How to Pay Off Debt Fast By Someone Who’s Done it – with Maria Nedeva

I am so excited to bring this particular episode to you. I’m actually interviewing a lady called Maria Nedeva who is a business school professor and she’s the creator of The Money Principle, which is a personal finance website where Maria teaches people in financial trouble how to build sustainable wealth. Now what I love about Maria’s website is that she offers real life strategies for building wealth, drawing on her own understanding of money that helped her to pay off debt fast – £100,000 worth of consumer debt in just three years!

What I love about Maria’s journey is the complete openness and honesty about the position that they were in and not financially having the insight available to them to even understand the level of consumer debt that they were in. Maria talks about a dinner conversation that she had at the dining room table one evening with her husband about thinking they had a bit of a debt problem, but actually they didn’t really know the numbers. And I hear this a lot with women that I work with, particularly women that have struggled with consumer debt. This whole concept of getting financially naked and really understanding your numbers in order to start moving forward.

There’s a really great analogy that Maria has shared in this interview, called the E R R Strategy, which is the Eliminate Replace Reduce strategy and I think that you’ll find that very, very useful. We also talk about how the focus should always be in any debt situation about increasing income or reducing spending or focusing on your relationship with money. And all three things need to happen, in my view, in order to start getting yourself out of debt and into a place of positive wealth building.

We also share quite an interesting analogy called the Walt Disney Hack, so I won’t spoil that one for you!

What I’d also just like to say is if you do find yourself in a situation where you’re not able to manage debt and you’re looking for some support, I would highly recommend that you go and seek professional assistance from a debt charity somebody like Step Change, for example, or just simply to Google ‘debt charities’, perhaps in your local area.

How to Pay Off Debt Fast By Someone Who’s Done it

A huge welcome to you this morning, Maria, Thank you so much for joining us.

Thank you very much for having me, Catherine. It’s a privilege to be on your podcast. Thank you So much.

Pleasure is all mine. I really am quite delighted to interview people and particularly you, Maria, with your story because I found myself in not quite a significant debt as yours, but certainly in my twenties I was in a pretty significant worth amount of debt. Your story is so inspirational Maria.

So before we go into how you actually got out of £100,000 worth of debt in just three years and then started creating wealth, I would really just be interested if you could just share with us a little bit about your story and how you even became a money blogger.

I originally come from Bulgaria. So although quite clearly, money wasn’t a talked about issue, and certainly building personal wealth wasn’t a big issue, I’ve always had this interest in making money. My problem was I never managed to keep any. And this we know – our wealth depends not on how much we make, but how much we keep. So in 1990 I was an academic, a university business school professor. In 1990 I arrived in Manchester with $20 in my pocket and a fellowship for Manchester university. And then, of course, I met an irresistible Englishman as you do, and we got together and we raised, happily, our sons until in 2009 in the autumn, I started getting this very uncomfortable feeling. It was all around whether we can keep our house, what is happening? So I remember having this incredible outburst at dinner at him and saying

“I’m sure we probably have a lot of debt!”

Now, have you noticed that I said, I’m sure we probably have a lot of debt? I didn’t actually know what was happening completely. So basically, it turned out that neither my husband nor I actually had paid any attention to the amount of money that comes in, and that goes out. And it didn’t come as a big surprise that one day in October 2009, my husband said

“Look, we’ve managed to accumulate a bit of debt.”

This a bit of debt turned out to be £100,000 consumer debt. This doesn’t include our mortgage. So of course, what I did first was I panicked. And then I decided that I’m going to tackle it. So in 2009 there were two things on my New Year’s resolutions list. One was finish the book on something that sounds very academic and irrelevant. And the other one was turn around our money situation.

On the first of January, I started learning everything there was to know about money. So to cut a long story short, we actually implemented a very, very straightforward strategy for paying off debt. We made as much as we could. We spent as little as we could. We put the rest on the debt.

So we paid £100,000 worth of debt in three years. And because I’ve learned an awful lot about money and life through this, I actually in 2011 decided to start The Money Principle and write about it. And let’s face it, writing about money is quite fascinating. There’s nothing like a failure who’s made it to teach you how to to do this kind of stuff.

That life lesson is invaluable. Just to pick up on that as well, Maria. I mean, I am a qualified financial advisor and have been for 20 years, but the reason I started my blog in 2018 was because I wanted to teach people how to improve their relationship with money because of my own personal experience. Nothing to do with my qualifications. I feel there Maria we’ve got a real synergy between our personal journeys in coming out of debt and then actually just wanting to teach people how to have a better relationship with money.

The interesting thing is that the knowledge you accumulate through doing something, particularly if you have the gift to reflect upon what you learn and what you do, is invaluable.

Yeah, 100%. I just want to come back to a couple of things that you mentioned in there, Maria. The first thing you talked about was that you had trouble keeping money. So the issue wasn’t overspending. It was trouble keeping it.

Yes, also I was spending. The issue was over spending. But the issue with over spending was not because I didn’t make enough. I’ve always made an awful lot of money, even in Communist Bulgaria, But I’ve always spent all of it. And the funny thing is that I didn’t even spend it on extravagant things. What we found when I sat down and looked at what we spend when I decided to pay off the debt, was that a lot of the money was completely wasted, and that is how I developed something that is known as the ERR Strategy for money management, which stands for Eliminate, Replace and Reduce.

To actually pay off debt and create the positive cash flow to, you have to eliminate all waste in your budget. And this waste can be on food to insurance. We found that we’re paying three times more insurance than we needed to. The other thing, though, is you have to replace. You don’t have to stop doing what you do, you just have to think about how you do it and whether you can do it cheaper and get more quality out of it.

And of course, you have to reduce your consumption. We all over consume in Western societies, even people who think that they don’t have enough – we over consume. Because I didn’t implement these three elements of mindful budgeting, as I call it, I never kept what I earned. So I would make £100,000 a year then spend it all. And this is not how how life works.

Yeah, I love that. One of the other things you talked about was about not knowing exactly what debt you’d accumulated. Not knowing your numbers, I think, is a really it’s a scary place. A lot of people who are in significant debt talk about the fact that they can’t even open their bank statements. There’s that fear attached to just owning up to the position that they’re in.

So when you had that conversation at the dinner table, Maria, with your husband and this insight came that actually, we don’t really know how much debt we’re in, but now we know. How did that help you with your journey?

Oh God, it’s like losing weight! If you don’t know your numbers, you can’t do anything. By the way my husband and I still have these conversations because sometimes I say

“OK, and how much tax do you think we’re going to pay this year?”

And he says several thousands, and I keep saying several thousands is not a number. if you don’t have a specific number at the end of it, you can’t make decisions. You can’t. So ultimately you have to know your numbers and a variety of numbers – not only how much debt you have, you have to know your earnings to that ratio because then you can decide what to do. You may need to go bankrupt, it may be really impossible to pay it. But you can’t decide before you know;

  • How much of your income you spend
  • How much is your debt?
  • What interest do you pay?
  • Your cash flow? Is it positive or negative?

You just need all your numbers in row.

Yeah, it’s really empowering isn’t it? It’s something I call getting financially naked. I make it quite fun because I think that often people go through this process with a lot of judgement. That inner critic comes out that starts saying “Oh, well, that’s a terrible thing. You don’t manage money very well.” And actually, what we tell ourselves is what we believe. If we believe that we’re not good with money, then we tell ourselves that. And then guess what? We’re not good with money. So it is about changing that relationship. Often people just go through this awful period of feeling a lot of negative judgement on themselves.

How did you feel going through that process, Maria? When you identified and brought some awareness to your numbers, How did you feel about that?

I honestly I blamed my husband because that is the kind of person I am. I get angry. I don’t get sad, I don’t get critical, I get angry and there was somebody to blame. But the thing is that we paid off the debt when I stopped blaming anybody and took responsibility. I basically said Okay, life is about learning, and I have a predicament at the moment. And predicaments don’t have solutions.

So when you’re in a predicament, that is when you go I’m so bloody hopeless I can’t do this. My life is over. And that’s what I thought for a week or two. My life is over. I’ll never be able to retire, my Children will live like in a Dickensian novel. Debt is prison. I actually checked whether there are still debt prisons in Britain! But then what I thought is hold on, I have to make this a problem, because problems have solutions. So I stopped having a debt predicament and had a debt problem.

And once I had that problem, the whole blaming him stopped. I had a problem to solve, right? And that is when the numbers come in. And rationality kicks in because at first the feeling comes, and feelings are very good things, but unfortunately they don’t help us make sound judgements. You have to move beyond the feelings and transform the negative feeling, which is inevitable, into positive.

The moment I started calling my debt negative wealth I had such negative reactions because I was writing this thing on Money Saving Expert, a diary, and somebody said, “Do you call your savings positive debt?” And I said no because there’s no point to that. The reason I started calling it my negative wealth is because it’s technically correct. You don’t fixate on the debt you fixate on wealth building,

So paying off debt builds your wealth. Suddenly every debt payment will make my heart sing because I was increasing my wealth. It is a combination between rationality, changing your feelings from the negatives and blame to the empowering and positive yes, I can do that, I have a problem to solve, and that’s how I do it.

Honestly, this is just music to my ears, Maria! I’m a nodding dog right now. If you could just see me! It’s so, so true. And I love the way that you described that, that you started thinking about it as negative wealth, and I often on the podcast talk about the word debt. I think it puts the fear of God into a lot of people because we attach an emotion to the word debt, and debt in itself isn’t necessarily a bad thing. We have good debt and we have bad debt. But I think sometimes just rewording that in a way that can help you to think more positively is so impactful.

And I love that description there that you’ve just given about positive debt and negative wealth because I think a little bit of it is semantics. But if we start to re-frame the way that we see debt and the way that we make judgements on ourselves around money, it can transform – and I know this from personal experience as well, Maria – it can really transform everything.

And suddenly, as you just described beautifully, you start to see solutions rather than problems. So you start to get into what some people would refer to is more of an abundance mindset rather than a scarcity mindset. It is all about mindset, right? I’m a huge believer in that it has to start with the mindset.

Yes. But it’s not only judgements that we make about ourselves. It’s also the judgement people make about us. A lot of people become really, really negative when they get a whiff of the fact that you have debt. I remember having an argument with somebody on a forum and telling him that even in crisis you have redemption, right? Yes, people get into debt, they can make mistakes, but the thing is, they have a choice. They either stay with it or they go – That’s it. I’m changing. I’m learning how to do things differently. Going on at them about how irresponsible they are and how my taxes, for example, are paying for your debt (which is complete rubbish, by the way), that is counterproductive.

Let’s remember the Catholic Church is actually wealthy because they sold indulgences in the 16th and 17th century. They sold indulgences and indulgences were about redemption. You can’t spend your life in the sin of money mismanagement. You can change.

what I love about Maria's website is that she offers real life strategies for building wealth, drawing on her own understanding of money that helped her to pay off debt fast -  £100,000 worth of consumer debt in just three years!

Maria, how did this affect your mental health and mental well being?

It’s a bit like the acceptance of death, right? First I I went completely mad. I was angry. I was disappointed, thought my life had finished. But this lasted about a week. And then once I started doing it, when I translated it into a problem, weirdly actually I was in a much better place than I had been for years. In fact, this will sound very new age and a bit weird, but between summer 2010 and February 2013 when we finished paying off our debt was some of my most productive and psychologically sound times in my life, because it’s so empowering to do something.

And don’t forget we increased our income incredibly to be able to pay off so much debt. So even the fact that I started chasing a side hustle, and making money and being interested in what I’ve always been interested in, which is business and how businesses make money. It is kind of incredible.

So let’s talk about two of those things, Maria. So one thing you talked about there is that you increased your income and then earlier in the interview you talked about having great insight, eliminating, replacing and reducing your spending. So let’s talk through those two aspects because for me, getting out of debt is three things. One is about managing how you feel about the situation that you’re in and your wellbeing the emotions. Whether that’s anger, fear, resentment, judgement, whatever that emotion is, then it’s about looking at how you can increase your income to cover debts or reducing your outgoings.

A lot of a lot of personal finance blogs that I read in particular always tend to focus on one and not the other, or they’ll focus on just having a budget and restricting your money. And, yes, there’s some merit in that, but not individually by itself. So in terms of increasing income, Maria, what did you do during that period to focus on on increasing your income?

I have a set of competences that means I can do quite a lot of very high level consultancy. So basically what I do from time to time, I advise governments around the world and research funding. So Suddenly, there was this thing where I could do some of this consulting on top of what I do for my university. I needed to inform the university that I was doing it. But if you work 80 90 hours a week, that’s your choice, right? So I started doing quite a bit of that. Then I was invited to take several visiting professorships and quite a lot of them, you sell your name basically because you work at such high level that basically you don’t spend a lot of time but contribute so much value to the university that they pay you a bit. Not much, but it adds up.

Then, of course, The Money Principle started making advertising revenue. So one year into starting The Money Principle it was making between £1000 and £2000 per month. And all that eventually adds up, right? And of course, my husband was a statistician consultant. We decided that he would give up in 2014 and work only on our projects.

But he did a lot of that as well. So basically we kind of started returning a lot and my salary increased because, I became a Dean for very large faculty which, of course, increases your salary as well. But this meant that I worked 1700 hours a week! There was no there was absolutely no stopping. It’s not easy. Whenever I talk about increasing income to audiences, usually people go, but that’s very hard. No, it’s not hard, but you have to be prepared to put either a lot of money a lot of time behind it. In the early stages to make money, you need to put time.

How long did that take you to build the blog and to start generating income?

A year. But don’t forget, I started The Money Principle and I didn’t know what a blog was.

How did you learn how to blog?

Well, you learn through doing, reading and talking to other bloggers. But mainly I think a lot of learning happens through and from other people. So, through other people, you read other people’s blogs and you learn what it is about and you suddenly start comprehending. Mind you I still have a problem, because recently I’ve been focusing on transforming it, because The Money Principle and my own line operations are still side hustles. I want to make a serious business out of it. And it is hard.

Because the difference between a side hustle and a business is that now I still sell my time through The Money Principle, from academic side hustles and stuff like this. It becomes a business when you exploit somebody else this time. And I haven’t made this transition yet. If there are any very good writers out there, please contact me!

But I want to get back to something else that you said Catherine, that most personal finance blogs are focused on either on cutting, spending, or increasing earning. I very early on actually realised that there is only one number in personal finance that beats the mole and that is your cash flow, monthly cash flow. So basically, if you calculate the difference between what you bring in and what goes out, you have three different kinds of profiles.

  • One is the debt profile where you spend more than you earn.
  • The other one is stabilising profile where your spending is constant and you gradually increase your earning. So your positive cash flow increases, but very gradually.
  • The one that beats everything is when you keep your expenditure constant and you really skyrocket your earning. That is when you create a very large positive balance which you can do anything with. You can buy a business as we did so we actually now own half of an MOT garage amongst other investments.

So that is where the eliminate and replace, that ERR strategy still plays. I still do it. I still look regularly at what goes out and I go, “OK, this is a waste. I pay £5 per month for M J M Channel on Prime and I watch one movie every two months. Come on. Buying the movies is cheaper.” Cancelled.

So you eliminate waste with everything. We still look, for example, how to go skiing cheaper. Weirdly, it sometimes turns out that it’s cheaper to go to a very expensive place. So three years ago, my son and I went to this grand hotel and it looked very expensive. But when you calculate that all your food is included, it actually turns out to be a very parsimonious saving option. So I still do the ERR strategy things.

Yeah, that’s great. And what really stood out for me there, Maria, is that when you mentioned about buying half of a garage is that your focus, then, is on building wealth rather than being stuck in the situation that you may be in. And I say that sometimes what happens, and I would include myself in this, is when you’re in that situation all you can think about is the debt. I know that there’s this probably quite controversial conversation in the personal finance space around do you pay debt off first or do you start saving or do you save first and then pay off debt?

What would be your response to that, Maria? Do you think that if someone’s in debt, do they plough everything into paying off that debt and getting out of debt as quickly as possible? Or do they maybe start saving at the same time? What’s your opinion on there?

It depends. So what we did is we put everything on the debt first after we saved some money – I don’t like calling it emergency fund because I think that debt is the biggest emergency, actually. I call it freedom fund. That is the money where you look at it and you feel warm on the inside and you think if the proverbial hits the fan, I can survive and it makes you feel good. It’s all about feelings again. But so once we saved that we put everything on the debt. We actually had a look, and the smallest amount we paid on the loan was £4.59 or something like that, because it was left. We didn’t need it in the monthly spending. We’d zero’d the monthly accounts and there was £4.59 left, and we put it against the debt, right? But but the largest was more than £6000.

That is an example that any spare money went on the debt. But I’m not bothered at all about paying my mortgage, and people can’t understand that, and I just look at them and go Come on at the moment, my mortgage is at lower than 2% interest and even with the latest drop in the markets index funds generate about 10% on average. One of my index funds made 28% last year, right? So why would I bother? Why would I worry about paying off my mortgage?

It is a very precarious balance. But you always have to make sure that you put the monthly positive cash flow somewhere, right? It can be against your debt or in your savings. But you make sure that every month you increase your wealth.

Yeah, just what I believe. I don’t I don’t like to refer to this emergency fund either, I like to refer to mine as my Financial Stability Fund because for me, it’s about how I feel about that money. Knowing that I’ve got that safety and security means more to me than calling it an emergency fund. Different people can label these up with their own language. I think that’s important, whether it’s a financial freedom, pot, a financial stability pot. Whatever you call it has to mean something to you. I am a big believer in it.

Everything on wealth, creation and wealth building for me is a game changer because the minute that we can stop being and acting and believing in this scarcity mindset and feeling overwhelmed and consumed by debt, then it just opens out these opportunities and the way that you built your blog Maria is the same way that I built mine. It’s going out and reading about how do I go about using my creativity, using some of the skills and expertise that you already have to start building little side hustles.

I mean in 12 months that you had with your blog generating between £1000 and £2000 worth of advertising revenue. That’s incredible in quite a short period of time. So sometimes we just have to get quite creative and actually invest some of our time and understanding. How can we start to create wealth and increase our income.

Before we finish Maria, I also would love it if you could share with us some information that was on one of your blogs, which was about the Walt Disney hack. Could you just share a little bit about what that is?

Traditionally, the Walt Disney hack is a creativity hack because you know all creativity is knocked out of us by the age of three or four.

Not many people realise that Walt Disney actually was a journalist, So he was sacked by his newspaper. And the note that went with the sacking said that he simply was not creative enough to be a journalist and, of course, being Walt Disney he said I’ll actually crack this thing. So he sat down and thought, and realised that in each of us that resides three personalities. So there’s the dreamer. There’s the critic, and there’s the accountant, and the reason we can’t think creatively about things, including personal finance I believe, is because we let all three in our heads at the same time. So just one example.

So you go “Oh yes, I really want to pay off my debt” and then the critics says “You idiot. You can’t even eat well. How are you going to pay off your debt?”

So dream gone, right? So what Walt Disney said is to get anywhere you just don’t let these three things to intermingle at the same time. So the first thing you do is you let in the dreamer and dream. And you forget about any restricting circumstances. You dream, and you dream a very detailed dream. So you dream about what it will feel like when you pay off your debt. How would you feel? What are you going to buy? And then only when the dream is complete, you let in the critic and the critic says:

“Now that’s all too well. But have you thought about this and that?”

So the critic doesn’t go, “You numb head. You can’t do that.” The critic says “Let’s see. Can we do that? How can we make this dream better?” That’s what the critic does.

And once the critic is finished, you let in the accountant and the accountant says you need so much money per month on top of what you have now to pay off your debt within this time period.

So by the time you’ve finished, you really have a workable strategy. And you can keep motivated because the dream stays.

Yeah, I just love that analogy. And it’s so true, isn’t it? Like we we kind of get somewhere a little inner critic voice. We talked about this on the podcast, actually, a couple of weeks ago. That little inner critic comes out. Sometimes that inner critic protects you, but sometimes it doesn’t.

But most of the time, the critic doesn’t if you don’t keep the critic in order and it’s with everything, like losing weight. “Oh, yes, I want to be size 10.” Really? You’re a size bloody 20. You can’t even get in your latest trousers. How are you going to lose weight?

But if you let the critic when the critic is needed, to tell you what the gaps are, it works with any kind of dreams. So I had this dream to go on a motorcycle around America, but I can’t ride a motorcycle, right? So if I don’t dissociate them, my dream is dead about three seconds after it’s occurred because the critics says:

“You? An overweight, middle aged woman on a motorbike around America. You don’t like dirt. How are going to carry 30 pairs of underpants?” – the critic kills it. But if you keep the critic out and dream the dream. The wind in your hair, the dust on your skin, everything, then the critic says:

“Okay, so you can’t ride a motorbike. You have to learn to ride a motorbike. You will need gear, so you need to lose weight because you won’t fit into the gear that is being sold.”

So you see it works with everything, is what I’m saying. It’s not only about paying off debt, it works with building investments, losing weight, finding your dream partner, any attempt to transform your life, the Walt Disney Hack can work.

Yeah, I love Thank you so much for sharing. And honestly, I could talk with you for hours. Maria, I think this has been one of my favourite episodes this year so far, So thank you so much for sharing such pearls of wisdom in there. I think there’s so many life changing analogies that you shared, and I love the way you talk about things that are really simple for people to get around their heads. Eliminate, replace, reduce. I love that analogy.

A huge thank you to Maria for her amazing insights and sharing how to pay off debt fast!


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