How Kelvin and Aja McClanahan Paid Off $120,000 of Debt


I first spoke with Aja McClanahan about her family’s remarkable journey out of debt on my podcast Brown Ambition. Nine years ago, Aja and her husband were $120,000 in the hole. Read on to find out how they clawed their way out and what life is like after debt.

When Aja McClanahan, 36, married her junior high sweetheart after college, the Chicago native knew exactly how her life would unfold. They would move to a cozy suburb, where they would have a couple of kids. She would launch a successful business as a translator and work from home, scheduling her hours around her children’s homeschooling lessons.

Her dreams didn’t seem so far out of reach. She and her husband, Kelvin, had tallied up their student loan debt and although the $30,000 tab was daunting, they figured they could handle it. They rented a two-bedroom house in an upper-income neighborhood and Aja leased an office space for her new business venture, charging expenses to her credit card along the way. Within a year of marrying they had a daughter, and paid for childcare while they worked. Another daughter soon followed.

So did letters from debt collectors — a lot of them.

The couple quickly realized they had miscalculated exactly how much debt they had. An extra $30,000 or so worth of student loan debt had been unaccounted for, which was tacked onto $20,000-$30,000 of credit debt Aja racked up financing her business. They had also purchased a new car around that time, which added another $30,000 loan to their balance sheet. All in all, they were more than $120,000 in the red.

One evening, with bills, notices from debt collectors and a court subpoena for an unpaid private student loan laid out on their kitchen table, the couple came to grips with their new reality. “We just said ‘Oh my goodness,’” Aja recalls. “It was terrible.”

The subpoena was attached to a private loan Kelvin, who works for the U.S. Postal Service, took out during an unfruitful stint at a local trade school. A court eventually ruled in the lender’s favor, allowing the company to garnish Kelvin’s wages to the tune of $750 per month.

“We were thinking we could finance our way to the American Dream,” Aja told Yahoo Finance. “You think, ‘I’m in my 20s and I’m gonna have the standard of living my parents have in their 50s.’ We were just trying to keep up with people who were probably further in the hole than us.”

‘You can’t wish yourself debt free.’

If they were going to get on top of their expenses, they knew their housing situation had to change. They could no longer afford the monthly $1,400 for their rental. They packed up their home — and their pride — and moved in with Aja’s mother, which allowed them to free up space in their budget. Aja picked up a copy of Dave Ramsey’s “Total Money Makeover “ for inspiration, and credits the book with teaching them how to budget.

But she’s the first to admit clawing their way out of debt was anything but an overnight process. They stayed current on their loans but were mostly paying the minimum balances required, making progress, albeit slowly.
“We hemmed and hawed a little bit,” she says. “It took us some time to really cut our budget.”

A little less than two years into their new living arrangement, a family friend called with a proposition. The friend had inherited a home in Englewood, a notoriously crime-ridden neighborhood on the south side of Chicago (the same neighborhood that inspired Spike Lee’s recent film “Chi-Raq”) and was offering it — free — to the couple. When they visited the house, a four-bedroom, 2,000 sq. ft. bungalow, they found bulletholes riddling the backdoor.

With two young daughters, they initially balked at the idea. “I grew up being able to bike ride and walk around so long as I came home before the streetlights came on,” she says. That was something she could never envision allowing her girls to do.

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Source: Yahoo | Mandi Woodruff