Against Difficult Odds, This Couple Overcame Five-Figure Debt

Michelle Smith, of Opelika, Alabama, is no stranger to stretching a buck.

Looking back, she recalls the moment she first realized that she needed a budget, “It was when I bought my first truck. I was 22 and single, and I realized after making my first car payment and paying all of my bills that I only had $16 to last me until payday. It was doable, but imagine eating on $1 a day!”

Ouch! But, she made it work, and that’s just the beginning of her truly impressive money story.

Now, let’s skip ahead to when Michelle met Billy.

She said, “When I married Billy, he brought $32,000 in debt with him. This wasn’t that big of a deal, at the time. We always made payments on time and still managed to bank a little bit of savings. But, then we had a baby, and things got really tight because it was cheaper for me to stay home with him than go to work, so I quit my job.”

That’s When Things Got Tough

Michelle said, “During that time, we had $100 each paycheck for diapers, groceries and gas, and that was making minimum payments on his credit cards. We made it work—we didn’t use baby wipes if we were at home because they were extra money (just washcloths and good old-fashioned soap and water). I made all of Conner’s baby food, and my grandma sent me $25 and coupons in the mail, once a month.”

So, they were squeaking by, but things didn’t always go perfectly.

Michelle said, “Every now and then, we got in a crunch and had to put gas or groceries on my credit cards so, even though we were paying on his, we were still accruing debt. And, honestly, his balance wasn’t going down, it was going up because minimum payments plus finance charges and interest do not equal less debt!”

Back to Work

After a year home with the baby, Michelle returned to work. She and Billy both work in law enforcement, and managing their differing shifts was no small task. Babysitting wasn’t optional, and it made paying off their debt that much harder.

To make things even more challenging, they both had to commute to an entirely different town for work each day. Michelle said, “We couldn’t afford to move, which meant we couldn’t really go home to eat lunch, our transportation costs were higher and we had to pay taxes in both towns. It was an all-around bad deal for us.”

They Did Their Best

Michelle, not one to be defeated, started experimenting.

She said, “I tried several budgeting techniques, and many of them helped. I actually ended up paying off Billy’s previous debt and about $10,000 that we had accrued while trying to pay it off. It was very hard to find a budget technique that I found myself sticking to, though.”

That’s when she resorted to a personal loan. Michelle said, “I ended up getting an unsecured debt consolidation loan for about $19,000 that I had left. It was a last-ditch effort. At least it brought my monthly payments down a couple of hundred dollars and gave us the wiggle room to move to the town we both worked in.”

“The Heavens Opened.”

If you’re squirming because you’ve learned that debt consolidation loans are not the best way to go, hang in there for the silver lining. Michelle added, “The loan company gave us a free copy of YNAB.”

And, boy, did she put it to work! YNAB clicked for her, immediately.

Michelle said, “When I started using YNAB, the heavens opened and angels sang! Seriously, it was so simple! I didn’t understand why none of these concepts had ever been taught and they really clicked with me.”

The other methods she’d tried had stressed the importance of discipline (as if a member of law enforcement doesn’t get the concept—the irony!). Discipline was never her problem.

Michelle said, “Discipline? I lived it every day or we might not eat well that week or get to work!”

More Control, Less Tension

YNAB’s method was different. Michelle stuck with it because, she said, “It was the consistent feeling of control that it brought me, which was what I was really lacking. It gave me a sense of security. I knew where every dollar was going, and I could relax my shoulders a little.”

She explained, “Any time I slacked off, and I just checked my bank account balance before I bought something (instead of looking at my budget), I would go from that feeling of control to anxiety—and somehow my balance would just shrink away.”

Slow and Steady Works

In the beginning, Michelle and Billy simply wanted to be done with their debt. They’d come so far—paying off $40,000 of credit card debt in the nine years before they found YNAB—and they wanted to be rid of the rest. So, that’s what they did.

Michelle and Billy doubled-down on their debt consolidation loan and, in three-and-a-half years, they paid it in full! Their other money wins include:

• Breaking the paycheck-to-paycheck cycle in the first 90 days.
• Saving and investing $1,000/month.
• Saving $7,500 during their very first debt-free year, and about $10,000 the next (some of which they generously gifted to some of their family.)

The extra money that they’re saving each month will help them buy their son his first car and pay for their retirement. Plus, their hard work put them in the position to buy their first home. What a turnaround!

There’s Nothing like Being in Control

Before they had control of their money, Michelle remembers feeling totally stuck. They lived in a rent-free condo, at one point, in exchange for their service—helping to keep the surrounding neighborhood safe and peaceful. Their unit had a single entrance/exit with one bedroom upstairs and another one downstairs.

Michelle said, “We were worried that, if there were burglars or a fire, we wouldn’t be able to get to our son, so he slept in our room until we moved. It was not an ideal situation. We were very grateful to have the condo while we struggled so much with debt, but it was so small and falling apart. Often times, the air or heat didn’t work. The carpet was eight years old. It was dusty and moldy in our bedroom, and Conner was on allergy medicine and breathing treatments the whole time we lived there because of it.”

She added, “I get teary-eyed just thinking about it. Being able to buy a house changed his whole world and ours.”

This is a photo from the day that Michelle and Billy closed on their house. She recalls, “We didn’t have anything in it, but we put up our Christmas tree. Seeing our son sit under that Christmas tree might have been the best moment of my life.“

A Whole New World

Before they began budgeting, Michelle said, “It felt like I was constantly going in to one kind of debt to pay off another. It was like standing in a big hole, digging on one side and throwing the dirt over your shoulder, filling up half of the hole, and then turning around and doing the same thing on the other side. We were just standing in the same hole, no matter what.”

They’ve come a long way. If you’re struggling to make ends meet (or to escape your own hole), Michelle said this:

“People may look at our numbers and think, ‘Wow, I could never do all that—I don’t even have an extra $100, much less $1,000.’ … I didn’t at one time, either. It takes time and effort and some sacrifice, but we still managed to keep our cable and have a nice meal out, every now and then, because we budgeted for our priorities. That is the key.”