$75k in Loans to Financial Freedom: A Chat with Fo Alexander, the Debt-Free Maven
As one of our PREMIER staff writers (including the VIRAL Nipsey Hussle Insurance piece), Faneisha “Fo” Alexander is a FORCE to be reckoned with. Like most Americans, she found herself in over $78K in student loan debt after finishing school.
Even with scholarships and financial support from her parents, it wasn’t enough to cover the cost of her education. After reading The Total Money Makeover by Dave Ramsey, Fo paid off her ENTIRE debt in under 3 years.
After sharing her story of paying off $78K in student loan debt in less than three years, Fo realized an obvious need for sharing her methods and lessons with others.
Through her online platforms, which reach thousands of women across the globe, she shares personal finance tips, hosts free finance webinars and more. We had a chance to sit down with the finance maven...
Fo, how do you find the discipline to pay off SO MUCH in under 3 years? What was your strategy?
Discipline definitely isn’t one of those things that’s developed overnight. However, I like to think that if you can become disciplined in one major area of your life, the rest will follow.
Long before I even started getting control of my finances, I got control of my health. Anyone who can manage and be disciplined about what they eat can definitely be disciplined about money.
I applied the same principles from health to finances. Simply put, I made it easy to do the right thing.
First things first, I had a plan. The readers have probably heard it before, but “failure to plan is planning to fail.”
I created an amortization schedule for my student loans-- this was before all of the fancy debt payoff apps existed. That schedule was my plan. It told me what I needed to pay and when I needed to pay it in order to reach my goal.
Having a plan upfront it the first step to remaining disciplined. But it shouldn’t just be any plan. It needs to be one that’s concise and clear so that it’s a no brainer for you to follow.
Secondly, I automated my finances. I put my student loan payments on auto-draft, which ultimately reduced my interest rate.
I know that some people dread the idea of giving Sally Mae access to your account, but that auto-draft will definitely ensure that you don’t deviate from the plan.
Lastly, and probably most important, I had a sustainable “why.” My “why” for getting out of debt was one that really kept me going.
You know, some people lose weight and maintain a healthy lifestyle because they were once in a life or death situation and don’t want to go back. I believe that your why has to be that deep in order for you to continue doing the work.
For me, it was not being able to have the freedom and future that I wanted if I didn’t clean my financial mess up. Actually visualizing the inability to travel or arguing with my future spouse about money was enough to scare me straight, so to speak.
So having a plan, automating, and having a deeply rooted why kept me disciplined.
I’d also mention that I was heads-down during this process. I really wasn’t hanging out with friends are going out to even get distracted. It just happened to be that kind of season in my life, so it all worked together in my favor.
What are some QUICK ways folks can spend less and save more?
So high level, that answer is delay gratification. Simply put: if you want to save more money, stop spending it.
When I was in college, I created what I called the “Ooo” test. If at any moment I walked into a store and said, “Ooo,” it was a sign that I wanted it but didn’t need it. If it was a want, I didn’t buy it.
That litmus test has always stuck with me and can be something that people use.
On the practical side, here’s what I recommend:
- Repair instead of replacing. It’s often cheaper to repair a handbag, shoe, clothes, etc. than it is to replace it. That doesn’t mean you have to DIY it. Instead, find a dependable seamstress/tailor, cobbler, mechanic, etc. By doing this, you’ll save on the costs of buying unnecessary new items.
- Buy generic brands. After working in merchandising and discovering that name brand and generic items are made at the same facility with minor differences (if any), I stand by this even more. Don’t waste money on a name, particularly for everyday consumer items.
- Automate your savings. If you don’t see the money, you can’t spend it. Have your employer automate a percentage of your paycheck to a savings account that’s difficult to withdraw from. This gives you less money to spend while allowing you to save.
I’d consider the aforementioned quick and easy to implement.
What's the ONE finance book everyone on earth should read?
Definitely my own, Dump Debt & Build Bank: The Everyday Chick’s Guide to Money! Otherwise, I’d recommend The Automatic Millionaire by David Bach. It makes money management very simple and gives a great overview of personal finances.
Explain WHY you think getting rid of debt is more important than using the money you'd allocate toward it for investing?
So, before I answer this, I do want to acknowledge that there isn’t a right or wrong way. People have successfully built wealth to pay off debt and vice versa.
What matters is that you get out of debt.
However, my preference and what I teach my audience is to eliminate debt first. I believe that it’s important to get out of debt first to eliminate financial risks.
Just think of this scenario:
We’re in a recession. Companies are downsizing and the housing market it down.
You go into work. You get called into a meeting with your manager and HR only to be told that your position has been eliminated.
For the last three years, you’ve leveraged your income to pay off all of your debt and you have money saved for a rainy day.
When you’re informed about the layoff, you’re disappointed but you aren’t worried from a financial standpoint. This is what you prepared for.
Now consider the person who’s still in debt, but chose to use their income to invest. They get laid off at the same time as you. Their money is tied up in a real estate investment that has no equity yet and, because the market is down, won’t be a quick sale.
Which situation would you want to be in?
I was in situation A. I was a top performer on the leadership track and I still got laid off. But the one thing that I didn’t have to worry about was Sally Mae or any other debt collector calling me for money while I was unemployed.
That’s why I think that’s it’s important to pay off debt first.
Eliminate the risks first. Wealth will always be available to those who use their gifts.
On your blog, you talk a lot about passive income. What are some GREAT ways folks can make passive income a reality, EVEN with a full-time job?
I’m big on passive income and letting money flow to you effortlessly. However, it does take work upfront to get those streams flowing.
Working a full-time job shouldn’t hinder you from making passive income. Here’s what I recommend for anyone trying to find a way to make passive income:
- Determine what you’re good at AND what people seek you out for that can be monetized
- Figure out how to detach yourself from that skill, but still make money (how to not trade your time for money)
- Create that product/service
- Provide a way for people to pay you for said product/service
- Let people know that your product/service is available for purchase...all the time
For me, it was writing books that packaged the answers to questions that I was always asked. I packaged my advice such that I don't have to be present to give it.
I wrote and published the books and made them available on common consumer platforms. I advertise at least one of my books every single day on social media.
I believe that people get stuck on the creating portion. Carve out time during your lunch and before/after work to do the necessary work to get your product or service going.
I can’t say that writing a book is for everyone, so find that thing that fits your expertise and skills.
Also, there’s also the longterm play of investing. If you have the resources to do so, investing is a means of generating passive income as well.
You talk a bit about a potential recession. How can we prepare for a potential dip in the market?
Yes, I actually talked about it in one of my latest podcast episodes. The reality is that the tides can turn by the matter of a tweet. So although things can change, you want to be prepared.
- Save for emergencies
- Pay off debt
- Reduce spending
- Increase your income
- Don’t panic
These are all things that you should be doing anyway, but in case you’re not, get started.
I think number five is just as important as the other points because we tend to make emotionally driven decisions with our money that may not serve us well in the future.
Don’t let the analysts and their clickbait headlines have you moving into a bunker. The market will recover. It always has and always will.
I’d also add that you should make sure that you’re continuously making yourself marketable by gaining new skills. Not every industry will suffer during an economic downturn, so always be prepared with an updated resume and LinkedIn profile.
Let's talk budgeting. Where do you see the most people FAIL when it comes to budgeting and how can we fix it?
This may seem counterintuitive, but most people try to fit their life into a budget instead of budgeting for their life.
What I mean by that is most people will try to force themselves to stick to an arbitrary, small number that doesn’t make sense for their life. So, because by human nature we tend to lack discipline, they end up spending well beyond their budget.
In order to be successful with budgeting you need to answer these three questions:
- What are your necessities (food, shelter, etc.)?
- What are your responsibilities (things that you have to pay for)?
- What are things that are just nice to have?
Once you can categorize your spending into those three categories, figure out what your average spend is each pay period or month.
If what you spend is more than what you make and doesn’t allow you to reach your financial goals, start reducing spending in your “nice to have” category.
Continue to your responsibilities. Do you really need that much insurance coverage?
Keep doing this until you’re still able to have your necessities, cover your responsibilities, and even afford some extra. This is budgeting. Not the random numbers game.
What's your BEST investing tip for a newbie?
Educate yourself. Take advantage of non-biased investment education. Sites like Morningstar and Investopedia are great places to start. If it feels like water coming from a firehouse, feel free to join my beginner investing course.
Who’s your favorite entrepreneur?
Comedian Kevin Fredericks aka KevOnStage. I’ve seen him grind from the beginning while keeping his faith and family at the center. That’s the real prize—success WITH family intact and no moral compromise.
The ONE book everyone should read to increase financial literacy?
A Step-By-Step Guide to Building Wealth from $1: The Black Wealth Masterclass :)
What’s the quickest way someone can make $100?
I think anyone can sell items from their house and make $100.