This article was reprinted with permission from NerdWallet.
NerdWallet interviews individuals about their journey to manage debt. These responses have been edited to be more concise and clear.
Anthony and Jhanilka Hartzog paid off their last $114,000 debt just months before the COVID-19 pandemic struck the U.S.
The Hartzogs were able to make it work after moving from New York City to Dallas. They had created a budget that was affordable and had created additional income streams.
Nearly two years later, we check in with them again: Was it possible for the Hartzogs to remain debt-free despite a global pandemic that decimated many families' finances? What advice do they have to offer others who are trying to get rid of debt?
Budgeting and emergency fund planning
The Hartzogs avoided the financial stress that many people felt after the recession and pandemic. We were able to keep our 9-to-5 jobs so that we didn't need to take on new debt. Anthony, a IT worker, said that this was a huge blessing. Jhanilka, his wife, is a mental health counselor and was able to work remotely.
Their resilience was also enhanced by two elements of their debt reduction plan.
Anthony stated in an email that they had created an emergency fund for at least six months to cover living expenses. This helped us avoid any situations that might have forced us into spending.
Second, they continued to focus on increasing their income. Anthony strongly recommends the debt-snowball method for paying off debt. However, he now adds another element: Finding ways to increase income. He says that everyone understands the basics of debt-snowballing. For me, however, I had to concentrate on increasing my income. This allowed them to throw money at their debts much faster.
They started their own cleaning company, walked dogs and rented their car through a peer to peer app. They purchased a rental property to increase their car fleet.
However, not all income streams are pandemic-proof. In 2020, the couple reduced their spending to avoid getting into debt. Anthony stated that we had to cut back on our spending until we could figure it out.
Maids 2 Match was almost shut down when our cleaning business nearly collapsed. He says that it was necessary to identify what spending was essential. To save money, the couple focused on keeping regular clients on schedule and avoiding marketing costs.
Growing their side hustles
The Hartzogs spent time together in quarantine, which helped them generate new ideas for making money. This included an online course that could be used by anyone who is interested in starting a cleaning company but doesn't know where to begin.
Anthony said that passive income opportunities have been more important to them than low-cost options like their online course. This allows you to use your skills and knowledge to help others get to where they are.
Reading success stories of others was a big part of the couple's journey to debt-free. Now Anthony and Jhanilka can share their story. The couple earned $232,162 in 2019, bringing in $109,000 per year from a mix of their 9-to-5 jobs.
They shouldn't let this extra income ruin their budget. Anthony says that even though their income has nearly tripled in some months, we still budget monthly. This is a reminder that the same habits that can help us get rid of debt can also help us stay debt-free.
The Hartzogs have not given up on their jobs because of the success of their side ventures. Anthony stated that they are both strong-willed and can continue building. He said that they have enough income right now to replace our jobs. But they would like to use their jobs to build more income and possibly buy more assets.
How to get rid of your debt
These strategies can make it easier to pay off your debt.
Make a list of all your debts and develop a budget
You should make a list of all your debts. This includes how much you owe and the minimum monthly payments. Next, create a budget that includes your monthly living expenses and debt payments. This will allow you to determine how aggressively you want to pay off your debt.
Plan a pay-down strategy
There are many tried-and-true ways to pay down debt. These include the debt snowball strategy that worked for the Hartzog family, as well as other methods like the debt consolidation or the debt avalanche. You can do your research to find the best one for you.
Prepare for an emergency
The pandemic taught us one thing: Prepare for the worst. The Hartzogs had six months worth of living expenses saved in an emergency fund. This helped them weather the pandemic without incurring additional debt. Start small with $500 to create a buffer in case of an unexpected expense.
Next: This is what it looks like: She has $131K of student loans, and cannot afford her life despite earning $110K per year. How to get rid of student loan debt quicker
How to increase income
The Hartzogs' story is a great example of the benefits of starting a side business. It can make a huge financial difference to find ways to make extra money. You can wipe out your debt quicker by having more money coming in, whether that's through a job at the local grocery store or monetizing a blog you have written for years.
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Amanda Barroso writes about NerdWallet. Email: abarroso@nerdwallet.com.
