How four sisters demolished their debt

These four sisters decided to band together and tackle their debt using one unified budget and plan. See how they did it.

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When four 20-something sisters in the small town of Plainview, Texas, realized they were all drowning in debt and scratching to get by, they decided to band together and tackle their problem as a family.

“We had accumulated $182,000 in student loans, credit cards and car loans collectively,” said Rufina Barrientos, a clinical laboratory scientist, now 30. “Our yearly income came out to about $106,000, so it sounded plausible that we could effectively pay down our debt in three years. Being the youngest, I thought I was getting the best deal out of the arrangement. I was two years out of college, when most student loans take 10 or more years to pay off. Score!”

What initially seemed like one of those ideas you get late at night, born after a couple cocktails and then forgotten by morning, turned into a solid plan. It was 2010 and Barrientos and her sisters Dee, Ana, and Amy were ready. “We’d had our disagreements in the past, but we grew to respect each other as women out in the real world,” Barrientos says. “So not only did we decide to live together, but help each other pay our loans and debt regardless of how much we came in with.”

The sisters met every Sunday to talk about their collective and individual financial status, as well as what they’d need for meals during the week. “These sessions were like therapy too because only three other people in the world knew what I was going through, and it was nice to have company during our joint quarter life crises,” Barrientos says. “The emotional setbacks were overshadowed by the amount of traction we were hitting with our debt.”

How they saved money

They rented a $1,000 three-bedroom duplex in Dallas (the den was converted to a fourth bedroom), saving them $400 a month off the bat. Then they drew up a contract. The rules were relatively simple:

  1. They direct-deposited all their paychecks to joint account, which paid monthly bills, groceries, medical bills and car maintenance; all the leftover income would be thrown to the debt.
  2. They planned to tackle the smallest debt first , ala Dave Ramsey. That meant credit card debt got paid off first, student loan debt last.
  3. They each got $75 in spending money every two weeks.
  4. They were religious about recording everything. “We took advantage of our sister Ana’s borderline OCD tendencies and she made spreadsheets for everything: debt, income, monthly bills and even groceries,” Barrientos says.

They stopped shopping for anything unnecessary. “We basically became minimalists,” Barrientos said. They also became fierce bargain-hunters by:

  • Studying grocery store sales and going to Wal-Mart and invoking its price-match deal.
  • Cutting cable and using Groupon for going out to movies, the library for books, and Redbox for renting movies. “That also cut the advertising we were exposed to so we didn’t know what we were missing out on most days,” Barrientos says.
  • Scoring clothing at thrift stores.
  • Negotiating. “Making phone calls and being that person who demands to speak to a supervisor is something that we embraced during this time,” Barrientos says. For example, Amy’s loans had gone to collection, and she was able to negotiate dismissal of fees in exchange for nine months of automatic payments. She also avoided paying a traffic ticket by showing up at court and going on probation.
  • Shopping for the best deal on insurance. They found a policy that would take payments automatically from Ana’s check at work, saving them $1,130 in a six-month period.
  • When dining out, they split entrees and drank only water.
  • When gifts were required, they got creative: For a baby shower, they donated their organizational and decorating skills instead of buying presents. For birthdays they made a “happy birthday dance” video. For Christmas they took a photo and made their own cards.

How they made extra money

Barrientos took a second lab-tech job on weekends at a hospital in the next town over. Sister Ana moonlighted at her insurance company marketing job by waiting tables at night. Dee, who worked at a pharmaceutical insurance company, was able to take advantage of significant overtime. “That is when our plan went into overdrive.”

Perhaps most important, they learned to negotiate. “During the course of our time together we were all promoted at work, in no small part to being more willing to speak up and letting our superiors know what we wanted and that we thought we were worth it,” Barrientos says. “When I got my second job I made sure to negotiate my salary there as well, I made $400 more a month because of it.”

By January, 2012, they’d increased their combined income by 50% and were taking home more than $15,000 per month.

Results came quickly

Within one month, all their credit cards were paid off.

Within six months, all their cars were paid off.

Eighteen months in, all four student loans were paid off.

“We invited all our friends to come out and celebrate with us at a night club, and we danced all night long. And that June we took our parents to Cancun to celebrate at our first debt-free vacation. We paid everything up front,” Barrientos says.

Once they were debt free, the sisters felt like it was easier to make big decisions. Barrientos moved to Los Angeles. Dee, 33, took a job in Hawaii, Amy, 34, moved to Austin and Ana, 32, got married.

Then they decided to stay together longer and help out other people in their family, including $12,000 to their father to get a work truck and $18,000 so he could renovate their grandmother’s home; and $5,000 to their brother to help pay off loans while his wife was out of work due to an injury. When Barrientos totaled her car, they used the insurance money plus joint funds to buy her a new one within two weeks.

Lessons learned

Barrientos says that it was essential to know exactly how much they owed every month. “Tracking the debt to keep us going, and making a pie chart or some representation of what we had accomplished was a big motivator, month after month,” she said.

It all sounds simple enough, but it wasn’t easy. “Making thousands of dollars a month but only being able to spend a few hundred on our own was rough,” Barrientos says. “Sometimes it felt like our independence was gone because we always had to check in with three people to make a simple monetary decision like asking for an increase in allowance for gas because prices went up. Also, working all the time was not good for our mental and physical health. We would need to speak up for one another and say, ‘hey, you need a day off or you’re going to crack.’ We implemented a ‘sisters day,’ where we would all ask for the same day off and go to a museum or movie, or go bowling, and get dinner together just to hang out and unwind.”

Dee left her job in Hawaii and is living with Barrientos in Los Angeles, working a seasonal job at Dodgers Stadium. When asked if they are still sharing money three years after their arrangement ended, Barrientos said, “Ha! I didn’t even think about it but yes. We are sharing money. We don’t keep track but we use each other’s incomes interchangeably for whatever is needed.”

Topics:
  • Credit
  • Saving and Spending
  • Credit
  • Saving and Spending
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This article was written by Vanessa McGrady from Forbes and was licensed as an article reprint. Article copyright 8/11/2015 by Forbes.
The statements and opinions expressed in this article are those of the author. Fidelity Investments cannot guarantee the accuracy or completeness of any statements or data.
This reprint is supplied by Fidelity Brokerage Services LLC, Member NYSE, SIPC.
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