Bernadette Joy and AJ Maulion (via NerdWallet)
In this series, NerdWallet interviews people who have triumphed over debt. The answers have been edited for length and clarity.
Bernadette Joy Maulion, 34, went to part-time business school after a career in human resources, hoping to start a new chapter in her professional life. The school was not cheap and she took out $ 72,000 in student loans.
She and her husband AJ, 37, had a $ 57,000 mortgage on the first house they had bought in Charlotte, North Carolina, and used it as rent. They also had a $ 180,800 mortgage on a second home they had bought after being inspired by Chip and Joanna Gaines of HGTV's "Fixer Upper."
While at business school, Bernadette Joy had an idea for her own company, a local version of the Rent the Runway online clothing store. He started the business with the help of AJ, but quickly realized that the debt was hampering his business future. The Maulions knew it was time to face their debt.
They set out to pay off student loans: sell things, do part-time jobs and add a roommate while living primarily on AJ's salary as a project manager. Motivated by their success, they also paid the rented house, then sold it and earmarked the proceeds to pay off their main mortgage.
Now, Bernadette Joy runs her business full time without debt. He connected with NerdWallet to share the ups and downs of his experience, which can inspire his own journey to pay off his debts.
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How much debt did you have at the beginning?
Bernadette Joy: We had approximately $ 72,000 in student loans, $ 57,000 remaining to pay on rental property and $ 180,800 in our main house. Our salaries at that time were $ 91,000 for AJ as project manager and $ 30,000 for me as executive recruiter. AJ was eligible for annual bonuses and I was eligible for commissions.
(Note: The Maulions paid the rental property in 2017 and sold it in 2019 for $ 153,000, using the proceeds to pay the remaining mortgage).
What triggered your decision to get out of debt?
BJ: We thought the business had great potential, and I was eager to quit my daily job. I looked at my student loans the last semester of my program in January 2016, and I felt completely overwhelmed. The only thing that kept me in my daily work was the debt. After much crying and stress, we decided that if we could pay off student loans, it would make us feel comfortable enough to quit smoking.
What strategies did you use to pay the debt?
BJ: We begin with student loans using the snowball method of debt. We pay the series of loans from lowest to highest (for amount due). The snowball method spoke to me specifically because I am the type of person (who) likes to see the things marked on my list.
From a budgetary point of view, it is important to be able to reduce the amount of variability in your expenses. It made more sense to mentally allocate AJ's salary because it was consistent. We begin to live on their income. Everything I did was like the icing on the cake.
We stopped any unnecessary expenses, including vacations, professional development, and also decided to grow the business more slowly to keep it debt free.
AJ: We stopped my 401 (k) contributions for one year until we paid the student loans. We really wanted to focus and put our resources in debt. We think about it and said that once we are done with this debt, we can contribute the maximum amount. (Editor's Note: NerdWallet recommends saving for retirement even while paying off the debt, to allow your money to grow).
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How else did you release money to pay the debt?
BJ: My car was on lease, the AJ Kia Spectra 2009 was fully paid. We got rid of the leased car, and that saved us a few hundred dollars a month. I went crazy and sold everything; We had a garage sale. AJ's younger brother was our roommate from 2016 to April of this year. He paid us the rent.
AJ: I would drive to Uber on the way home from work. I did it more or less for six months. I was also extra on TV shows, like "Banshee" on Cinemax and "Shots Fired" on Fox.
We also reduced food consumption and bought everything that was for sale in the supermarket, including Cheez-Its.
Did you ever get discouraged? How did you stay motivated?
BJ: There were cases in which we had to slow down because we were exhausted.
Once, I went to the mall and bought a lot of things because I thought I deserved it. I returned home and felt so guilty: I realized that much of my personal expense was caused by emotion. Knowing my trigger, I would divert that energy to (build) my business.
I used to hang Post-it on my refrigerator of our current debt number. Even if I could get a couple of dollars, I put it in a Post-it. For example, there are this pair of shoes that I really wanted in the store. Instead of buying them, I put that money in debt and put the Post-it. I put pictures of them on Instagram and people contacted me. They would ask: "Where is your Post-it?" That responsibility of the people was excellent.
AJ: You are so absorbed in (paying debts), but don't forget to recognize your successes.
You have to keep taking those little victories. It took three years for us to pay the debt, for others it could take longer. Celebrate small victories so you can last longer.
What would you have done differently?
BJ: It would have given me much more grace during that time. The reason we were able to pay the debt soon was because I was very angry about that.
Our original term to pay off the student loan was two years. But once we started to gain momentum, I thought we could pay it sooner. I didn't recognize that at the beginning, it's a little easier to cut from your budget. I wish I had told myself: you're still really good; People don't usually pay this in two years.
How did this experience influence your business?
BJ: I chose to grow my business more slowly, not rush it. My business model was influenced by wanting it to be affordable for me and my clients. It forced me to be super creative. I think if I had followed the traditional route, I would have taken a loan for a small business. But everything was self-financed, without external investors, without loans.
Actually, we don't stop investing (for our future) completely. We were diverting funds to build this business.
AJ: It took me a while to feel comfortable with this investment. She made me believe in the long term, the vision of the future. I was taking lots of photos for the inventory. We have a room in our house where we receive customers to look for dresses. I felt that it was part of something bigger for our future.
What are your financial goals now?
BJ: We want to retire early, and now that I'm not in a 9-5 job, we want to see how we can take AJ there too. The image in our fridge is now about our next vacation home. Every first Sunday of the month, we talk about how we are going to get that.
How to get rid of your own debt
Inspired by Maulions commitment to get rid of debt? Here’s how you can get started:
Create a budget that gives each dollar a job to do. We like the 50/30/20 budget, which allocates 50% of your net salary to needs, 30% to needs and 20% to savings and debt payments.
The Maulions said staying on the same page as a couple helped them succeed. Establish regular money conversations with your partner to control goals, stay motivated and hold each other accountable.
Do not shorten your retirement. If your employer offers a retirement plan with a match, NerdWallet recommends contributing at least enough to get the match, even while paying the debt. The sooner you put money into your retirement fund, the more time you will have to accumulate for your retirement.
Photo courtesy of Bernadette Joy Maulion.
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Amrita Jayakumar is a writer on NerdWallet. Email: [email protected] Twitter: @ajbombay.
The article How I abandoned the debt: small profits help to achieve a great dream originally appeared on NerdWallet.
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