How a Simple Automatic Paycheck Split Helped a Mom of 2 Cope with $40,000 Credit Card Debt

How a Simple Automatic Paycheck Split Helped a Mom of 2 Cope with $40,000 Credit Card Debt

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  • Netflix’s new documentary “Get Smart With Money” stars Ariana, a mother of 2 with $45,000 in credit card debt.
  • Ariana was paired with financial expert Tiffany Aliche, aka The Budgetnista, to find solutions.
  • Aliche asked Ariana to automatically split her paycheck into 5 separate accounts. This helped her pay $40,000 in one year.

Last week, Netflix released a documentary called “Get Smart With Money” which follows four “mentees” as they gain financial literacy.

Four financial experts each choose a mentee to receive financial coaching for a year. One mentee, Ariana, is a mother of two who has $45,000 in credit card debt and over $100,000 in student loans.

“I’m an emotional spendthrift,” Ariana says in the documentary. “I am currently buried under a mountain of debt.” Her husband offered to use his income to cover their family’s expenses so she could focus on paying off the debt, but, she says, “That just didn’t happen. I tried.”

Ariana even consolidated her debt from eight credit cards into one personal loan to make repayment easier. “But then it freed up all my credit cards, and they ended up running out again,” she says in the documentary.

She’s paired with Tiffany Aliche, aka The Budgetnista, author of the New York Times bestseller “Get Good With Money,” who helps her nearly wipe out her debt.

Aliche’s first solution was to automatically split Ariana’s paycheck into 5 accounts

In the documentary, Ariana shares that she earns $5,700 per month and spends around $5,300 per month. “The good news is that there are actually savings there,” says Aliche.

To help her reduce her emotional spending, Aliche encourages Ariana to make a simple change: split her paycheck into five separate accounts:

  1. Family bills
  2. Personal invoices
  3. Expense account
  4. Emergency savings, used strictly for emergencies
  5. Dream Savings, to support Ariana’s dream of traveling with her husband

Ariana is instructed to only keep a debit card attached to her spending account and to start using it instead of a credit card. “Automation is the new discipline,” says Aliche.

After 3 months, Ariana paid off $10,000 in credit card debt

In the documentary, the cameras check each of the financial mentees once every three months. After three months, Ariana had managed to repay $10,000.

She says, “Separate accounts have really, really helped me so far because I don’t have to think about anything. As soon as my check comes out, it goes into these different funnels, and I don’t only carries the card that is associated with my spending account.”

As Ariana reached a major milestone on her debt repayment journey, she was still ashamed of the amount of debt she had taken on.

She says: “I feel like a bad partner, like a bad mother, that my past decisions affect my family. If I didn’t have these huge debt repayments, there would just be a lot more flexibility. My husband is probably wouldn’t have to work overtime every week.”

After 6 months, his car broke down

At the start of the documentary, Ariana explains that her biggest fear is that her car will break down. Like many Americans, she said, she couldn’t afford to fix it in an emergency, nor could she afford to pay for her car monthly if she had to buy a new one. After six months, his worst fear came true: his car broke down.

Fortunately, Ariana’s husband is a mechanic who was able to fix the car for her. All she had to pay was $1,200 for parts, which she was able to take care of because she had created an emergency fund from the automatic paycheck split. “Your worst fear came true, but you handled it,” Aliche tells him, celebrating the milestone.

After 9 months, his credit card balances were down to $16,000

Using automatic paycheck splitting to split her money, Ariana was able to pay off $19,000 in credit card debt, with $26,000 remaining. During a meeting with Aliche, Ariana shares that she got a raise at work.

Aliche tells him, “When you take care of your money, literally more money will come to you because you take care of the money you have. You are on the other side of what I like to call broke post-traumatic syndrome.

The documentary shows Ariana shopping at Target, this time using only her debit card. “Credit card debt is cancerous,” warns Aliche, as she encourages Ariana to wean herself off it completely and only spend with her debit card.

“I paid it all back with an interest rate of 10% or more,” Ariana says. Next, she says, she plans to use the same method to tackle her six-figure student loan debt.

After a year, Ariana was down to $5,000 in credit card debt

After a year, according to the documentary, Ariana was down to just $5,000 in credit card debt.

She says: “The mindset has changed to give me grace and be patient with myself, organize my money in a way that gives me space to do the things that matter to me, everything paying off the debt, it changed my life.”

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