I had the distinct pleasure of meeting Amy Nickson of Working Moms Word who brings a different perspective to personal finance. I suggested we exchange interviews on each other’s blogs. Thus I’ve drafted some questions that I posed to Amy in the interview which follows.
I had forgotten much of when I was digging out of debt and Amy brings some unique perspective. I managed to avoid some of the ways our society sets financial traps for people and thus she has more experience in freeing herself that we should all heed.
Amy, please introduce yourself and share your story:
Before starting the interview, I would like to share my debt payoff journey, because, it helped me to learn a lot of personal finance lessons.
I was a pampered daughter of a single mother. My mom gave me every means of happiness and support. I grew up in a lavish way and I never realized the importance of living an organized and disciplined financial life. Well, later I understand the benefit of living a peaceful debt-free life.
Amy’s debt story
When I entered the college, I became a spendthrift, I used my credit cards randomly to live an extravagant life. After completing my graduation, I got a small job and soon I took out an auto loan to buy an expensive car.
That time, my mom’s health wasn’t well. She was diagnosed with liver cancer. Her health started deteriorating and she passed away in the hospital after 15 days of immense suffering.
The time was absolutely devastating for me. My sweet mom left me, even my boyfriend wasn’t there to support me.
I had to pay off $88,000 debt including credit card debts, student loan, and a car loan.
I had no option to sell the house to get out of debt. But, I was determined to get out of the bad financial phase without losing my house.
I talked to one of my friend who is a financial advisor for suggestions. My friend told me to opt the debt settlement program to pay off my credit card debts.
I opted the settlement service and paid off my $16,000 credit card debt which had a higher interest rate.
But, my earning was low so I couldn’t able to continue the settlement service.
Later, I decided to pay off the $35,000 credit card debts on my own.
So, I started working on the part-time job to boost my income. That time I decided to formulate a budget to set aside money.
Since my plan was following the debt snowball method, I had to save extra money to make larger payments toward the smallest debt and minimum payments to the rest of the debts.
I stuck with my plan and followed the debt snowball method. It helped me to pay off the credit card debts in 3.5 years successfully.
My car loan was too high; I sold the car to pay off the loan.
I was able to get out of the student loan debt smoothly because the credit card debt journey had taught me to live life within my means.
I started saving more money so that I could pay a little extra than the minimum payments toward the student loan.
The extreme money-saving strategy helped me to pay off the entire student loan in next 3 years.
In the meantime, I left my full-time job and started doing freelancing as a full-time work. After a few months, I started working as a full-time blogger.
Currently, I am a freelancer and a contributor writer for the Oak View Law Group. I earn my bread and butter from there. I have a blog Working Moms Word where I share personal financial tips and suggestions.
Honestly, the debt journey helped me to become financially disciplined. I learned many financial lessons.
I learned how to create a budget, set aside money, and different types of debt relief method work etc.
1. Dave Ramsey says never ask a fat guy how to diet, or a couch potato how to train. What gives you an edge where personal finance is concerned?
Well, I am not a financial expert. After completing the graduation, I started working in a small consultant agency as a writer.
I started part-time working on freelancing writing projects. Most of the projects were on finance. So I had to go through many financial magazines, websites, books etc. Most of the tips I mention in my articles are tried and tested by me.
I prefer to research to get data, quotes and related resources from the search engine before writing on any financial topics including financial independence, personal finance, retirement, debt, bankruptcy, etc.
Also, the financial hardship (debt journey) had taught me some useful financial lessons in a hard way.
2. Which famous cat (e.g. Garfield, Felix, Keyboard, Bill) do you most closely identify with, and why?
It is a sweet question indeed :smile:. Well. since my favorite color is blue and I love music a lot, I think I am like “Keyboard”.
3. If your current plans are perfectly realized, what will be your net worth in 1 year, 5 years, 20 years?
Not much because I just got out of my student loan debt burden. I bought a new car using my savings. Currently, I am trying to build a good savings cushion for my future. But I hope I can soon be able to invest money to grow.
4. What is the worst thing that can possibly happen to you financially?
For me “Debt” is the worst thing, which can create the biggest mess in one’s life. If I stop living a financially disciplined life and start spending money more than my income, debt trouble can arise in my life again.
5. What is the most important thing everyone should do financially?
I think “Budgeting” is the most significant thing that everyone should follow to organize their finance. I know there are many debates on it. Some people argue that they can manage their finance without following a budget. Well, exceptions can be there. But for me, budget always worked like a “life-saver”. When I was in deepest financial trouble, it helped me to save extra money. Thus, I was able to pay off my credit card debts and student loan on my own. The budget helped me to meet my basic expenses while making debt payments. I still follow a budget to track my money.
6. What is the least important thing everyone talks about financially?
I think, “Envelope budgeting” has lost its importance because you can easily manage your money by simply following a budgeting app on your smartphone. Some free budgeting apps work really good. You can easily understand where your money is going by using a budgeting app.
7. What is the smartest/stupidest (pick one) thing you’ve ever done with the money?
I sold my expensive car to pay off the auto loan. I think that was the smartest thing I did with my money. Since I had to save money to pay off other debts, I rented my garage and a portion of my home to earn extra money. After getting out off debt, I bought a small car with cash. It helped me to save money on the interest rate. I think, buying an expensive car was a foolish decision since the value of a car depreciates with time. And taking out a loan for buying a big ticket item that depreciates with time is a mistake, save cash instead.
8. What will you do in the next stock market crash?
Stock! A completely new thing for me. I think an advisor can guide a person who is completely new to stock market like me! :smile:
9. What is your favorite investment vehicle?
I think investing money into the retirement account is best. Well, I haven’t started yet. But, I have a plan to secure my retirement days by investing money into a Roth IRA. My contribution can grow tax-free. I can make withdrawals tax- and penalty-free after I reach the age of 59 and more. But people who want to become rich can invest money in mutual funds as well. It is a less risky investment than stock and gives a good return after a certain time.
10. What is the best way to pay off debt? Snowball or Avalanche method?
Yes, you are right. Here I would like to explain the two methods first.
In debt snowball method, you need to target the smallest outstanding balance first. You need to make larger payments on the smallest debt while paying the minimum to the other debts. After paying off the smallest debt, you need to target the second smallest debt. By doing so, you will be able to pay off your debts.
But, in the debt avalanche method, you need to target the highest interest rate debt first. You need to make the largest payments to the higher interest rate debt while paying the minimum for the rest of the debt. After paying off the highest interest rate debt, you need to target the second highest interest rate debt. Following this method also helps to get out of debt.
Debt snowball method vs Debt avalanche method
Both methods work great. But, which method is perfect for you depends on some factors like your affordability, opinion of saving money on interest, goal, and motivation.
Because, in debt snowball method, you can pay off your first debt easily. It will take less time since the debt amount is small.
After paying off the first debt, a sense of confidence can grow in you. But the drawback is, it will take a longer time to get out of the debt completely.
But, in debt avalanche method, you can’t easily pay off your first debt because the interest rate of that debt is higher. It will take a longer time to pay it off. But by paying off the higher interest rate debt first, you can save a significant amount.
But once you pay off the highest interest rate debt, you can easily pay off the other debts you owe. It will take less time to get out of debt fully.
Since paying off the highest interest rate debt takes time, people lose their interest and focus. But sticking to this method can make you debt free fast.
lastly, I agree that the journey wasn’t smooth for me, but it was a turning point in my life. It helped me to find out the best profession for me. And of course, I am living a peaceful debt-free financial life.
I’d like to thank Amy for taking the time to do this interview. The Mad Fientist’s Hierarchy of Financial Needs provides a useful context for Amy’s remarks. I feel she demonstrates that she’ll win the Survive & Sustain level. Amy’s personal financial situation will be moving on up to the Accumulate and Financial Independence much sooner than she expects.