Dealing With Debt
A crushing debt may be the result of unexpected and unavoidable setbacks in life, from a medical problem to the loss of a job. But a surprising proportion of those who have shared their stories of acquiring, and then clearing, significant debts in their life characterize the spending that led to the problem as foolish or careless.
Alexis Busetti is among that rueful group. A financial coach from Houston, Busetti describes much of her $75,000-plus debt as the result of “spending on things and experiences I could not afford.” Eating out as a student. Buying too-new cars. She’s even critical of her college choice: “a very expensive private school.”
How she finally eliminated the debt echoes another theme of debtors who run up their bills as part of a family. It takes a commitment from the entire family to successfully turn things around financially. She describes she and her husband beginning to budget early in their marriage, and then encouraging each other, keeping “the communication strong” and following “through with the details of our plans.”
This interview has been edited for length and clarity.
What was your total debt, and how did you acquire it?
My total debt was more than $75,000. About $72,000 was in the form of student loans ($60,000 mine and $12,000 from my husband), but there were also a couple of low balance credit cards and two car loans.
Was the debt worth acquiring?
The credit card debt was definitely not worth it. I spent frivolously as a college student on things and experiences I couldn’t afford. Most of that debt probably went toward eating out with friends.
We enjoyed the vehicles we purchased using debt, but if I could go back now, I would approach those types of purchases differently altogether. I would have bought less expensive vehicles with cash and saved the amount of the car payments until I could afford to buy nicer, more reliable and expensive cars.
As for the student loans, that’s where I wish I would have had a completely different paradigm when it came to college education. I made the decision to go to a very expensive private school for my first two years and financed much of it. Even after transferring to a state school, I had already gotten myself into so much debt, it was difficult to see my way out. Once my husband and I decided to turn our financial lives around, though, we cash-flowed graduate degrees for each of us.
What motivated you to pay it off?
The motivation to pay off our debt was the realization that we did not want to live life in that way. Our income had obligations before we even brought it home–it was going toward financing things we had already spent money on instead of being freed up for our future, or even our present. Even after experiencing some increases in income, our salaries were already allocated to the debt we had accrued. We recognized that for us, it was a very constrictive way to live.
What was your plan to reduce your debt?
We read a lot from Crown Financial Services and Ramsey Solutions regarding debt, budgeting, and biblical stewardship. We started budgeting very early on in our marriage. The budget allowed us to plan for debt repayment, spending and saving.
How did you stay on track?
We stayed on track because we always kept our eyes on the larger goal of financial freedom and independence. My husband and I tend to be people who are very committed, so once we determined to walk this out, we encouraged each other, kept the communication strong, and followed through with the details of our plans.
How long did it take you to pay off the debt?
The debt was completely paid off about six years ago. It took longer than it may have for some other families whose paths are more linear. During the time when we were in the process of repaying our debt, we cash-flowed my graduate degree and my husband took a significant pay cut when he went back to graduate school (his school was completely paid for and he took a small salary from the university). However, when my husband began his professional career, the remaining debt was repaid very quickly.
What advice would you give to others struggling with debt?
I would advise other people who are struggling with debt to make up their minds regarding their paradigms about money and, if they are married, to agree on it. It doesn’t do any good to live off ramen noodles to pay off a credit card or car loan to just finance a couch two months later. A decision has to made: do you view debt as a tool and a way of life, or do you view it as a harsh taskmaster who has a hold on you and your money?
How do you remain debt-free today?
We determined debt is not an acceptable means for purchasing anything for us (except the mortgage on our primary residence). If we need or want something, we save up for it and pay cash. We started the habit of saving, even before we were out of debt and always have a stockpile of liquid funds available in case of emergencies. Our habits are 180 degrees different from before we married over 15 years ago. I know how much better it feels to live like this, and that’s why it’s my joy to share our experience and ultimately help others plan to do the same.