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‘We lived off $25 a week’: How I wiped my $1 million debt

Here's exactly what Cathy did to destroy her $1 million debt. (Images: Supplied, Getty).
Here's exactly what Cathy did to destroy her $1 million debt. (Images: Supplied, Getty).

Read part one to find out how Cathy used a vision board to escape her $1 million debt and spend two weeks with Richard Branson.

So, what do you do when you have to shift $1 million of debt?

Declare bankruptcy? Sell the family home? Cry?

For mum of four and Belle Property principal Cathy Baker the answer was none of these.

Baker was lumped with the nauseating debt in 2009 after a commercial property project she was working on went wrong.

- Briony's story

The company she was doing the work for was being liquidated, and she and her husband were left to foot the bill.


She knew she didn’t want to sell the family home, but she was in a tight spot.

Ten years later, she’s made $4 million in commission as principal at Belle Property Central Coast, where she sells some of Australia’s most luxurious properties.

And, she’s spent two weeks with Richard Branson on Necker Island and achieved every single one of her goals, including shifting the debt.

Here’s how Baker harnessed savvy budgeting tricks and her own potential to do this.

Step 1: Substantially reduce your outgoings for at least 6 months

Baker’s four kids were in private school. The first step was simple: she had to get the kids out.

Then she and her partner took a good look at their household bills.

“I managed to get our meals down to $25 a week in expenses, which was basically a dinner full of eggs and vegetables,” Baker told Yahoo Finance.

“Pasta goes a long way, and veggies that you can make into a soup, a pasta sauce, or into an omelette. There are so many different variations using really simple ingredients.”

Baker had worked as a chef when she was 16, so she knew how to transform basic products into delicious meals.

In addition to pasta, vegetables and eggs, on the shopping list were baked beans, cereals, flour and milk.

“From there, all we needed was a tank of petrol to take us where we needed to go each week and we could live off that,” she said.

They remained on that budget for around six months.

“We basically were really frugal so that everything we were making was going towards the mortgage and paying the tradespeople.”

Step 2: Daily phone calls

The next step was to keep her debtees onside.

The failure of the commercial property project left Baker, an interior designer, and her husband owing money to several contractors and tradespeople.

So every morning at 8am Baker would dedicate time to phoning the people she owed money to.

She used the time to reassure them that she was doing everything she could to make sure they were repaid and updated them on her progress, and the amount of money she was able to send their way - even if it was only $50 for that week.

“[You need] brutal honesty. You just have to show that you’re authentic, and that…you’re doing everything you can to try and resolve things, and that you are committed to paying them back,” she said.

“I never thought for one moment that it was an option for anybody else to wear the consequences of what had happened to us.”

Even though it was a bad situation, the contractors appreciated the honesty and appreciated hearing from her.

“If you’ve got a list of how bad it looks…and you’ve made contact with every person on that list, you have a better mental state in just knowing that you’re dealing with things.”

Step 3: Increase your earnings potential

At one point, Baker and her husband were each working three jobs.

She took on work as a cleaner and writing submissions for a hospitality business, until a friend from her children’s private school offered her work in real estate.

She went from an entry-level job as a receptionist at the company before moving into a customer relations manager role, then a sales associate position and then a sales agent.

Along the way, she recruited industry experts to help her accelerate her progress through weekly mentoring sessions.

“I couldn’t pay them, so I showed them my vision board and asked them for help,” she said.

Every week, she would spend time talking to her real estate mentors who would help her figure out the skills and projects she needed to prioritise to take her to the next level.

It was this weekly check-in that Baker believes was instrumental in her success: the accountability drove her forward, and at pace.

“It meant I had to focus on the most relevant activities, and if I didn’t achieve what I was meant to achieve for that week I was letting them down as well as myself,” she said.

“I had a really clear focus of what that [week] was supposed to look like because they would tell me.”

She would finish work every day and then go home and study the real estate business even further. Put simply, to Baker failure was just not an option.

It’s an approach that she’s stuck with for the last 10 years.

Within four years, she had made $1 million in commission, and today has made $4 million in commission as principal at Belle Property Central Coast.

Step 4: Rinse and repeat

Ten years later, Baker paid off the last of the debt.

It was an amazing feeling, she said, but the steps to it were simple.

Work hard, be authentic and keep an eye on the prize.

If you're in debt, what can you do?

Melissa Browne, image of gold coins.
Melissa Browne shares her tips on how to kick your debt. (Images: Getty, Supplied).

The reality is that a $1 million debt would be insurmountable for many people, financial advisor and author of Unf*ck Your Finances Melissa Browne said.

While it’s unpalatable, declaring bankruptcy is one option that can be considered. Otherwise, it’s worth considering making some lifestyle changes, like downsizing, if the debt needs to be shifted urgently.

“You would be looking at a couple of things… One, do you have any assets that you could liquidate to pay off that debt?” Browne told Yahoo Finance.

“Or if you have a personal home or assets that don’t have debt against them, could you pay that debt off and keep the assets that you have? While that debt may not have been for your home, for example, you may be able to figure out a way to pay off that debt and still keep your home.”

It comes down to one question: what do you have that you could sell to eliminate the debt, or how else could you pay off the debt while holding onto your assets?

Bankruptcy is an option, but so is thinking big

If you have no assets whatsoever and your income earning potential is limited to less than $100,000 a year, Browne said it’s worth considering bankruptcy.

Entering voluntary bankruptcy means you will be appointed a trustee who will then manage your bankruptcy. You will need to let them know about all of your debts, your assets and then they may make decisions around whether to sell assets.

Once your income reaches a certain level, you may also be forced into compulsory payments.

“There are consequences of bankruptcy and it shouldn’t be your first port of call,” she said.

“It can have a serious impact on you. It can affect your ability to travel, and can affect your ability to hold directorships.”

If you decide not to sell assets or enter bankruptcy, the only other option is to pay it off, as Baker did.

And as Baker did, that means taking a good hard look at your budget.

“[Baker’s $25 budget] shows what people are willing to do if their backs are up against the wall,” Browne said.

“The question is, what are you prepared to suffer for? Because you’re going to suffer in bankruptcy.”

If you are in the position where you could potentially pay off the debt in a few years by saving money and increasing your income, then it’s a matter of knuckling down and embracing extreme frugality.

“Just go, ‘Right, we’re going to go hard for the next three years,’” Browne said.

And think big.

Housing is one of the biggest life expenses, whether it’s a mortgage or rent. If you’re renting, it could be worth looking into house- and pet-sitting opportunities.

If you’ve found a couple of long-term sitting stints, you could wipe out that entire expense for months or even years at a time.

“It might be that you need to move every six months, but you won’t have electricity bills, you won’t have rent – that whole cost will be eliminated completely,” Browne said.

Otherwise, call your bank and ask for a better interest rate or negotiate with your landlord. Next, call all of your utilities providers and get a better deal.

Paying down a debt of that size is an undeniably daunting task, Baker said, but it can be done.

“As long as you believe it and that you have a plan on how to achieve it, you can.”

Read part one to find out how Cathy used a vision board to escape her $1 million debt and spend two weeks with Richard Branson.

- Are you a woman with a great money story? Get in touch here.

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