Pavithra Mohan* talks to three people about how they managed to stop their spiral into debt and get on top of their finances.
Photo: Li Yang
When you find yourself financially adrift or deep in the red, how do you begin to pull yourself out?
We talked to three people about how they did it.
When Ashley Davidson separated from her husband, she was suddenly saddled with maintaining a lifestyle that had been affordable with two salaries but was exorbitant with just one.
It wasn’t just rent.
Davidson had to start footing her own health insurance and replace many shared household items when her husband moved out.
While married, the couple didn’t live pay cheque to pay cheque, but they never prioritised building up a robust savings account; Davidson says she usually had no more than a few thousand dollars saved at any given point.
By the time they got divorced, Davidson had virtually no savings and about $12,000 of credit card debt, between paying thousands for a divorce lawyer and spending money she didn’t have on social activities and seeing friends.
“When you’re going through a divorce and your friends say, ‘Hey, come out, you need to get out of your house and stop sitting around watching Netflix,’ you say sure,” she says.
“But the social budget kind of blew everything out of whack.”
Davidson knew she had to do something about her debt.
She took on additional work and put all that money toward paying off her credit card; she did the same with her yearly bonus.
Once her lease was up, she moved into a cheaper apartment (though she still had to borrow money from her parents for a security deposit).
Davidson paid off the debt in just over two years.
Now, she immediately puts part of her pay cheque into her savings account and has heavily cut back on social spending.
“I think the biggest thing is, I’ve learned to say no,” she says.
“I’ve learned to stay home and eat in.”
“For me, personally, it was these small changes I could make, and those add up significantly.”
The experience has also shown her the importance of being transparent about finances with a significant other, which wasn’t always the case in her marriage.
Richard and Laura Pawlowski took a more drastic approach than most people would to pulling themselves out of debt.
In 2010, the Pawlowskis were retired and both on the verge of turning 70, but they had been hit hard by the recession.
Their investments bottomed out while their monthly house payments and credit card debt climbed higher.
“We had to live on our social security income,” Richard says.
“Our savings were pretty much wiped out, and we were going back into debt again, and then deeper into debt.”
“It was traumatic.”
They considered selling their home and finding an apartment instead, but even that felt like a stretch financially.
So they gave up their home and became “homeless by choice,” as Richard calls it.
“We decided to just take off and live in a tent,” he says.
“We had been camping most of our lives, so we took it on as an adventure.”
For two years, the couple camped out in national parks.
“The way we lived for this two-year period allowed us to not only get out of debt,” Richard says, “but living this way and travelling, we saved a lot of money because we didn’t have to pay rent and our car was paid off.”
“It turned out to be a great blessing in disguise.”
They hadn’t planned on camping out for two years; the original goal had been to find a new place to settle down.
Eventually, they found a place where rent was cheaper.
You could say the Pawlowskis’ experience is an extreme version of the method Marie Kondo espouses.
They were forced to part with most of their possessions when they hit the road, which meant carrying important documents and photos on a flash drive.
But one of their key takeaways is that as hard as it is, people can pare back their life to survive financial hardship.
“Go without for quite a while,” he says.
“You can always get stuff.”
“But don’t let your trappings define who you are.”
“I didn’t have a logical approach to money,” Kassandra Dasent says of how she managed her finances in her twenties and early thirties.
“I was working and looking forward to my payday, and most of the time, I had already planned what I was going to spend it on.”
The little she had saved for retirement was because she had to maintain a minimum contribution to ensure her employer would match it.
By her early thirties, Dasent had gone through a divorce and was carrying a whopping $55,000 in debt.
While she had put away $20,000 in retirement savings, Dasent was otherwise living almost pay cheque to pay cheque.
Had she earned more money, Dasent says, her financial habits wouldn’t have been any different; if anything, she would have spent more.
In 2009, the debt began to consume her.
“I started to feel physically anxious,” she says.
She gave herself a crash course in personal finance and mapped out a plan to pay it all off in five years.
She started charging money for her side hustle as a singer-songwriter.
“The biggest decision I made, which was very hard for me, was to give up my apartment and move into a roommate situation for a year,” she says.
“That cut my living expenses in half.”
“It was the first time I really started thinking consciously about, what am I spending on and why am I spending on it?” she says.
Dasent finished paying off her debt in 3.5 years, right as she got remarried.
Now, Dasent and her husband try to live on just one income.
“One of the biggest things was spending significantly below our incomes, so if one of us were to lose our income, we could still survive,” she says.
“That remains the No. 1 thing for us.”
* Pavithra Mohan is an assistant editor for Fast Company Digital.
This article first appeared at www.fastcompany.com.
