A YouTube blogger who got out of nearly $200,000 in debt in less than two years has shared her secrets of getting out of debt.
Aja Dang was in her early 30s when she experienced what she described as “Aha!”. A moment after being faced with an unexpected vet bill, she was determined to get her finances in order.
The 36-year-old radically pared down her lifestyle overnight, forgoing trips to Europe with her friends and dining out while executing on a tight budget.
In addition, she employed the “debt snowball” method, which urges borrowers to repay their loans in order of magnitude — starting with the smallest first and working your way up.
The idea behind this is that the individual gains momentum over time and has the motivation to stick with their plan.
Aja Dang, 36, radically downsized her lifestyle overnight, sacrificing trips to Europe with her friends and eating out while executing on a tight budget
Dang’s debts consisted largely of her student loans after she earned a bachelor’s degree in marketing from the University of San Francisco and a master’s degree in broadcast journalism from the University of Southern California.
Together they repaid her $150,000, but by 2018 — eight years after graduating — they had accumulated $50,000 in interest.
The rest of her debt came from a car loan and credit cards.
What is the Debt Snowball Method?
The debt snowball method encourages individuals to make a list of their outstanding debts and rank them from smallest to largest balance.
Then, borrowers should ignore interest rates and tackle the smallest outstanding balance first and then work up.
There is a “snowball effect” in which the amount paid out grows over time.
The aim is to motivate borrowers to repay the entire amount.
An alternative plan is the “debt avalanche” method, which advises borrowers to first target the debt with the highest interest rate and then work down.
The snowball method is often a quicker way to pay off debt one at a time, but the avalanche method means borrowers pay less interest over the long run.
But Dang said she was in denial about her financial situation for most of her 20s, before getting a wake-up call when her one-year-old dog, Luke, needed emergency surgery — for $5,000.
“I found myself in a situation where I either had to take on more debt or put my dog to sleep,” she told Dailymail.com.
“I never wanted to be in that position again.”
From there, she decided to start a YouTube series documenting her journey to paying off her loans — and holding herself accountable.
At the time, she was making $60,000 a year from content creation.
She immediately consulted online blogs about debt management, cut her budget, and added that the biggest sacrifice was not eating out anymore.
Her main expenses were $1,500 a month for rent. In addition, she priced a $200 gym membership, $200 for car payments, $700 for groceries, and $60 for gas.
And she kept one luxury: a monthly facial that would cost her $100.
She said, “It’s so important that you don’t take all the joy out of your life or you won’t stick with it.”
“I always tell people to choose the things they don’t want to give up and then factor them into your budget.”
In addition, Dang also boosted her income — initially by making extra money through jobs like dog sitting and selling her clothes on second-hand websites like Poshmark.
And as time went by, her YouTube series grew in popularity, growing her net salary to over $100,000.
Her top advice to others who are in debt is to never pay the minimum repayment amount on a loan – something she believes will surely keep you in debt for life.
The overpayment allowed her to pay off both the principal amount of the loan and the interest at once.
Dang said she refused to give up her monthly $100 facials, adding that it’s important to keep a little joy in your lifestyle — no matter the debt
At the time, she was making $60,000 a year from content creation, but soon grew her income to over $100,000
She also recommends building an emergency fund from a young age. The goal is to have three to six months’ worth of expenses in a high-yield savings account, she says.
And she said it’s important to find a “community” of other people in debt to motivate each other. She generated her own through her social networks.
Dang’s tips come as more Americans face financial difficulties amid high inflation and broader economic uncertainty.
Data from the New York Federal Reserve showed that household debt rose by $148 billion to $17.05 trillion in the first three months of the year.
That’s an increase of $2.9 trillion since the end of 2019, before the pandemic and subsequent economic turmoil began to squeeze household budgets.
The problem has been exacerbated by Biden’s debt ceiling standoff with congressional Republicans, which could result in the US defaulting on its debt as early as June 1.
This week, experts urged households to take emergency precautions in the event of a default.
Earlier, analysts warned that a default could cause mortgage and credit card loan payments to skyrocket and investment to fall.
