Achieving Debt Freedom In 18 Months: A Financial Success Story
Rachel Burris7-minute read
September 21, 2020
On a cold, snowy day in Detroit, LaKeisha walked to work in tears, feeling suffocated by her financial burdens. In the space of a week, she had lost a tire to one of the city’s many potholes, and her car had been broken into, leaving a window shattered.
After dealing with the tire, she had had to call all the junkyards in the area to find a replacement for the window. After all, the dealerships were too expensive, and she couldn’t put in a claim with her insurance for fear her premium would go up.
Her income was in the mid-40s, barely more than the $40,000 of debt she had racked up. She had student loans, a car loan and three credit cards that she didn’t think she’d ever be able to pay off.
As she stumbled from the parking garage to her office building, LaKeisha says she just kept thinking, “Where did I go wrong? I went to school. I got the college degree. I went back to school and got a master’s degree. I’m not making all the money, and I have this debt. What am I doing wrong? Why is this so hard?”
LaKeisha was one of the millions of Americans drowning in debt. If you, too, are struggling, you may feel that there’s no end in sight. But there can be if you learn from those who have triumphed over it.
Some financial success stories are impossible to follow and seem too good to be true. Believe it or not, this article is not one of them. This is the story of LaKeisha Mallett, who pulled herself out of stifling debt in 18 months with just a book, a radio show and sheer willpower.
Where LaKeisha’s Story Began
LaKeisha grew up in an average, middle-class neighborhood in the inner city of Detroit. They weren’t poor, but as LaKeisha says, “I never saw anyone winning with money that did it honestly.”
Her mom was a single parent with a high school education, who did the best she could to keep a roof over their heads. She kept steady employment but couldn’t afford to buy a home until LaKeisha was a teenager. So, LaKeisha’s early years were spent moving around a lot.
Since financial literacy is not taught in school, most children learn from their parents. LaKeisha learned what she could from her mother. “My mom’s biggest thing was ‘just don’t spend it all.’ But what to do with the part that wasn’t being spent – I didn’t know what does ‘not spending it all’ mean,” says LaKeisha.
LaKeisha decided that the best path to a better life was to go to college. So, she took out student loans and got a degree in telecommunications. “I thought college would be my gateway to making a lot of money and living the good life,” says LaKeisha.
After she graduated, she took a job at a telecommunications company in the Metro Detroit area. She was making $29,000, and she quickly realized that her entry-level salary wasn’t going to cut it.
As each year went by, her debt continued to mount. Her student loan payments were upward of $300 a month. She was struggling to pay off that debt while still balancing her car and everyday living expenses. She had three credit cards to help her handle costs.
LaKeisha wasn’t living extravagantly by any means but still wanted to enjoy life as much as she could. She went on vacation and paid for it with a credit card. When she came back, she had to use her tax refunds to try to pay off the bill. She was caught in a vicious cycle and wasn’t making enough money to keep her head above water.
She had listened to her mother and was saving some money. Yet, after her tire blew out and the window of her Chevy Cavalier was smashed in, all of her savings were wiped out. That’s when the weight of her financial pressures became too great for her to bear.
In December 2007, LaKeisha’s coworker found her sobbing on her way into the office. When LaKeisha explained what was wrong, her coworker told her to create a financial plan and recommended that she listen to Dave Ramsey’s radio show.
So, with $40,000 of debt, a low salary and no savings, LaKeisha started to turn her life around.
The Secret To LaKeisha’s Financial Success
LaKeisha was guided along the journey to debt freedom by two men: Dave Ramsey and David Bach. Dave Ramsey’s radio show had not made it to Detroit yet, so LaKeisha streamed it online. On the show, Ramsey explained how listeners could rid themselves of all debts and secure their financial future through his Baby Steps. The first step was to save $1,000 to create an emergency fund.
But as she started to follow Ramsey’s Baby Steps, LaKeisha decided she needed to gain a better understanding of personal finances. “Growing up, there were no conversations about saving, investing, making your money work, making it work for you or anything like that,” LaKeisha says. “So, I went to the one place that I thought would give me the answers, which was a book."
Pay Yourself First
The book that LaKeisha turned to was David Bach’s “Smart Women Finish Rich.” In the pages of Bach’s book, she discovered a revelatory idea: paying yourself first. “I had never heard of that concept,” says LaKeisha. “He said, you pay all of your bills, you pay everyone else, you should pay yourself first. Pay yourself 10% of your income.”
So, LaKeisha started taking 10% of every paycheck and putting it into a savings account. By paying herself first, LaKeisha was able to save $1,000 for an emergency fund. She had accomplished Ramsey’s first step. The second step was to use a snowball approach to pay off all debt.
By the time LaKeisha began attacking her debt with a snowball approach, she had already developed a habit of saving. She continued to put 10% of each paycheck into her savings account. According to LaKeisha, using the two strategies together was vital, as it ensured that she didn’t fall back into old habits of spending.
“I was running on autopilot and didn’t think twice about putting the money away,” she says. “I just did it every pay. And I still functioned with what I had leftover.”
As LaKeisha grew her savings, here’s how she chipped away at her student loans, car loan and three credit card payments.
The Debt Snowball Approach
“The snowball approach is one of the easiest, most practical ways to get out of debt,” says LaKeisha. You begin by listing all of your debts from smallest to largest. Then, you pay the minimum amount due on all of your debts, except for the first debt on your list, the smallest one.
You concentrate on your smallest debt, using every extra penny you have to pay it off. Any money you come upon – whether from a bonus or a tax refund – goes toward paying off that first debt on your list. Once you’ve paid it off, you continue paying the minimum on the rest of your debts and focus on the second debt on your list.
While this approach may sound too simple to really work, it does in fact lead to success because it provides you with the framework necessary to pay off everything. When LaKeisha started using it, she wasn’t sure it would help her. But she was determined to put the strategy to the test.
She cut out all spending. She didn’t go shopping. She didn’t take vacations. If it wasn’t a necessity, she didn’t spend money on it. Every action she took was intentional. Every cost that she cut went towards paying off her debts.
She hadn’t calculated how long it would take her. She just followed Ramsey’s instructions, taking it one step at a time.
On a sunny day in August 2009, just 18 months after she had begun her journey, LaKeisha wrote her last check to the U.S. Department of Education. She was finally debt-free.
LaKeisha describes that day as feeling like an out-of-body experience. She was the first person she knew who didn’t have any debt, and no one could understand how she had paid it all off.
“Looking back on it, the journey to debt freedom was just so much easier than that hamster wheel I was on, just trying to get ahead financially,” she says.
When LaKeisha was piled under debts and had no savings, it seemed to her that there was always something going wrong, something unexpected that she had to pay for. But once she started to accumulate an emergency fund and had financial resources available, the emergencies occurred less and less.
Despite the financial pressures she had to face along the way, LaKeisha is now grateful for all of the steps she took during her journey. While making more money may have made her life easier, she thinks a higher salary would have appeased her. Without the struggle, LaKeisha believes she may still be in debt today.
Paying It Forward
After her success, LaKeisha started sharing the steps with everyone she worked with. “Because to me, it was like, ‘Oh my gosh, this happened in 18 months!’” As she says this, LaKeisha takes a breath. She exclaims with renewed enthusiasm, as if the thought is occurring to her for the first time: “Oh my goodness, everybody could do this! You could really do this!”
What was strange to LaKeisha was that her friends were amazed by her success, but they didn’t seem inclined to try to use the same approaches to improve their own financial burdens. Instead, they seemed convinced that their debts were just an inevitable part of their lives.
But LaKeisha found a way to pay it forward. She became one of Dave Ramsey’s counselors and taught his Financial Peace University. Now, as a financial strategist and the chairwoman of Mallett Coaching, LaKeisha helps her own clients achieve financial freedom and prosperity.
For those who are still struggling to find their way out of their financial burdens, Lakeisha says, “Take a breath. Everything is figure-out-able – even if that’s not a word. One of the things I say is you can overcome debt. You don’t always have to carry it with you.”
The critical thing to remember is that it never helps to wait. You can start working toward financial freedom now, no matter how high your debts are, no matter where you are in your life. As LaKeisha says, just tell yourself: “I’m not going to let it overtake me; I’m going to overcome it!”
To begin your journey to debt freedom, sign up for Rocket HQSM. With our free tools, you can keep an eye on your credit score, get information on how to improve your finances and start planning for your financial future. You can also increase your financial literacy by reading more articles on personal finances.
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