I love successful debt reduction stories. They give everybody inspiration, but just for folks in debt, but also for those who aren’t in debt because it shows us the wonders of financial goal setting and determination to achieve them. Cathy, who is the Chief Family Officer of her family got rid of her student loan debt in April this year. Unlike many folks, she did not incur any credit card debt when she was in college. Instead, she and her family made the effort to pay the student loan off faster. She is now focusing on paying off her mortgage (which she estimates can be done in six years).

I asked for an interview after she announced her success at paying off her student loan (which she agreed). BTW – my questions are in bold.

Cathy – Many students graduate with a ton of credit card debt. Yet, when you finished law school, all you had was student loans. What did you do differently from your student peers (whether spending or lifestyle) in college or grad school?

I wasn’t as frugal as I should have been in retrospect, but I also knew enough not to spend beyond my means. So, while I had friends who used their credit cards to pay for vacations and things like that, I told them that I couldn’t afford to go. I distinctly remember skipping a celebration cruise to Mexico after graduation for that very reason and not wanting to admit that I couldn’t afford it, but no one blinked an eye. And I know not going was the right thing to do. I just wish I’d known more about using coupons, ing generic, etc., so that I could have taken out less in loans.

How often did you get credit card offers in school?

I honestly don’t remember.

In your blog, you had a short post about your “tipping point” where you realized you had to take some action to get rid of your student loans. Just for my readers, can you tell us what was that tipping point again?

It was when I graduated from law school and saw how much I owed in student loans each month. That’s when I realized that I needed to learn about personal finance and change my financial situation. (There’s more about how my financial habits changed in the original post here: http://www.chieffamilyofficer.com/2008/06/my-personal-finance-tipping-point.html.)

You mentioned in your blog that you used a combination of the debt snowball method and snowflakes method to reduce your debt. Just for the benefit of my readers, could you give a brief description of what they are?

Others have already described these better than I ever could – Moolanomy has a good explanation of the snowball here. And the originator of the snowflake, PaidTwice, explains that here.

Most people would agree that credit card debt is bad, but that mortgage debt is “good”. Personally for me, all debt is bad. I was renting the first 10 years of working but I now have a mortgage to pay (though I never had any credit card debt). This to me felt like having credit card debt! What made you so obsessed with paying off your mortgage as soon as possible?

Well, I wouldn’t say that I’m “obsessed” with paying off the mortgage. The reason we’ve decided to make that a priority is because when it’s paid off, we’ll have quite a bit more flexibility in terms of our options (such as private school vs public school for the kids).

Do you use any budgeting tools like YNAB or Quicken? How do you monitor your household monthly spending?

I meant to try YNAB but never got around to it. I’ve used Quicken in the past, and it’s what gave me the framework for how I manage our spending now. Most of it’s in my head at this point.

As I read your blog, I get the sense that perhaps Marc (husband) and yourself are on the same page as far as finances go. Did you get that feeling (or did you know) before you married him. Did you consciously or unconsciously made sure that he was financially responsible?

We are pretty much on the same page, and I do think it’s important that we’ve been that way from the beginning. It was absolutely important to me that he was financially responsible, but I think it’s a character trait that’s indicative of a person’s overall character. I suspect you’d be hard pressed to find someone who is financially irresponsible and yet responsible in every other way in life.

Do you actually sit down with Marc and discuss your finances or does he trust everything to you?

We discuss almost everything, but there is a great deal of trust that goes both ways. All of our accounts that can be joint are joint, and we don’t question every purchase the other person makes. We do, however, each have a separate credit card just so that we have separate credit in case something were to happen to the other person.

You seem to acknowledge that you cannot be a total tightwad and be frugal to the last cent on everything. You mentioned on your blog about pampering yourself once in a while and also things like being prepared to spend slightly more on take outs because of the “dinner time stress”. Do you actually budget or plan for the occasional splurges?

A little bit of both. The occasional splurge doesn’t really get budgeted for unless it’s substantial. Things like spending more to relieve stress on a regular basis get factored into the budget.

Being who I am, I have to ask this question. How many credit cards did you have and how do you make use of them? (like cash back or airmiles etc) Which cards do you have and like?

I have two cards and get cash back on one and miles on the other. We just started using our Amex Blue Cash as the primary card since we haven’t been flying due to fear of traveling with the kids (we’re in no rush to make that happen).

Like yourself, I pay off my bills in full. One of the ways that I have always spent less than I earn even though I’m using credit cards to pay for almost everything is that I do not spend on things I do not need (even if they are on sale). In your blog, you mentioned an occasion where you stopped ing a rice cooker with a timer even though you would love one. Aside from stopping yourself from ing things even if they are on sale, how do you ensure that the credit card is not abused?

I think knowing that you are going to pay the bill in full in a few weeks is actually a great way to stop from unnecessary spending.

You’ve spent a considerable effort in eliminating your student debt and now would like to reduce your mortgage principle as well. How do you balance that with having an emergency fund? How many months of expenses do you have in your emergency bank account?

Depending on how drastically we cut our expenses, we have six to twelve months’ worth in the EF. Finding a balance is all about finding what works for you. Of course, we’ve had our EF for a long time now. Back when we were starting out, building the EF took priority over paying off the principal on debt.

You blogged about your failed all cash experiment where you tried to just use cash. You mentioned how difficult it was with your kid and carry tons of $1 bills and quarters. Would you still recommend this “experiment” to others?

Why not? The worst that happens is you give up as quickly as we did. On the other hand, you might learn a lot about your spending habits and/or reduce your spending.

You mentioned that you are setting aside money in UTMA accounts for your children. As you know once they reach the age of maturity, with a UTMA account, they can use it however they like. Have you considered a 529 plan instead where you can only use it for “education”?

The UTMA accounts are actually for that purpose. It’s money that the kids have received as gifts. It seemed a better use than going out and ing them toys on top of the tons of toys they already have. I’m certain that when they’re older, they’ll appreciate the fact that Mom and Dad saved the money for them. And we’ll talk about what the money should be used for before they’re given access to the accounts – things like living expenses, car insurance, etc. Education money is saved separately.

You are an attorney, a mommy and your family’s CFO. And you blog diligently. How do you manage your time? Do you plan your meals ahead? When you do actually blog? I would really like to hear your time management techniques.

I wish I had easy answers. The real secret is the world’s most amazing husband and father. Other than that, I can only admit that I often blog at the expense of housekeeping.

You mentioned about getting roomba, the robot vacuum cleaner? How is that working out? And have you invested in any other “time saving” gadgets?

It didn’t work out. The long hair was too much for it to handle, and I don’t think I cleaned the brushes properly. I love my slow cooker dearly.

You stated that you could pay off your mortgage in six years. I have no doubt you will achieve that and I wish you all the best. Thanks you so much for your time.