Get Out of Small Business Debt

Guest: Grayson Bell

Grayson Bell started an e-commerce business in college. While it would be considered successful by many standards - revenue exceeded $1 million - he shut it down. When he did, he found himself $50,000 in debt on seven credit cards. But instead of filing for bankruptcy, he paid it all off.

In this interview he shares what happened and how he paid back this debt, including his unique method of tackling his debt, and the one thing he believes is key to getting out of deep debt. His story is both enlightening and inspiring. This interview with Grayson Bell aired live November 11, 2013.

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Excerpt from the interview

Gerri: My guest, Grayson Bell found himself - get this, $50,000 in credit card debt shortly after college. How did it happen and what did he do to dig himself out because he has been debt-free for over a year so there is a happy ending to the story. Grayson, thank you so much for joining me.

Grayson: Thank you Gerri for the opportunity. I really appreciate it.

Gerri: Tell me, you started a business in college and you didn't end up one of those dotcom millionaires, you ended up with a different scenario. Tell us what happened.

Grayson: As every college student’s dream, I’ve always wanted to be an entrepreneur. But I found out it’s a little bit harder than what the TV ads make it seem. I started an e-commerce company my junior year of college. I built it by myself, part-time for four years. I went from $0 the first year to over $1 million in sales in the fourth year.

This was on top of me owning a full-time job after I graduated college. I ended up working from nine in the morning until probably two o’clock at night, burning the midnight oils if you will. As a recent graduate that’s okay, you can keep pushing and pushing but after a while it ended up that I needed to really look back at what I was doing. I got to a point where I was making money and all the money I was making I was continually just investing in the business.

On top of that, I was using my credit card to continually fund extra things that I needed to do for the business. Pretty much just betting on my future of revenue growth. But by the time it was all said and done, I realized that I was recently married, there was a lot of stuff going on, and when you work from 9 AM to two o’clock at night your health really starts to deteriorate over time. I’d found myself with deteriorating health, my wife just a year, we weren’t really having the greatest relationship and that was all on me. I had to make a change and I shut the business down.

Gerri: Grayson, that had to have been tremendously difficult for you to make that decision, $1 million in sales is nothing to sneeze at.

Grayson: I agree. The thing was is that I realized at the time there are more important things in life. The ability to make money is always there, you just have to want to strive for it. And the things that I learned running my business is far more valuable to me than where the money came from. I built the business from scratch. I did everything in that business. I was everybody. I was customer service, marketing, president, everything. I valued those experiences over how much money I made and I look back today and it was the greatest decision I’ve made.

Gerri: Grayson, you ended up with $50,000 in debt. You couldn’t sell the business?

Grayson: I sold some pieces of it and that’s actually what brought the pieces down to $50,000. I had over that. But as a college student and as a person running his first business, there were just so many pieces that weren’t up to par. Nothing illegal but it just weren’t clean and making it easy for somebody to come in and go I could take this or I could take that. I was able to sell some pieces that were valuable and then I was left with $50,000 worth of credit card debt.

Gerri: Alright. So here you are, you’re young, you’re newly married, you’ve shut down the business, you’ve got a job, and you need to pay off $50,000 in credit card debt. Now, for a lot of people that would be heart attack city right there. How did you deal with that stress well?

Grayson: There was a lot of stress. But for me, the biggest thing that got me motivated is I’m a very visual person so I went out and bought a whiteboard. And I put everything that I owed on that whiteboard because the problem that I was finding is that I was paying minimum balances on all my credit cards, when the time I was done I had seven credit cards. When you’re looking at balances, each time you make a payment on seven credit cards, they don’t look that big but you’re not looking at the overall picture. 

When I finally put it on that whiteboard and I calculated how long I was going to be in debt if I continued making minimum payments, I was going to be about eighty by the time I was done. And that wasn’t something that I was going to deal with so I had to make a change. And after I got everything on the whiteboard and my wife was more than behind me, it was time to make the change.

Gerri: How did you tackle it? That’s a huge amount of debt to tackle. What was your first step?

Grayson: The first step was figuring out how I want to do it. You’ve had listeners before talk about the debt snowball versus the debt avalanche, some people call it, I am all for any way that you take to do to pay off debt but I decided to go with the avalanche method. The reason why I chose that is because I had quite a few credit cards with high interest rates and they had high balances.

And even though there's an emotional factor in paying off debt and you got to have those little milestones, I wanted to take the emotion factor out because the emotions got me into credit card debt. Just paying for things and not thinking about it so I wanted to take that out. I wanted to go the mathematical route and so I went that way and I started with my first credit card.

And the most important thing that I can say to everyone is you get to create little milestones along the way. You can pay off a credit card and that feels good but if you don't celebrate when you first pay off the first thousand, or $5,000, or $10,000, don't go out go to Vegas but maybe go out to dinner with your wife or your loved one and just celebrate the little victory. It was a huge motivator and it kept me going through the four years that I had to pay off the credit cards.

Gerri: And Grayson, for someone who might be listening and doesn't know the difference between the snowball and the avalanche method, both methods you pay the minimum payment on everything except for the one debt you’re targeting at that moment then you put everything you can toward the target debt with the snowball method which Dave Ramsey’s a big fan of. You take the smallest balance card first, you try to eliminate that, then you roll up that payment to the next. The avalanche, you take the highest interest rate debt and then you try to pay that off so then you can move to the next highest rate and so on.

It can be very different depending on your interest rates and your balances, the results, but different people have different motivations. II just wanted to make sure we’re clear about what the avalanche method does. Now, the your first card that you targeted using your your debt avalanche, did it take a long time to pay it off?

Grayson: It did. It probably took me a year to pay off the first one. It’s hard to get into the swing of removing yourself from all the spending habits that you had before and what you were doing before. But once I got that first card off, I rolled in how much I was paying on that into the next one and it really does build up over time.

The one thing that I did a little bit differently, you should take a method that works for you is that I didn't pay 100% of my extra income into my debt repayment, I actually created an allocation method where I would pay 90% into debt and then 10% into savings. And then as my debt got lower, I would slowly switch it.

By the time I was almost done paying my debt, I was saving 70% and paying 30% against the debt. That’s what made me go for four years but that also created a saving mentality. So when I was out of debt, all I wanted to do was save. I was used to it.

Gerri: That's very interesting. What are we going to call your method? The snow fort method?

Grayson: I don’t have a name for it yet. But I have shared it on my blog before and a lot of people thought it was interesting. It’s like the investment allocation for your retirement funds. As you get older, you get more conservative. As you’re younger, you’re aggressive. It’s similar to that and it’s where I got it from. But it doesn’t work for everybody but I was really happy that I was able to do that. Now all I like to do is save. It feels good to save.

Gerri: Speaking of your blog Grayson, let's talk a little bit about your blog. You have a blog at so I guess you were too bored to just have a full-time job, you still had have something else?

Grayson: When you’re used to working until 2 AM, you got to feel that void with something. I’ve always loved anything online. One of the things I did when I was paying off debt is I became a freelancer and I did a lot of work for other people, and that’s how I made some extra income to pay off my debt. That's what I did during that whole time and I still do it now because I learned so much from my business that I can sell those services to others that are working in the e-commerce field. I don’t ever feel that I can stop doing extra stuff on the side and the blog is so fun. I started it literally a month or two after I paid off my credit cards because I wanted to share my story. And it's been over a year, and I’m still going strong, and I still enjoy being a part of it.

Gerri: So you you took about four years it sounds like to dig out of this credit card debt, correct?

Grayson: Yes.

Gerri: And then you’ve been debt-free for over a year now?

Grayson: Yes, I have.

Gerri: What's your advice for someone who's in this situation, they’re facing a huge mountain of debt and they're terrified/ What you do say to them?

Grayson: The best thing I could say is to face the terror. The journey is scary. I've been there. I didn't want to look at what I owed and when I saw the total, I had that little feeling inside the stomach that just made you cringe. But what you need to do is you just need to start. So many people get so scared of it and they don't know the answers that they just won't even continue down the path of trying to beat the debt. And that’s the worst thing you can do. You’ve got to face it and you just have to start somewhere.

It doesn’t matter if you start paying off extra $10 on top your credit card minimum monthly payment. If you pay just a little bit more, you’re going to save yourself a lot of interest over time and you’re going to get started then you’re going to realize you are making progress, and then you’re just going to really go for it.

Gerri: I find that so true that sometimes you do need to reach out for help. They may need to talk to a credit counseling agency. They may need to to consult with a bankruptcy attorney. But almost in every case, the sooner they decide to take that step, whatever that next step is, the better their situation because these things just don't tend to improve on their own.They don't just disappear, unfortunately.

Grayson: I certainly agree. I also would say that I talked a lot of people that either are afraid to work extra so either come up with a side business or do some extra work for other people, afraid to freelance because they just don't know how to do it.

Now, extra income is out there to earn if you just want to take the time. And almost everybody that I've met has a service or has an ability that they could sell to somebody. You’re going to really speed up your debt repayment if you can find ways to make extra money. I did a lot of freelance work. I actually picked up a second job at night just doing some computer work for other companies. It has to happen. It will take longer if you don't find extra income.

Gerri: The money has to come from somewhere, right?

Grayson: Yes. You only can whittle down your expenses so much.

Gerri: Right. Grayson, your story is certainly inspiring. Thank you so much for joining.

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