How 3 families dug their way out of debt
By Matt Alderton
November 11, 2015
Three families faced one common challenge — paying down debts ranging from $5,000 to $371,000. How did they do it?
- In Chicago, former real estate agent Netiva Heard filed for bankruptcy and switched careers to deal with debt from medical procedures and the downturn in the housing industry.
- In Jersey City, New Jersey, teacher Toni Ball took on additional work to make ends meet and whittle away at her $12,000 debt from credit cards and personal loans.
- In Dallas, parents Rita and Brandon Lester worked to erase his debt and to build her credit, and together they’re now teaching others how extreme couponing can save families money.
These families are not alone. According to a 2014 study by the Urban Institute, more than a third (35 percent) of Americans are experiencing debt severe enough that they have bills in collections.
To survive a debt crisis, couples and families must take a two-pronged approach, says Los Angeles-based financial coach Pegi Burdick, author of “It’s Never About the Money, Even When It Is: How to Untangle Your Emotions from Your Money.”
“Debt does not mean death,” she says. “People survive. They just need to have the willingness to make changes — challenging as they might be — for the greater good.
And couples and families must work together to become debt-free.
“There’s no ‘you’ in a relationship; there’s only ‘us.’ You’ve got to emphasize that you’re a team and that you’re going to solve your problems together.”
That’s exactly what these three families did:
Netiva Heard: ‘We both made poor decisions’
In 2008, Chicago-based real estate broker Netiva Heard was diagnosed with cervical cancer, was three months pregnant and “the industry that I was in — real estate — was pretty much dead,” Heard says. Soon, Heard and her husband, a senior student financial consultant, found themselves deep in a $371,000 debt hole, most of that due to medical expenses and the real estate market downturn.
“We were struck with foreclosures, judgments and collections, and our credit was horrible,” Heard says. “And on top of all that, I was unable to work, so everything fell on my husband. It was something we’d never faced before.”
Although one’s first instinct often is to lash out, Heard says, “The fact is, we both made poor decisions. We both spent too much. We both should have saved more. We got into debt together, and we were going to have pull ourselves out of debt together.”
Step one was creating a budget. “We had never tracked our money before. Money came in and we spent it on what we wanted. That’s just how we lived,” says Heard, now a certified credit counselor, personal finance coach and owner of her own financial services firm MNH Credit Solutions.
Heard filed for bankruptcy to eliminate her medical and consumer debts, while leaving her husband’s accounts open. The couple continued to pay everything off, employing a mix of strategies, including couponing and meal planning to keep expenses low.
At the same time, Heard started a new career as a credit counselor to increase her income. “I had to ask myself: What skills do I have that I can monetize right now? With real estate comes credit, so it’s something I already knew a lot about.”
And Heard got her two children to help in the family’s debt recovery effort.
“We involve them in trying to come up with different free or cheap things to do,” she says. “Playing a game of ‘Who Can Plan the Best Free Family Outing’ worked great for us.”
It took Heard’s family 2.5 years to recover from their debt. Now all that remains is student debt, and Heard and her family are determined to stay debt-free.
“By the time we climbed out of debt, we had learned a lot about our money values, individually and as a couple,” says Heard. “Now, instead of spending every dime that comes in, we set goals for our money. We track what comes in and what goes out, and we guide our money toward what we want to accomplish.”
Things are definitely looking up. Surgeries removed Heard’s cervical cancer, and with monitoring twice a year, life has returned to a sense of normal and her credit counseling business is growing.
“For example, we were able to purchase a foreclosure — all cash,” she says. “Now we don’t even have a mortgage. That’s something that would have never happened before.”
Toni Ball: ‘My budget is something I live by’
Toni Ball, a married mother of three, was “up to my eyeballs in debt.”
“I had no savings,” says Ball, a full-time teacher in Jersey City, New Jersey, who methodically tackled her $12,000 credit card debt over the past year.
How did she do it?
I used to stay up at night worrying about money. Now I feel relieved, less stressed and more responsible.”
— Toni Ball,
a teacher who says she once was “up to her eyeballs in debt.”
She cut back on food and entertainment expenses, put together a budget and started focusing on her improving her credit scores. The envelope method of paying bills, which she adopted as part of the Live Richer Challenge program, helps her to set aside money from her paycheck to cover food, gas and other recurring expenses. She used the snowball method (tackling debts from the smallest to the biggest) to plow away at her card debt, paying a little more each month on her big balance. For added income, Ball has taken on additional teaching work and is a chess instructor.
With her husband currently unemployed and three children under the age of 10, it’s still tough to make ends meet.
“My budget is not a piece of paper,” she says. “My budget is something I live by.”
That sometimes makes for some tough decisions, such as whether the family of five would go away for Thanksgiving this year. Ball is paying for the trip with the income she gets from one of her part-time jobs, “and I have created a budget for the trip,” she says.
That doesn’t mean life is hard, Ball says. Life is fuller than it was a year ago. Instead of spending on entertainment, she says the family often will share an experience.
“Sometimes I still splurge,” Ball says, but it’s usually on food — “something we don’t normally eat.”
Over the past year, much has changed. Her credit score of 485 has climbed to 663. And she says she is relieved at how far her family has come. “I used to stay up at night worrying about money,” Ball says. “Now I feel relieved, less stressed and more responsible.”
Rita and Brandon Lester: ‘We had to pull ourselves together’
Dallas residents Rita and Brandon Lester, parents to five children, tackled their debt together and credit issues that they brought into their marriage.
“I made a lot of mistakes early,” says Brandon, who is an IT manager for Future Telecom. “I didn’t listen to my parents. I built up a lot of credit card debt early that I’ve been cleaning up now.”
Rita, on the other hand, heeded her parents’ advice of not using credit and buying only what you can afford. “I never had a credit problem. I had to establish credit,” says Rita, a claims adjuster for Southwest Airlines who has almost completed her associate’s degree.
Paying down his $5,000 debt, because of their different financial mindset, required “a lot of going back and forth to figure out how to approach” Brandon’s debt problem.
And there was a lot of correspondence going back and forth, too, with the credit card companies, Rita says, as some of the charges were disputed.
“We had to pull ourselves together,” Brandon says, and that started with checking their credit reports.
Unified, they focused on paying off the smallest debt first, then moved on to the next smallest, and then the next.
And Rita worked to build a credit history. “It was stressful,” she says. “I didn’t know what I needed to do to build a credit history.”
Now Rita regularly tracks her credit scores. “Once you see the initial progress, that’s when you see that score go up,” she says.
The couple also started BandRi Events to provide event planning and event services, such as invitation design, photography and specialty treats.
The couple also teaches people how to save using coupons “similar to what you see on ‘Extreme Couponers’ on TLC, but on a more realistic level,” Rita says. “We show people how to use coupons and match them with sales and deals to oftentimes save more than 50 percent on their normal household needs.”
They practice the couponing strategies that they preach. “Some nights we can feed our entire family for less than $10,” she says.
Her advice for others battling debt? “Stick to your goals.”
And Brandon’s advice? “It’s a lot easier to start out on the right foot than to fix things.”
Together they’re both very disciplined now at paying down their debt, paying more than the minimum and working toward credit scores of 600-620 (“We’re shooting for the 700 club,” Rita says) to put their dream of buying a home for their family within reach.
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