Have you ever found yourself with so much debt that you didn’t even want to tell anyone? Tiffany Aliche has, but that was before she transformed herself into the the frugal-minded “Budgetnista” we know her as today. Learn from this bestselling author of The One Week Budget and thebudgetnista.com as she shares her story and expert tips to take control of your financial freedom.
I’ve read that you lost your job, racked up $35,000 in credit card debt, and added $20,000 of debt on a bad investment all within a short period of time. What was the breaking point that motivated you to turn it around?
I took $20k off of my credit card to invest with a “friend,” who later proved to be dishonest. I made other poor choices that lead my credit card debt to grow to $35k. It was one of the hardest lessons I ever had to learn.
My breaking point was when in an act of desperation, I confided in my best friend, Linda, about my mistakes and current financial standing as a result. Until then, it was a monstrous secret that I kept to myself and it was making me sick, sad, and scared.
Linda’s reaction changed everything. She said, “Awwww, that’s ok, Tiff! We all make mistakes.” She was so kind and to my surprise, a bit nonchalant about the whole thing. I’d been carrying around my secret shame for a year, thinking that everyone would be horrified that “The Budgetnista,” had made such a catastrophic mistake (or at least that’s what I told myself).
Once I got over the initial shame, I was able to put a plan into place and change my financial life.
When someone accumulates a mountain of debt as large as that one it can be an overwhelming task to regain financial stability. What was the first step you took towards financial freedom and what would you recommend to someone who finds his or herself in a similar situation?
Honestly, the first step has nothing to do with paying off the debt. Most people never even get to a place where they can formulate and activate a plan, because of the shame they carry about their debt.
The first step is to forgive yourself. Once Financial Forgiveness is achieved, everything else you do after that is easier and more permanent.
The 5 Steps to Financial Forgiveness are:
Clearly, it’s not possible to wipe out all that debt at once. How long did it take you to balance your books?
It took me about four years. Soon after I decided to begin paying off my debt, I suddenly lost my job. Because of this, my debt-pay-plan slowed down, but did not halt. I used some of my unemployment to continue to pay down my credit card debt.
I never did go back to a 9-5 job and instead started a business (The Budgetnista). Once my business picked-up, I dedicated 20% of my income toward my debt-pay-down. Doing so was the magic bullet that I needed to kill off my credit card debt.
I still have student loan debt (insert groan), and some credit card debt as a result of my business, but not nearly what I was carrying before.
I’ve read that you credit a lot of your budget-mindedness to your father, who holds an MBA in Finance. How did your dad influence the development of your frugal habits as a child?
My father was diligent about teaching my four sisters and I about money from an early age. I can remember asking for ice cream when I heard the ice cream truck jiggle outside. My father would say things like, “You guys (my four sisters & I) left the water running in the bathroom all morning. All of that water cost $5. If you hadn’t left the water on, I could have used that $5 to buy each one of you a cone.”
Guess who NEVER left the water running again…
My father had a knack for turning everyday life into financial lessons. We would also have weekly family meetings where the state of our finances were openly discussed. There was always an air of open, honest transparency around money in my house as a kid.
Can you recall any examples of ways he helped teach you about financial literacy at a young age that our readers might be able to use in their own parenting?
One of the best examples of a financial lesson my dad taught my sisters and I was with the electric bill. Every month he would highlight the bill’s total and compare it with last month's.
Both bills would sit on the dining room table where we could all see them everyday. If the bill went down, we used the excess money for fun things like vacations, family pizza parties, trips to the movies etc.
This is how my dad made finances a family affair. We were all held accountable for our actions, no matter your age. It’s a lesson that still guides my financial life today.
My dad taught us that there is no action too small. Everything affects your finances, so be purposeful.
In The One Week Budget (which can be purchased on Kindle for less than $4!), you pack a 12-step course on money management into just seven days while keeping it fun, informative, and easy-to-follow. What is the number one lesson you want people to take away from the book?
The number one lesson I want people to take away from my book is that money management isn’t hard. It can be done fairly easily and with way less discipline than you think!
One of my biggest takeaways from your teaching is the 'Need it, Love it, Like it, Want it' approach. Can you briefly introduce the concept to our readers?
These are the four questions you should ask yourself before spending any money.
Need it? Love it? Like it? Want it?
Identify and take care of your NEEDS first, ie: food, shelter, clothing (not a shopping spree), water etc.
Next, identify, write down no more than two LOVES. This is very important. We often neglect the things we LOVE, in favor of our LIKES and WANTS, because they tend to be cheaper and take less patience.
If you want to live a purposeful, passionate financial life, you have to make most of your money choices with the first two questions.
NEED = purpose
LOVE = passion
If you don’t NEED it, or it’s not one of your two LOVES, then you should LEAVE it. Spending money on LIKES or WANTS, means you’ll have less money for your NEEDS and LOVES.
We all have our shopping vices (show of hands for shoes, anyone?). What have been a few difficult “like it” or “want it” purchases that have been particularly difficult for you to give up?
Eating out is probably my biggest spending vice. I still struggle with it. One of the tricks I use to keep myself in line is to remind myself of one of my LOVES – travel.
I compare the cost of the meal, with a trip I’d like to take. For example: one dinner out with my friends ($40) = ¼ of a round-trip train ticket to Montreal from New Jersey (where I live).
If I decline to eat out four times, I can go to Canada! That’s powerful motivation.
I even created wristbands and credit/debit card stickers with Need it? Love it? Like it? Want it? on them to help as reminders. I have them available on my site because they became so popular!
In addition to cutting unnecessary purchases from your budget, it’s important to make sound decisions when you do spend your money. Can you please share one expert tip that our readers may not have tried to get a great deal on some of those “need it” items?
My favorite tip has recently saved me $600 / year and a client of mine $1200 / year.
The most this tip has saved someone I’ve helped is $900/month, $10,800 / year!
One of my clients asked her car insurance and car-note company for a discount and was able to save a collective $900/month!!! Why? They had all of these coupons that they never applied to her account. She had been with them for 10+ years and had never asked. When she said she was going to leave them for another company, they “magically” found the discounts.
You probably won’t save as much as she did, but you may save something and that’s awesome too.
As promised, here is a sample script for you to use when calling to ask for your discounts.
“Hello, my name is _________________ and I’ve been a loyal customer for _____ amount of years. I was reviewing my bill from your agency and do to financial constraints; I’m not able to continue paying this amount. I want to remain a customer, is there something you can do to help me? “
1. Be EXTREMELY pleasant. I cannot stress this enough. The person on the phone has waaaaaaaay more power than you know. They are able to do a lot for you, and will only do so based upon how you treat them. So be very, very, nice. Ask how their day is going; say thank you and that you appreciate their help etc.
2. Be persistent. Just because one person says no, that doesn’t mean the next one will. Hang-up and try again.
3. Do a little research. Find out some of their competitor's rates and use that politely against them. That’s how my client was able to save $900 / month after her two phone calls to her car insurance and car-note company.
4. Be prepared to leave. If you really can’t afford the service any longer, you might have to cancel it. If you keep getting no’s, ask to be transferred to their Retention Department. This is the service provider’s last chance to offer you some help, if they don’t, you may have to let them go. I canceled my cable seven years ago after getting too many no’s. It was the best decision, because now I use that money to go on vacations instead. :)
Thank you so much for taking the time to answer our questions! Any last words of advice you would like to impart to our readers?
Yup! My motto is, and what I want to leave you with is, to LIVE RICHER: purposefully & passionately live your ideal life filled with more fun, but for less money.
Like this interview? Check out the rest of our Interview with a Savings Expert series. Have a question for an expert or someone you want to see interviewed? Tweet your suggestions with #SavingsExperts to @CouponPal!