Expert Interview Series: Alex and Cassie Michael of The Thrifty Couple On Personal Debt Management

Alex and Cassie Michael are known as The Thrifty Couple, and they started the site to provide creative tips and financial resources to encourage families and couples to become debt-free and to be good stewards of their money. We caught up with Alex and Cassie to hear their thoughts on debt management, major purchases, investing, and credit cards.

What’s the story behind The Thrifty Couple, and why did you choose to start a blog?

After our wedding day just over 17 years ago, we dove quickly into over $100,000 of consumer debt – starting with having to get a loan to check out of our hotel on our honeymoon. We soon found ourselves months behind on our bills, interest rates skyrocketing due to missed payments, and dreading those nightly phone calls from debt collectors. We had no hope we would ever escape that stress and couldn’t see the light at the end of the tunnel. But believe it or not, we still didn’t wake up and realize our dire situation.

It was on a Mother’s Day when we excitedly found out we were expecting our first-born child; that was what finally woke us up. We rejoiced at the excitement of our first child, yet wept as we realized we were bringing in a child into this hopeless situation. And this was the motivation we needed to pay off our debt just seven years later.

The first 3.5 years we tried some common “crash diet” approaches (attempting to slash our budget by up to 80%) to pay off our debt, but found those approaches difficult and unlivable. It was only after readjusting and coming up with what we like to refer to as our 2% plan (paying off our debt by slow, incremental change) that we were able to pay off over $85,000 in those last 3.5 years.

After paying off that consumer debt, we were continually asked how we accomplished that feat. And it was then that a friend recommended to us that we start a website to share our story and tips with the world.

Our site has three main goals (along with having fun along the way!):

  1. Give hope to those that are hopeless – we’ve been there and know that sense of dread of not seeing a way out
  2. Encourage those that have paid off their debt to stay that way – plus, we share how our plan uniquely prepares you to do so
  3. Encourage others that have never gone into debt to stay away from debt – we love an email from a newly-married couple that shared how our story scared them to death – and more specifically scared them from following the same path we started down so many years ago

Do you think that Americans are finally starting to make smarter financial decisions? Or do you feel that we’re still spending money too freely and getting into debt?

It’s is a difficult question without painting with a broad brush. But it has been encouraging to see that there appears to be a growing desire amongst many families to be more budget-conscious and try to carefully consider their spending and debt load. However, we do live in an age where we can purchase almost anything we want online without blinking an eye, continue to be surrounded by advertisers at our every step (or click), have every conceivable restaurant and consumer option available to us to spend our money on, and all the while have creditors making it easier and easier to get a loan for our every wish. We probably have a long way to go as a culture and nation to become more fiscally aware and be smarter with our finances – but again, that’s not meant to take away from those families that are actively taking those steps towards being more fiscally responsible.

What are some of the “hidden” behaviors of people that result in them running up debt?

Often, the number one “hidden” behavior we see is families not communicating with one another on financial issues (resolving this is a huge part of our debt payoff system we developed).

But alongside this are a few other behaviors, such as:

  • Not giving yourself an allowance (or limit) towards how much you can spend in a given area
  • Not regularly checking in and tracking your actual expenses/budget/spending closely.
  • Making a significant number of seemingly harmless, small purchases – only to later realize how quickly they add up to a huge amount.
  • Overjustification or making excuses about why you have to purchase a certain item
  • Thinking something is too good of a deal to pass up (although this is rarely the case as there are usually good deals to be found on a continual basis)

Do you have any advice on how to avoid getting into unmanageable debt when buying a home or car, investing, or going on vacation?

The largest mistake we generally see families make is getting pre-qualified for a home or car loan and then trying to find that dream home or car that matches that amount. Many people don’t realize that pre-approval amount is your “upper limit” of what you can afford – meaning it places the family at their spending limit and ties up their budget each month with little wiggle room. If you are looking at getting a loan, try to find something for much less than you are approved for.

However, the most obvious answer should hopefully be to try to not have to get a loan in the first place. We highly recommend planning ahead for these type of expenses, breaking down the expenses you expect, and saving and allocating the money prior to that vacation, investment, or car purchase.

If someone buckles down and makes reducing credit card debt their sole priority, how long might it take for them to pay off a $10,000 debt? What about $50,000? Or $100,000?

When it comes down to it, this is really going to depend on each individual family. As we stated above, we used our incremental plan we used to pay off our remaining $85,000 in 3.5 years. That plan involved both slowly decreasing our spending each month and bringing in additional income. Some families might have an easier time making this work for them, while others struggle. However, our biggest encouragement is to take those steps and don’t worry about how long it takes you compared to someone else. What truly matters is that you’re making progress and getting closer to being debt-free!

What is the biggest myth about credit card debt or usage today?

Probably the biggest myth out there is that it’s necessary to get into credit card debt because it’s just a part of life. Often, many assume that living the American Dream just involves having to get a credit card and overextend yourself financially to enjoy life; when instead it’s those that learn to live within their means and can learn contentment with what they have who often seem to have a better sense of well-being and don’t have to worry about their debt hanging over their head.

If someone said to you, “I know I need to focus on my credit card debt. But I always feel like I deserve nice things,” how would you respond?

In no way would we ever tell anyone that they can’t have nice things or even that they don’t deserve them. Instead, we would just ask if those things are needed right now. When you can learn to save and buy those nice things when you have enough money to buy them, you’ll find yourself appreciating and valuing them more after all that sacrifice it took to save for those items while foregoing other purchases throughout the process.

Name one thing that most people can do today with their credit cards that will help them reduce their debt.

Stop using them. If you can become more creative with the money you have at your disposal, your entertainment, and anything else that requires you to think you need to slide that credit card to help you to live, you might find that you’ll have more money at your disposal to start paying down that debt – and that your credit card balance will start decreasing instead of going up each month.

For people looking for a new credit card who want to avoid substantial credit card debt, what aspects of a credit card should they concentrate on?

Finding a credit card that doesn’t offer you way more than you need is a great place to start. When you find yourself with a huge credit limit (like we did with our first loan after we were first married), you’ll see just how easy it is to justify certain expenses that you never would have with a lower spending limit. Our attitude went from seeing that as a huge credit limit to making several purchases off our new “savings account” – a costly mistake and terrible way to start a new marriage.

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