Debt, episode 1
Tips to get past your debt – and find out how one family got rid of debt by the time the parents were 30.
Listen to the episode:
- Dani Klotz's story, [starts at 00:00:46]
- Tonia Brinston, Financial Educator, LSS Financial Counseling, [starts at 00:06:15]
- Kane family story, [starts at 00:13:37]
- LSS Financial Counseling – Find out more about their services at their website or call (877) 809-0039 for start your free, confidential counseling session.
- National Student Loan Data System – Find out how much you owe and who you owe in student loans.
- National Foundation for Credit Counseling – Find out if a credit counselor is certified.
- Debt-free by age 30 – Read the full story about how the Kanes got rid of their debt.
Read the transcript:
Trisha Handrich, Host:
Debt is one of those things that looms over almost everyone's lives, whether it's college, card debt, house mortgage, credit card debt or combination of those. Many of us want to be out of debt as soon as we can, but it can feel impossible. In this episode, we hope to help you walk through that a little bit. We'll talk to a twenty-something who has debt and others who were able to get rid of their debt by age 30. We’ll also get some advice from a debt counselor with LSS Financial Counseling. I'm Trisha Handrich, and this is Smart Living, Simple Money.
First up is Dani Klotz. She's 28 has been married for five years. They have a 2-year-old and she has her bachelor's degree. Her husband, though, is still finishing up school and their debt situation is what you might expect. I first asked her to describe that situation by telling us more about the choice of pursuing education.
I think my personal debt story starts with my college education. And my college route didn't happen as traditionally as some would. I did a year of international service before college. And I also was [in college] for four and a half years; I added a semester. And I think that is worth mentioning because a semester of college, especially at private liberal arts universities… it means something. It's extra costs for sure. That’s where it begins. I always had a part-time job, and I paid for college through those jobs, scholarships, grants and student loans – federal and private.
Did you feel like you were able to navigate getting those loans or were there any scary moments to that?
Yeah, I'm sure there were scary moments to it. I also think when I was going through that process, I was ignorant enough not to be scared. The first few years of college, my parents took care of that, and then I got married and then I started [paying] it, and I didn't think too much about it. I should have thought more about it while I was taking out loans.
And now that you're few years out of college, what does that look like now?
Well, I started off with the most aggressive plan you can have with student loan repayment. And then on top of that I was making extra payments. When that happened, my husband was also working full time, and we didn’t have a child, and we also weren't homeowners. Four years later, I had to change that payment plan, because now my husband's back in school and I'm the only one working and so my income has to be redistributed a bit.
When you guys were starting to talk about making a big purchaser of your home. How did debt come into the conversation?
I think how it mostly affected our decision to own a home or not was in how much debt we wanted to take out, if that makes sense. So what they qualified us for with a lot more than what we felt comfortable with. And we ended up buying a home that with was a lot less than what we were fully approved for, which was a wise choice, because now as our income has shrunk, we’re still able, to you know, make those payments. And ultimately for us, I think it was the right decision, because where we live, renting a home was going to be more expensive than making a monthly mortgage payment.
I do want to ask you what your debt looks like in amount.
I think at this point I have about $40,000 in student loan debt, that’s not including my home. Yeah, and that's a little bit more than the average today. The number I found was $37,000.
And that’s you personally?
Yeah, me personally, right.
And that’s not including what your husband has accumulated, as well.
How do you stay hopeful?
Well, it is challenging to stay centered, I think, because when I look back at those choices that resulted in this debt, I don't think I would change them, and I'm not sure how I would have, you know, given the resources I had and where I was. But I was a single person [then]. I can't say that all that debt would be gone by now, but much more of it would be because that’s important to me and that’s what – on my stressed out days – what kind of gets me riled up. [I think] I really need to get a second job, or I need to do this or something. But the reality is, if I got a second job to pay off that debt, I wouldn’t have any time with my family. So how to stay hopeful?
Sometimes I have to take a deep breath and remind myself that this is where I am now, it’s not where I'm going to be forever. And my husband will have a full-time job in the future, and we will have more resources. The debt will get paid off. Even though I'd love for that to happen today.
Thank you so much for sharing your story, I appreciate it.
Yeah, no problem. Thanks again for having me.
I also had a chance to sit down with Tonia Brinston. She is with LSS Financial Counseling, and she goes around the country leading workshops, helping people to gain the skills to get out of debt, to protect themselves from identity theft, just to name a few. I first asked her about how she helps people to get out of debt in what kind of advice would she give to somebody just graduating from college and now has accumulated a bunch of debt, doesn't know what to do and what kind of advice she has for those individuals.
Tonia Brinston, Financial Educator, LSS Financial Counseling:
First thing I would say is know who you owe and know what you owe. And there is a website that is available for college students. It's called the National Student Loan Data System for students. And that's at nslds.ed.gov. That’s the database system for all students to go see how much they owe and who they owe. There's also what’s called a public service loan forgiveness program that individuals can see if they qualify for. And they also can get their payments set up based on their income, which is really helpful because it's kind of like they look at your income and determined what they think is a feasible amount to pay every month.
Going back to the beginning of the process, I'm an incoming student to college and I’m signing up for student loans. Is there any advice that you give to people in that stage of life?
Well, I would do my research. I always recommend you do your research.
- Price compare if it's more affordable for you to go to a private college, a community college or a university.
- Apply for grants and scholarships. There is a multitude of those out there from some of the big corporations throughout our country.
- Don't take out more than you need. Oftentimes you go apply for a student loan, and you [may] get way more than what you need. It’s worth it to just look at that, and if you do, know how are you going to budget that money going forward.
What do you recommend to people who are feeling quite overwhelmed with debt in different ways?
I first like to let them know that they're not alone. We all have had or do have some sort of debt. I mean, in this society, it's almost like you have to have some in order to qualify for a loan. So creditors can see your creditworthiness. Also there are multitudes of helpful resources out there, like LSS. And you want to make sure that they’re NFCC approved, that’s the National Foundation for Credit Counseling. If the nonprofit organization is seeking to get free credit counseling, [you] want to make sure that they’re NFCC approved. If they're charging for them to help you out. I probably would fall back from that because they're not doing anything more for you than you’re doing for yourself. When you get an opportunity to come and see a counselor for free, I think that's the better option because they will help you look at your financial picture. Most of them, like us at LSS, we do it online, in person or over the phone. And just to add to the first point that I made that people are not out here alone, if you're in a hole, stop digging. Come and see a counselor, be honest with yourself in terms of making your budget, so you can really see what your actual financial picture is and what we can do to help you get into a budget or if you want to get into a debt management plan, that's also an option as well.
So we're getting into how do you prevent from getting too far into debt. So you make a budget, payment plan?
Absolutely. Actually, there are several ways. I always like to use the create a workable budget. And again, be honest with yourself. Check your daily routine, because eating out at lunch every day, it gets really costly. One of my coworkers asked me why I never went out to eat with them. I told her, if you save your receipts for 30 days, I'll give you an answer to that question. And she actually did do that and [on] the receipts that she did save, she discovered that she was spending over $200 a month just going out to eat every day. When you can make your lunch, bring it in with you and that $200 can also go into an emergency savings or into a quickly you liquidate savings account.
And also pay more than the minimum due. When you pay more on the minimum due on credit cards, for instance, you get your debt paid down quicker and it saves you a bundle in interest.
What are your favorite tips and tricks for people in debt?
Be ready for life’s surprises. Have a savings plan, [and] pay yourself first. The old rule of thumb used to be: pay yourself 10 percent of what your income was in a savings account and that was it. The new rule is to pay 10 percent into your savings account and put 10 percent also into your retirement plan. So you want to pay yourself first, put that money away every month, and you'll find a way to live off the rest. We’re resilient people. We'll find a way to live off the rest of the money that we have after we put money away into our savings account. And start small, and when you’re confident you’ll want to increase that. Set up automatic payments, have your financial institution do [your savings] automatically for you. Once you pay off the loan, continue funneling that money into your savings account. Even if you get a raise, whatever you've been paying, just keep doing that. And eventually you'll start seeing your savings grow.
After the break, we hear from Dan and Carrie Kane, who were debt-free before 30.
Something that we've heard throughout the episode is debt can sometimes feel quite impossible to get out from underneath of. But for this episode’s life hack, we hear the story of a couple who eliminated all of their debt before they turned 30 – another feat that seems nearly impossible. This story involves Dan and Carrie Kane from Ohio. They married at 24 and decided to pay off their house debt as soon as possible. They refinanced their home to a five-year mortgage so that they could eliminate that debt faster.
The Kanes decided to live off of Dan's income and save Carrie’s income for debt repayment and generosity. They agreed that in order to reach the goal of being debt-free before they turned 30, they needed to make a few sacrifices. They ate out less frequently, drove an old car and didn't add a dishwasher, or make any upgrades on their home. The Kanes paid off their house, and get this, in one year and nine months. Now, their goal is to stay debt-free for the rest of their lives. They saved up enough money to purchase their cars in cash and plan to do the same if they decide to buy another house.
When we talked to Carrie, she pointed to three things that helped them reach their goal:
- Number one, live beneath your means, Carrie said the main thing to do is spend less than you make so you have money to save, pay down the debt or give away.
- Number two, be clear about your goals. Carrie added, you have to be specific about the goals you are trying to accomplish and stick to it.
- And number three, celebrate the progress. Carrie also said, we marked points on our debt thermometer where we celebrated with a dinner out or by doing something special. After talking to the Kanes, and hearing stories like theirs, I have to ask myself what my financial goals are and what I need to do to reach them.
Stick with us for episode two as we talk about budgeting.
Smart Living, Simple Money is a podcast of The Mennonite Inc. and Everence. I’m your host, Trisha Handrich, with executive producers: Hannah Heinzekehr, Madalyn Metzger, and Sheldon C. Good. Our producer is Sara Alvarez, voiceover by Jeff Shaffer, sound producer by Norm Sohar. Thank you to our intern Jace Longenecker, graphic design by Jena O’Brien. And thank you to Greg Yoder for our music at the beginning and end of the podcast. All recording is done at Everence.