written by Shae Bynes, Founder of ChasingYourFreedom.com
Today’s Debt Crusher Spotlight is on Micaela Coleman, a real estate agent and investor who survived not one, but two corporate layoffs and, along with her husband, has paid off over $85,000 in debt.
If there’s one thing I’ve noticed from every conversation I’ve had with people who have paid off large amounts of debt, it’s that it takes laser focus and sacrifice. That was true for my family, and it’s true for so many others. Thanks Micaela for sharing with us!
Can you share a little bit about yourself (family, occupation, etc)?
My academic background and professional experiences are in marketing and I attended two Big 10 schools with the intention of having a corporate job forever. Whether sales, brand management, or market research, I have worked across multiple industries and amassed transferrable skills that have primed me for entrepreneurial endeavors that keep my creativity flowing.
In 2006, during the summer between my first and second year of graduate business school, I got married. Upon completion of my MBA program, I relocated to Indianapolis, where I took a role with a pharmaceutical drug company and my husband took an engineering position with a large engine manufacturer. With the decline in the economy, I lost my job in 2008, and to replace my income I took on a limited-term assignment in St. Louis for six months.
After permanently returning to Indianapolis in 2009, months passed before I eventually landed a full-time position in marketing strategy & analysis with a telecommunications giant. When said company restructured their workforce in 2011, my team was eliminated and again I was on the quest for what’s next.
Rather than rush into another corporate marketing role, we made the decision to wait and in the meantime focus efforts on real estate sales and investing. The primary reason was that I needed to “figure out what I wanted to do when I grow up” and the other reason was because we anticipated an opportunity for my husband to take an international assignment. Turns out that the time spent waiting was worthwhile because we spent 4-5 weeks earlier this year totally immersed in another culture, in Beijing, China. I was able to figure out ways to manage operations remotely, and at this point I think I just may have finally figured out what I want to do when I grow up.
What debts were you facing before your debt crushing began?
Before the debt crushing began, we faced approximately $107,000 in debt. This included home appliances purchased interest-free for 3 years when we bought our first house in 2007 ($7,400). This also includes both of our undergraduate student loans, and my graduate student loans ($68,000), and two vehicles ($32,000). It was anticipated that we would always have two solid incomes averaging in the low-to-mid six figures to pay all of these items off. However, when this proved not to be the case, we needed a new game plan.
What led you and your family to a decision to break free of debt?
Well, when I lost my job 10 months after I completed grad school, we had to make responsible changes to avoid blowing through our savings. Initially, the changes were simple, such as dining out less and eating in more, watching every expenditure closely for budget adherence, and reducing unnecessary luxuries. Then, the urgency shifted when it became apparent that a commuter marriage was on the horizon because it meant maintaining two separate households. Despite having sizeable income from both parties and the fact that my new employer covered relocation, this change gave the appearance that we would never get out of debt; but rather, would start adding more to what we already owed!
The thought of being in debt until we were in our 40′s seemed too daunting to bear. In reality, having the debt was interfering with our ability to travel freely, which we both enjoy doing frequently. The debt was also preventing us from having more cash on hand to find pleasure in hobbies, such as artistic expressions, photography, and gaming, none of which are cheap. Likewise, neither of us want the debt to be present when we decide to start a family, which is a little ways off still. Regardless of when it happens, preempting the stress of parenthood in any way has been a motivator as well. From my perspective, being debt-free would mean that a weight would be lifted so that we could pursue other interest and move forward with new business ventures. Lastly, we desire to be in a position to afford a lifestyle that is resource rich, so that we can ultimately thrive as opposed to merely exist. So, in order to mitigate these concerns, the debt has to go.
What was (is) your debt payoff strategy?
At the peak of my desperation to find a meaningful solution for getting out of debt, I found Dave Ramsey’s radio program on a Sunday afternoon drive from Indianapolis back to St. Louis in October of 2008. After becoming more familiar with his approach to debt snowballing, I purchased two copies of The Total Money Makeover, and once both my husband and I had read half way through we agreed to give it a try. We negotiated a hybrid version of the Dave plan that worked well for us, and have stuck with the plan without putting undue pressure on ourselves.
- Ensured at least 6 months’ living expenses before paying off any additional debt
- Retirement savings: Since we got a late start with committing to retirement accounts and didn’t want to wait another 4-5 years when all of the debt will be paid off, we started making contributions, automatically taking the money off the top of every paycheck.
- Each time we pay monthly bills they are always paid in full with nothing rolling from one statement to the next.
- We pay the lowest debts first, as Dave suggests, but we tackle everything in large lumps sums once enough money is our savings account to pay the balances entirely.
Were you intimidated by the task in front of you? If so, how did you translate that intimidation into action?
We were not intimidated. We were ready to crush the debt with a vengeance!!
What obstacles have you faced since starting your journey to debt freedom and how did you address them?
The biggest obstacles were when I was laid off on in 2008 and again in 2011. Another was having to face a considerable reduction in my salary upon returning to Indianapolis from the limited-term assignment in St. Louis. When I took the job in Indianapolis, it paid 1/3 less than what I made immediately out of grad school and at the job located in St. Louis. Just when it would have seemed that our debt crushing plan would suffered dearly, God made sure that it did not. What was ironic is that we were so laser-focused that the amount we were able to deposit in savings during my first year with the telecommunications giant in Indianapolis was approximately the same $30,000 that I wasn’t seeing in annual income. What we learned with this is that it’s not about how much money you make, it’s about how much you keep.
Tell me about the avenues your family took to pay off debt (new income sources, less spending, sacrifices).
There were a few extremes that came into play with our debt pay off strategy.
1. Sold off one car and carpooled: The first was taking a chunk out of our savings to pay off my car. I had never written a check for $14,000, but it sure felt good to have money leftover afterward. This freed up $330/month, and I was so enamored of living without a car payment on my 2006 Honda Accord that I pushed for the elimination of my husband’s car payment. Long story short, we sold his car and profited about $2,000, then purchased another trusty 2006 Honda Accord in cash after about 3 months. Having one car was tough for a while, but carpooling with co-workers was a short-lived blessing that my husband partook of during the interim. As time went on, I became comfortable with transferring large amounts from our savings account to pay balances in full. Most recently, we bid farewell to my graduate student loan at a balance of $32,000, which is the largest payment that we have had to make.
2. Reduced entertainment and travel expenses: We altered our spending to reduce the entertainment/travel expenditures, which were where we spent most of our money before the debt pay off became a priority. Between the time that I returned from St. Louis and started working for the telecommunications company in Indianapolis, we did cut cable from the budget. Later, we added it back in at a substantial discount where the monthly bill may have been just $30 for a souped-up package of far too many premium channels and killer internet speeds. But, before the awesome discount while I had no job, we used an antennae for accessing a handful of channels of local programming, rented movies for having date nights at home instead of out, and watched movies through the Play Station 3 gaming console. As well, we cut travel out of town to an as-needed basis (weddings and funerals only), and did not vacation at all for a year.
3. Found ways to save on monthly expenses: Plus, I looked for ways to save in other monthly expenses. One way was by arranging to have multi-policy discounts with our insurance company, who is paid every six months rather than monthly. Similarly, we went on payment plans with the gas company and avoided credit cards entirely to keep from being charged interest. Also, I negotiated with our lender to have property taxes paid directly by me to the County twice a year, which saves us from overpaying on escrow. Finally, we are in the process of refinancing our mortgage, which will save us overall about $400/month.
4. Increased our income: We began including additional streams of income in 2009 when we were introduced to real estate investing. The alternative streams have included real estate sales (I am a licensed real estate agent), wholesaling real estate, and home staging for homeowners and investors trying to sell in the competitive retail market. With each income stream, we both play a role and have found ways to leverage our strengths.
How much debt have you paid off to date and when do you anticipate total debt freedom (excluding mortgage)?
Since we started the debt pay off in October of 2008, we have paid $85,400 excluding the mortgage (80% complete). What remains is my undergraduate student loan, approximately $22,000, which will by paid mid-year 2013. We anticipate being debt free (excluding the mortgage) by April of 2013.
What advice would you give to the freedom chasers out there who are just beginning their journey to become debt free?
A) Tithe – One thing that’s been consistent is that we have continued to tithe no matter what. I was a tither before we got married, we went into our marriage as tithers, and have always been in agreement that obedience to God is first. He has been a provider, He has been our salvation, He has bestowed upon us His favor, and things aren’t always rosy, but He continues to make a way. I believe that has come with our adherence, and I encourage all Christians to receive this debt pay off story be a testimony to His goodness – not our own.
B) Plan for the worst – In this economy, employers cannot guarantee your continued earning opportunities. That responsibility lies with the individual, and an entrepreneurial endeavor of some sort is essential, as is a healthy savings account with at least 6 months of living expenses. When we introduced alternative income sources, had already experienced the sting of job loss and knew the importance of leveraging skills outside of the corporate realm. There are many other ways to make money outside of having a steady paycheck, and being ready for what’s next means having a plan in place to pursue alternative streams of income when (not if) necessary.
C) Tailor your solution; make it challenging yet purposeful – The Dave plan may seem too extreme for some people, and the Colemans’ Hybrid may not resonate well either, which is why I would encourage people to tailor their debt pay off solution to one that you can be in agreement with. Don’t make the plan so easy that the same habits that got you into the situation aren’t addressed, but don’t make it so complicated that you’re discouraged at every turn.
D) Reward yourself – Mark your milestones with something meaningful for you. I’m a foodie, I love to eat at unique, local fare restaurants, so commemorating hard work is usually done at our milestones with food and beverages. Whatever is your way of celebrating, make it the Payoff Ritual that you can look forward to without fear of disrupting your progress.
Thank you so much Micaela for sharing your story and providing some great tips for others!
If you want tips on how to crush your debt, be sure to check out my free Debt Crushers Blueprint.
If you have your own Debt Crushing Success Story, I’d LOVE to hear it. Simply contact me here.