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This story originally appeared on NerdWallet
NerdWallet interviewed people to learn about their debt-management journey. These responses have been edited to be more concise and clear.
Sylvester and Karen Akpan
Payed offIn 18 Months, $201,060
Karen Akpan was fired from her lucrative contract as a clinical researcher in 2019. Sylvester Akpan, her husband had no savings, and they made an approximate $50,000 annual gross income from their travel blog on Instagram. However, their income was not enough to pay their monthly $4,300 mortgage payment or put an end to their six-digit debt.
They made some bold moves.
The Akpans bought an RV and sold their home in 2020. They then focused their efforts on Instagram to make more money. Within a year, they were able to pay off their debt.
Although the path taken by Akpans was unusual, it highlighted a hard-to-miss truth: Lowering your expenses and increasing your income will give you more money for paying off debt.
“We had our hands up”
Karen speaks out about how “we were all up to our necks” after the job loss. We were only able to live on the bills.”
They were behind on their mortgage payments and had to borrow money from credit cards. Karen and Sylvester also owe more than $90,000. They owed over $110,000 on student loans.
Karen and Sylvester, who had lived together in the same house for four years with their son Aiden, sold it. A large portion of their proceeds was used to pay off non-student loans — the $36,000 pool loan and the $25,000 solar loan. They ended up with $20,000.
Karen states, “We used literally our last dollar to purchase an RV through Facebook Marketplace and then fix it up.” It was an act of faith. It was a leap of faith. I believed everything would turn out.”
Aiden is 8 years old and was homeschooled. He liked living in an RV. Karen states that Aiden is living the dream. Sylvester was not an easy sell, but he eventually accepted. Karen says that Sylvester is now an RV enthusiast.
Karen says that once the Akpans left, everything changed. “Everything improved: our marriage, family dynamics, and our relationship,” Karen said. We made the best decisions ever by being in this small space together and making it work for us.
“The money has just begun to come in”
Next, the Akpans focused on making more money through their blog, TheMomTrotter.com, and its Instagram account that covers budget traveling, homeschooling and parenting. Karen has been blogging for around four years but had not made much money. She decided to create more engaging content.
Her rates were increased and brands began to reach out to her. For example, representatives from the YMCA asked her to post about its summer swimming program on her Instagram. She then “created content that drew from my own experience and was relatable to my audience for the YMCA,” she states.
This partnership has taken her to brands like Circle K, National Geographic and Camping World, as well as Nature Valley, National Geographic and Disney Products. Although the Akpans earned money through YouTube and freelance writing about half of their earnings came from branded Instagram content.
Remember how Karen Sylvester and Sylvester made about $50,000 in income through their Instagram and blog?
Their brand earned a profit of almost $318,000.
Karen said that the money started to come in, but sometimes it was hard for her to understand why.
“I ought to have invested that amount”
They used this income to pay off their student loans. They paid Sylvester’s $40,000 balance and Karen’s $69,000 at the end of 2020.
Karen was thrilled to repay these loans. However, she also harbored doubts. She says, “I should’ve invested that money.”
Karen said that she had just begun to understand money when her family paid their loan off. She now knows more and would rather have kept a large portion of her earnings in a brokerage account, while still making loan payments.
To be fair, the decision to pay off student loans or invest is a tricky one. It is worth comparing your loan interest rate with what an investment would make, as well as other factors.
“I am championing all people now”
These days, the Akpans continue making money on Instagram, homeschooling and traveling locally in the RV, wherever the weather is best. The Akpans spent winter in Florida, and they have been making their way to the East Coast since then. NerdWallet contacted Karen in July to find out if the family was still in Maryland.
They also travel abroad once per month depending on how cheap they are able to get tickets. The next major trip they are planning is to Kenya.
They are still working to pay down their debt. They paid down their $6,500 auto loan last summer. They also paid $18,103 on the timeshare, and $5,527 to the Internal Revenue Service. They are now negotiating the amount they will pay off some credit card debt.
Karen regrets not having invested last winter but she and her family have made every effort to make plans for the future. Sylvester and Karen regularly contribute to brokerage accounts as well as Roth IRAs and 401(k). Aiden, who also has his own custodial IRA, is on the payroll.
Aiden gets more than just retirement savings. He also receives intel. At 14 years old, his mother left Cameroon to move alone to the U.S. She didn’t have any opportunity to study personal finance as she lived with her extended family. She is making sure that her son is well-informed. Karen says, “If you ask him about an index fund, he would be able to explain it to me.”
How to get rid of your debt
A large portion of household budgets is spent on housing. Karen explains that her family was once “house poor”. Karen recommends looking at ways to reduce housing costs. For example, could siblings be allowed to share a room in a smaller house? Are there areas with lower living costs?
Some people will not be able reduce their income or increase it. These strategies may be a good option if you are struggling with debt.
- The debt snowballPay off the smallest amount of debt first, and then pay down all other debts. Next, move to the next small debt.
- Debt avalanche:Pay the lowest interest debt first, while paying the minimum on all others. Next, pay off the debt at the highest interest rate.
An emergency fund will help you avoid taking out more debt when faced with a major expense. Start with at least $500 to put in savings. You should aim to contribute regularly to your savings account so you can cover at least three to six months of living expenses.
Karen offers one last tip for dealing with the challenges of repaying debt. Take what you can and be kind to yourself.
Photo by Alyssa Lynne Photography. Credit to Karen Akpan
Publited at Thu, 19 August 2021 00.16.04 +0000