You don’t need us to remind you that American households were crushed by the Great Recession – so much so that today, the gap between the rich and the poor has never been wider and the average family with a credit-card balance is grappling with $15,611 in debt.
But not all is bleak. Five years since the recession officially ended, more and more stories of families overcoming insurmountable financial obstacles have begun to emerge. We’ve taken a look back at 2014 and picked our top five most inspiring personal finance stories of the year. These personal finance heroes have tackled six-figure debt, redefined the idea of retirement and turned their lifestyles upside down. In addition to revisiting their journeys, we caught up with several of our favorites to see how they're faring today.
No. 5: Kim Mathis managed to pay off $5,000 in one year while earning just $21,000.
Compared to the other debt comeback stories on our list, Philadelphia native Kim Mathis’ triumph over her $5,000 credit debt load may not seem all that, well, inspirational. But trust us -- this single mother of two deserves all of our kudos. As she told Credit.com’s Gerri Detweiler earlier this year, Mathis quit her job at a cable company to assume full responsibility for the care for her mother and father, along with her youngest daughter, who was diagnosed with cerebral palsy.
When times got tough, she turned to credit to bridge the gap. She eventually decided to go back to school to earn a certificate in massage therapy, a trade that would help bring in extra income and allow her to be more proactive in her daughter’s physical therapy regimen. Her turning point came when she enrolled in a debt-management plan with a debt settlement company. A credit counselor mapped out Mathis' budget and helped consolidate her debt into easier payments. Meanwhile, Mathis set her sights on applying for low-income housing through Habitat for Humanity, which she was finally approved for in 2009. In the spring of 2014, she kissed the last of her debt goodbye.
“My life now is much better,” she says. “I’m blessed and thank God every day for what I have."
No. 4: The Brandow family paid off $109,000 worth of debt in just four years.
Brian Brandow was planning his family’s annual summer vacation four years ago when reality hit him: There was no way they could afford it. Their credit cards were completely maxed out. At the time, Brandow, who lives with his wife and three children in Long Island, N.Y., was earning well over $100,000 per year as an IT manager. When he finally took stock of his credit card bills, he realized his debt had nearly eclipsed his annual income -- they owed $109,000.
Like Sandy Smith, another member of our list, Brandow decided to tackle his debt the old-fashioned way. He drew up an Excel spreadsheet and designed a budget that would fit his family’s needs. They went to their local credit union and enrolled in a debt-management plan. His wife went back to work as a retail supervisor to bring in extra income. They made their last credit card payment in September, a full two months ahead of their schedule. And they aren’t looking back.
“We have shifted gears and now have turned our attention to building wealth,” Brandow says. “Our goals now are set on a fully funded emergency fund, retirement savings, and college funds for our three children [and] teaching them not to make the same mistakes we have made with money.”
No. 3: Sandy Smith paid off $50,000 worth of debt in two years, despite a six-month bout of unemployment.
Queens, N.Y.-native Sandy Smith, 36, got into debt the same way millions of young people do today: By investing in her education. Between her undergraduate degree and her MBA, Smith was $75,000 in the red before she even kicked off her career. After graduation, she decided to start her own boutique, and business soared in her first year. But the Great Recession (combined with a poorly timed construction project nearby) forced her out of business, leaving her more than $120,000 in debt.
She considered filing bankruptcy briefly but eventually decided against it. Instead, she went to extreme lengths to force herself to budget. When she got a new job, she turned off direct deposit on her paychecks and chashed them. She socked away the majority of her income for her bills and used the envelope system to budget the remainder. To generate extra income, she took on freelance writing gigs and sold cell phone cases on Amazon.
When she was laid off from her job, she continued to pay off her debt for six months (she received a severance package) and eventually got work as a temp for nine months. That job is now full-time. In October, she reached major milestone: she had paid off $50,724.79 — nearly half — of her $120,000 debt.
“I felt as if I had just finished running the New York City Marathon and had shoved the previous winner right out of a guaranteed podium spot,” she wrote. “I won.”
2. Lynne and Tim Martin traded their home for life around the world.
We first came across Lynne and Tim Martins’ story through the debut of Lynne’s memoir, “Home Sweet Anywhere.” In the book, Lynne, 73, tells the story of how she and her husband decided to ditch their comfortable life in Paso Robles, Calif., sell all their possessions, and spend their retirement bouncing around the globe.
Their new mantra? "Postpone nothing," Lynne says.
It took decades to build the nest egg that now sustains them overseas. Lynne was always an aggressive saver, but Tim, like most Americans, didn’t start saving for retirement until he was well into his 40s. To catch up, he dabbled in real estate for a while and ran a small electronics firm.
Today, their joint savings effort has afforded them a pretty comfortable travel lifestyle. The $6,000 monthly stipend that they use to live while on the road is sourced entirely from returns on their joint investment portfolio. They use Homeaway.com and VRBO.com to rent apartments, condos and sometimes houses, which are largely cheaper than extended hotel stays.
We caught up with Lynne for an update on how their travels are going. They’ll be heading to Mexico for two months in the new year, followed by their first trip to Asia.
“Financially, everything has gone just as planned,” Lynne says. “We are still traveling and home free. So far our home-free lifestyle has worked out beautifully.”
No. 1: Amy and Mat Kroezen paid off $118,000 worth of debt in four years.
The Kroezen family from Atlanta, Ga. is our pick for the most inspiring personal finance story of the year. As U.S. News & World Report’s Kimberly Palmer reported in January, Amy Kroezen, an interior designer, and her husband, Mat, a dance instructor, managed to pay off $118,000 worth of debt in just four years (the bulk of which was in the form of student loans). It was ambitious, to say the least. At the time, they were earning less than $70,000 in combined annual income.
You don’t pay down that kind of debt by clipping coupons and packing lunches alone. The couple drastically reduced their expenses to the point where they could subsist on only one of their salaries, which, after taxes, rounded out to about $19,000 per year. They used the other paycheck to pay off their debt, for monthly payments that totaled about $3,000.
In order to squeeze into their new budget, they moved into a low-rent apartment, learned how to build their own furniture, and even grew some of their food. And though they were scraping by each month, they didn’t neglect their savings. By the time they had paid off their debt, in July 2014, the couple had managed to save another $20,000 for a down payment on a new home.
“We feel like we’re on top of the world,” says Amy, 30, who we caught up with this week to see how they have been faring. “Even though we’re making nothing compared to a lot of other people, we don’t have this debt hanging over our heads anymore.”
That freedom has afforded them an opportunity to pursue a long-time dream: Becoming part owners of a ballroom dance studio in Atlanta, where Mat is currently working as a manager.
“This year has been simply amazing,” Amy says. “We can still live frugally, and now it's just our way of life. It no longer feels like we are missing out on something."
Do you have an inspiring personal finance story to share? We'd love to hear from you: firstname.lastname@example.org.
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