As I promised last month, here are more stories of people who got themselves out of debt in different ways – sometimes very difficult ways requiring personal sacrifice. But just as recovering from a serious illness may require harsh medicine, most debt-free people declare that it was most definitely worth the effort.
Take Tom, for example, a 57-year-old man who gained custody of three girls after a divorce. His salary could no longer support living in their house and they were forced to move into an apartment in the same school district. A second job became necessary when one of his daughters needed to be hospitalized with a chronic health problem, and his insurance did not fully cover the bills.
After several failed attempts at augmenting his income with various jobs, he started a paper route which provided only $400 per month. The schedule was a nightmare, but he managed to get up and complete his route before waking the girls and having breakfast with them.
Extras for the girls, such as cheerleading and other school activities, had to be sacrificed, and the girls took jobs at a local restaurant to save their pennies for pocket money and, eventually, for their own transportation needs.
As if that weren’t enough, one credit card raised the interest rate from 9.9 percent to 12.9 percent, even thought he was paying on time. His debt had ballooned to $36,000. Desperate for help, he entered into a five-year debt management program with a Lutheran social service agency with a monthly payment of $633. Some of his debt interest was reduced to just 1.75 percent. He also set up a repayment plan with the hospital where his daughter had received treatment. Two of the girls started college with the help of scholarships and financial aid and the third took CNA classes. Now an empty-nester, he canceled his cable and Internet service.
He then took out a mortgage on a $53,900, two-bedroom townhouse, which, due to a crashing market and a homebuyer stimulus package, he could now afford. He swapped a $1,200 a month apartment for the townhome with monthly payments of just $400. He expects to be free of credit card debt by 2015.
Then there was Molly who also had been saddled with $36,000 in credit card debt. She feared telling her boyfriend, thinking that he would surely run if she confessed. But he didn’t run, when she got up the courage to tell him. She had acquired the debt while in college, many times spending unwisely for fancy clothes. She had spent the last two years whittling her debt down to $12,598 and she was still struggling to make the payments.
Her boyfriend realized that although she had made some very bad decisions in the past, that her courage and determination to face up to her responsibilities made him decide that she was a girl worth hanging onto.
Unfortunately, her $30,000 salary as a schoolteacher didn’t cover her rent and expenses with enough left over and so she ran up more debt on six credit cards. One day when she realized that she couldn’t even make minimum payments, she had a complete meltdown and called one of her banks in tears. The bank recommended a not-for-profit credit counseling agency and she, like Tom, entered into a five-year debt management program with a single monthly payment of $806.
Having nothing left after rent and utilities, she began using the local food pantry and she re-bagged the food so her roommates would think she had shopped at the grocery store. She made friends with the cafeteria staff at school and occasionally was able to bring some leftovers home.
Then she moved closer to her family and took four part-time jobs, one of which became full time with a $27,000 salary. With her boyfriend’s help she started using a spreadsheet he drew up, which helped her track her spending and take charge of her finances. She began planning her expenses at the beginning of each month and she now knows where every penny goes. Once she sets her budget and spending goals, the budget takes over and controls her spending.
She and her boyfriend got married after each saved $5,000 for a wedding with 220 guests. Her sister made the cake and the catering was done by a friend. They had a low-cost honeymoon in Mexico for only $700 plus airfare.
Now Molly is out of debt and saving for a new car to be purchased with cash.
The moral of the story is: you can do it if you really want to badly enough and, yes, it’s always worth it. Just ask Tom and Molly.
• Virginia Peschke is executive director of Consumer Credit Counseling Service of McHenry County based in Woodstock. Questions on any aspect of credit, debt or mortgages are welcome at 815-338-5757.