Business News

How I Decreased Debt: Downsize the Home, Develop the Enterprise

August
18, 2021

Read 7 minutes

This story originally appeared on NerdWallet

In this series, NerdWallet interviews people about their path to taming debt. Answers have been edited for length and clarity.

Karen and Sylvester Akpan

Paid off: $ 201,060 in 18 months

Karen Akpan lost her high-paying clinical research contract in 2019. She and her husband, Sylvester, had no savings and had an estimated gross annual income of $ 50,000 via their travel blog Instagram. But that income just wasn't enough to cover her $ 4,300 monthly mortgage payments – or to curb her six-figure debt.

So they took a few brave steps.

In early 2020, the Akpans sold their house and bought a mobile home. Then they focused on making more money on Instagram. They were able to pay off their debts within a year.

Although the Akpans' path has been unconventional, it points to a hard-to-deny truth: By reducing spending and increasing revenue, more money will be left to reduce debt.

"We were up to our necks"

After losing our job, “we were up to our necks,” says Karen. "We lived to pay bills."

The Akpans were late with mortgage payments on their north Los Angeles home, relying on credit cards. Karen and Sylvester also faced approximately $ 110,000 in student loans and owed more than $ 90,000 for their auto, timeshare, taxes, and other debts.

When Karen and Sylvester sold the house they had lived in with their son Aiden for four years, much of the proceeds went towards paying off some non-student loans – their $ 36,000 pool and solar loans $ 25,000. Between those payments and their agent's commission, they eventually ended up at around $ 20,000.

"We literally used our last penny to buy an RV from the Facebook marketplace and fix it," says Karen. “That was a leap of faith. I just believed that everything would work out. "

Aiden, who is 8 years old and is homeschooled, agreed to live in the RV. “Basically, he's living his dream right now,” says Karen. New Years Eve was harder to sell, but a round eventually came about. According to Karen, "it is now everything to do with RVs."

As the Akpans moved on, "everything changed for the better: our relationship, our marriage, our family dynamics," says Karen. "It was the best decision we ever made to be in this small space and make it work."

"The money just came in"

Next, the Akpans focused on making more money from their TheMomTrotter.com blog and Instagram account, which covers budget travel, homeschooling, and parenting. While Karen had blogged for about four years, she hadn't made much money out of it. So she focused on creating more engaging content.

She was able to raise the prices she could ask brands and eventually brands started reaching out to her. For example, representatives of the YMCA asked her to advertise the summer swimming program on her Instagram page. Then “she created content for the YMCA that was based on my personal experience and that my audience could identify with,” she says.

This is how she works with brands like Nature Valley, National Geographic, Disney Products, Affirm, Crate & Barrel, Circle K and Camping World. The Akpans also made money through YouTube and freelance writing, but about 80% of their income came from branded Instagram content.

Speaking of income, remember how Karen and Sylvester made about $ 50,000 in 2019 through their blog and Instagram?

In 2020, her brand made gross profits of nearly $ 318,000.

"The money just came in," says Karen, "sometimes I don't even understand how it happened."

"I should have invested the money"

The Akpans used this income to tackle their student loans. At the end of 2020, they paid out New Year's Eve balance of about $ 40,000 and Karen's $ 69,000.

While she was looking forward to repaying those loans, Karen had concerns – and still does. “I should have invested the money,” she says.

When her family paid off their loans, Karen says she was just beginning to learn about money. Now that she knows more, she says she put much of her earnings in a brokerage account while making incremental loan payments.

To be fair, the decision to pay off student loans or invest in is a difficult one. It pays to compare the interest rates on your loans to what an investment would yield, among other things.

"I now stand up for everyone"

These days, the Akpans continue to make money from Instagram, homeschooling, and local RV travel wherever the weather is best. You spent the colder months in Florida and worked your way up the east coast this summer. (When NerdWallet connected with Karen in July, the family was in Maryland.)

The Akpans also try to travel internationally once a month, partly depending on the cheap tickets they can get. Your next big trip is to Kenya.

The family also pays debts. Last summer, they paid off their $ 6,500 car loan. And just recently, they paid the remaining $ 18,103 they owed on their timeshare and $ 5,527 they owed the Internal Revenue Service. Next, they negotiate a withdrawal amount for some credit card debt.

If Karen has regretted not investing last winter, now she and her family are doing all they can to plan for the future. Karen and Sylvester regularly contribute to broker accounts, as well as Roth IRA and 401 (k) accounts. Aiden is also on the payroll with his own IRA.

Aiden receives more than just a pension – he also receives information. His mother moved to the United States from Cameroon alone at the age of 14 and had no opportunity to learn about personal finance while living with an extended family. So she makes sure that her son is informed. "If you ask him what an index fund is, he could explain it to you," says Karen.

How To Get Rid Of Your Own Debt

Housing usually eats up a large part of the household budget. That was certainly the case with Karen, who says that she and her family used to be "poor". Although she doesn't recommend RV life to everyone, Karen suggests looking for ways to cut housing costs. For example, could siblings share a room in a smaller house? Is there an area with a lower cost of living to explore?

Not everyone will be able to reduce or multiply their income. When faced with debt, consider one of these strategies:

Debt snowball: Pay off your smallest debts first while paying the minimums on other debts. Then move on to your next smallest debt, and so on.
Debt avalanche: Pay off the highest interest rate debt first while paying minimums for the others. Then pay the debt at the next higher interest rate.

Keeping an emergency fund can also help prevent you from taking on additional debt when you face large, unexpected expenses. Try starting with $ 500 in a savings account. Ideally, you will contribute regularly to cover the cost of living for three to six months.

One final piece of advice to navigate the ups and downs of debt settlement: "Have mercy and take it easy," says Karen. "Do what you can and forgive yourself for the mistakes you made."

Photo by Alyssa Lynne Photography, courtesy of Karen Akpan

Laura McMullen writes for NerdWallet. Email: lmcmullen@nerdwallet.com. Twitter: @lauraemcmullen.

Related Articles