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Disciplined young couple manage to pay off debt

Melissa and Zach Floyd came home from their Italian honeymoon with more than lifelong memories. They had $14,350 of debt between them, a combination of overspending and wedding expenses.

Both brought credit card debt into the marriage, but that's where the financial similarities end. Zach is a planner, who always makes sure to pay his bills on time. He may be the only 35-year-old who uses a checkbook register to keep track of his purchases on a daily basis.

Melissa's money personality is to buy first, pay later. She describes herself as a "pay it on the third notice kind of person" and once had the credit score to prove it.

So how did the St. Louis Park, Minn., couple overcome their different money personalities and pay down their debt?

* They faced the truth: Before the honeymoon, the couple spent freely on happy hour, dinners out with friends and other discretionary expenses. But it wasn't until Zach faced the ugly truth, going through four months of expenses, that he learned their tab was about $1,000 per month.

"Get out your calculator and look at your spending patterns," Zach said. "Then figure out how much you owe."

* Find a system that works for you: Despite plenty of high-tech budgeting and debt payoff programs, pencil and paper are Zach's tools of choice.

"It's embarrassingly low-tech," Melissa said, "but it's seriously the greatest thing."

Here's how his system works. Zach writes down each paycheck and the bills that must be paid from it. Then he sets aside a portion for food, gas and a small allowance for each of them, and takes the remainder to pay down a chunk of debt.

"Sometimes it was $100, sometimes it was $500 I would do it the day I got paid so I knew that (the money) was already gone," he said. If they could afford additional payments throughout the month, he'd send those, too.

* Melissa's credit wasn't hot, but Zach's was. To lessen the payoff time and the money spent, he transferred their credit card balances to new zero-percent-interest credit cards. These promotions all but dried up during the credit crunch. But consumers with good credit are starting to see these offers again.

* They switched to cash: To tackle their debt on an administrative assistant and a teacher's salary, they chucked their credit cards, knowing themselves well enough to realize that having cards in the wallet would be too tempting.

"When you're paying for your discretionary things with cash, you can physically see how much money you're spending, whereas with a check card, it's so much easier to swipe it," Zach said.

They keep their food budget low by planning meals and shopping for certain items at Costco. And when the urge to eat out hits (which it still does too often, the couple admits), they head to places where they can eat for less than $30.

* They communicated. A lot. At first, the couple's differing money styles posed a conflict. "I felt like I couldn't spend anything, and that caused some friction for a while until I came to the realization that it's not like I can't spend anything, we just have to talk about it," Melissa explained.

Zach's twice-monthly e-mails also helped. Every paycheck, he'd send an update, to the penny, of their expenses for the month, what bills they had to pay, and how much debt they'd extinguished so far. "Once I could start seeing that balance coming down, it became a lot easier to adjust to this way of living," she said.

* They found motivation. Getting pregnant with their daughter, Olive, really helped the Floyds' focus on becoming debt-free. "We didn't want a pile of debt following us for the next five, 10, 15 years," Zach explained.

Finally, three years and four months after getting serious about their debt paydown, the Floyds sent their final credit card payment to the bank. Now they have a cash cushion, a college account for Olive, and are planning their first family vacation.

They have no plans to break out the credit cards any time soon. "It's 100 times more difficult to pay (debt) off than it is to accumulate it. That's the part I just didn't understand," Zach said.

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