I want to share a very personal story today that isn’t something I normally talk about on the blog, but something that is has become very important in my life. That topic is credit card debt, and more specifically, how I got out of it. Since this has become an important part of my life, I hoped that it might help others in my situation.
Any time I mention to someone that we paid off more than $33,000 in debt, ($25,000 of that was credit card debt) people look at me like I’m a unicorn. But really, it wasn’t THAT difficult. If I were to break it down into a mathematical equation, it would look like this:
Education + Hard Work + Sacrifice + Money + Time = Debt Free
If you’re interested in my story, keep reading. Please note that I’m not a financial advisor and I don’t know if these methods will work for you. This is just my personal account. I hope you are able to get something from my story!
How it beganAs a short back story, when I graduated college in 2009, the real world hit me in the face hard. When I entered college in the fall of 2004, I was told people in my career field had a 90 something percent job placement rating within the first year of graduating. I’m not sure if that just wasn’t true or if the economy tanked, but by 2009, hardly any of my friends who graduated were finding work in our field. I became a substitute teacher, but quickly realized when my student loans started coming in that that alone wouldn’t be enough income. I got a second and a third job. One was working at a t-shirt shop and the other was working at a boutique.
My husband was in school full time and working part time at a minimum wage job. So, if you’re still following me, that means his one job plus my three jobs…between the two of us, we worked 4 jobs. My income varied weekly, and it felt impossible to get on our feet.
On top of this all, in the summer months when I wasn’t subbing, I had a hard time finding someone who wanted to hire me for three months. My second and third jobs didn’t need me in the summer, so I was kind of SOL. I didn’t make enough during the school year to save for the summer months, so we used the cash from my husband’s job to pay our rent and charged the rest of our bills. We lived like this for around two years. When we started maxing out credit cards and couldn’t pay the minimum balance any longer, we knew we were in trouble and needed to make a change.
I know I mentioned earlier that we had $33,000 in debt, and $25,000 was in credit card debt. That makes us sound like crazy spenders, but it wasn’t really the case. My husband and I each came into our relationship with a little bit of debt, and accrued another load of it during our hard financial times. Although we weren’t crazy spenders, we were a little bit stupid with money. A lot of little stupid financial choices add up to big bills eventually. Mostly, we knew we were in some financial trouble, but weren’t educated on how to remedy the situation.
image viaThe first step- Credit Advisors
The first thing we did when we realized we were maxed out on our credit cards was to try and get out more loans. We got denied, which was painful, but it really kicked us into high gear. What were we going to do? Just like any other 23 year old would do, I googled it…”get out of debt” and discovered some credit counseling programs that would help us. I realize that there are a lot of programs out there that are a scam, but the one we used was www.creditadvisors.com. If you are going to go this route, I highly recommend putting in a ton of research ahead of time, and maybe even asking your bank to give you some insight. There are lots of scams out there, so be very careful!
Credit Advisors was awesome and a huge answered prayer. If you’re confused about what it entails, go to their FAQ page, but I’ll give you the basic rundown. This is not a situation where you make a “settlement” and pay off a portion of what you owe, and the rest is forgiven. You still owe all the money, but rather than paying the minimum on all your credit cards each month, you just pay one bill, to the Credit Advisors (or whatever association you choose). We gave them a list of who we owed money to, and they made phone calls and had the debts “frozen” which means that the cards were suspended until paid off. In some cases, they froze and lowered the interest rates on those cards also. So although it’s not a settlement, you probably will end up paying much less in the long run than you would’ve if you didn’t use a credit counselor.
For example, if we had a card with $1,000 on it, with a 6% interest rate, each month that that bill wasn’t paid in full, it would be collecting interest on the 6%. Credit Advisors tried to get all the credit card companies to basically take a snapshot of what we owed at that very second (for example, $1,000) and asked if we could pay exactly $1,000, rather than have our bill climb every month. Almost all of our credit card companies obliged. What’s in it for them? Well, some people have so many bills that they can’t pay them off and the credit card companies never get paid back. It’s worth it to them to strike a deal and freeze the balance remaining on your card, because there’s a guarantee there that you will be paying it off.
Something worth mentioning here- this is NOT the same as bankruptcy. A lot of people shy away from joining a credit counseling program because they think it’s going to ding their credit or make a negative financial impact on their life in the long run. Also, most of these programs are referred to as credit “counseling” but please note that nobody is counseling you. Nobody called me on a monthly basis to chat with me about how my money situation was. They left me alone the whole time, but I was able to call in and speak to someone directly if I had questions or concerns.Once we gave Credit Advisors a list of who were in debt with, they took a few weeks to make phone calls to everyone and set up the payments. They even advised us that there were a few bills that we shouldn’t consolidate together, like our student loans and car payment, because it would hurt us in the long run. When it was all said and done, we negotiated a payment amount that we felt like we could afford monthly, and we set which day of the month we wanted the payments automatically drafted out. The plan they put us on said it would take us four years to pay off our debts. Ouch!
A couple more things worth noting…
- The first month, we got all kinds of late notices from our credit cards saying that we owed them money. I panicked, thinking we signed up for a scam. After a few phone calls, it turned out that the credit card companies took a few weeks to process the changes to our account.
- We still received all of our monthly statements from our credit card companies, reflecting the payments made to our accounts. We were no longer paying them, but we had the ability to see how much we were paying them and were able to see the money amount we owed decreasing monthly.
Being in debt can be soul crushing. Hearing that it would take four years to pay off quite frankly, sucked. I spent a lot of time angry and in denial that we were so far in the hole.
Stay tuned for part 2…
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