Today we welcome renowned author, speaker and blogger, Tiffany Aliche, from The Budgetnista, to share her debt payoff story. Tiffany took a dire debt situation and not only paid off the debt, but used the lessons learned from her experience to start her own business. Today, Tiffany helps tens of thousands of people learn to manage money and life with her blog and her Live Richer Challenge for women.
How did you acquire $35,000 in debt? What did that debt consist of?
When I was in my twenties, I had a desire to make money through investing. A man that I considered a friend offered to invest $20,000 for me, assuring me that I would make a hefty profit on my investment. I took the money out via cash advances on my credit cards. The man didn’t invest the money, however: Instead, he took the money and was gone. By the time I faced up to the fact that my money wasn’t coming back, the fees and interest on the cash advances from the credit cards added up to a hefty $35,000.
What did it feel like to have that much debt?
I was devastated and afraid. I’d never had debt before. My dad was a CFO and an accountant, and he had taught me well how to manage money properly. I was only in my early twenties, but had saved up a down payment and purchased a modest home, and always paid off my credit cards each month. To now have to deal with debt – especially debt of this magnitude – was frightening.
How long did it take you to pay the debt off?
After I faced up to the fact that the money wasn’t going to be paid back, it took just under 3 years.
What resources did you use to help you through this process?
The most important thing I did was to take care of the emotional aspect of the debt. I was embarrassed and ashamed that I had accumulated the debt. The first thing I did was to confide in a friend. It was such a relief not to be carrying the burden alone anymore. Second, I got an accountability partner to keep me on track with frugal living and debt payoff.
Did you face any challenges along the way?
Oh, yes. As soon as I realized that I was going to have to pay this debt back myself, and made a commitment to pay it off, I was laid off from my job as a teacher due to the recession. There I was, with a mortgage to pay, $35,000 in debt and with no job. I got a part-time job with a non-profit organization, moved back in with my parents, and rented my house out. The other big challenge I faced during this process was dealing with the anger I had held because this “friend” had stolen from me.
What were you doing for a living while you were paying off the debt?
How did it feel once you paid it all off?
It felt bittersweet. I still had some anger toward the person who had stolen the money from me, but having the debt paid off allowed me to acknowledge my part of responsibility for the situation, namely, not educating myself and trusting him. It was after I paid off the debt that I was able to forgive him, forgive myself, and move on with teaching others how to manage money wisely.
What practical tips do you have for people looking to pay off their debt?
First, deal with the emotional part of your debt. Assess what happened, accept what happened, and then make a plan to move on. Second, get an accountability partner, someone who will hold you accountable to your goals. Third, along with cutting expenses and practicing frugal living, take any unexpected money (I call this UM) and throw it toward your debt. I define unexpected money as any money you’d already expected to spend but then didn’t have to. For instance, if you go out to lunch with a friend, and then she picks up the bill, put that money, which you’d already planned to spend, toward debt. The same holds true if you save money on a grocery bill, get an unexpected discount on something you’d planned to purchase, or if mom hands you a $20 bill just to be nice. Using all UM to put toward debt will really get your debt payoff plan rolling.
What steps are you taking now to stay out of debt or build wealth?
Primarily, I’m working on budgeting well with the fluctuating income that comes with being a business owner. I never use credit cards now without a concrete plan for paying them back quickly. And, I’ve found a trustworthy financial advisor and am learning how to invest wisely.
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Note: This is part of a series called “Debt Success Stories” which features people who were able to pay off a significant amount of debt. If you have a Debt Success Story I would love to hear about it. Please visit the contact page to let me know the details.