
But that won’t happen without taking the first steps and starting on the path to financial freedom by doing something. What is your something? Is it pulling your credit reports? Is it purchasing a copy of Dave Ramsey’s Total Money Makeover? Is it applying for a part-time job? Is it looking for a roommate? Is it cutting up those credit cards? Whatever it is, just do it!
What other questions do you have for her about how to become debt free? Are you interested in debt free living?