Article Categories
Home
Newsletter
Donate
Books
About
Contact Us
Site Map
Policy
Books I've Written
Investment Guide
Worksheets
The $12,000 Credit Card Challenge
Are you thinking about conquering your credit card debt but haven't given your debt much thought? Have you ever wondered how people who are deep in debt managed to come out ahead financially?
She wanted the best way to consolidate credit card debt as a way to pay it off or some other idea maybe she hadn't thought of.
What follows is based on a real life scenario and she managed to eliminate over $12,000 of credit card debt in just a few years, much less time than if she had just regular minimum payments. This is the story of Sara (name has been changed) who dug herself out of more than $12,000 in credit card debt.
Sara liked spending money, she was shocked when she noticed that her four credit cards had a combined balance of over $12,000. She couldn't recall what she had spent the money on. When sticker shock hit her she thought of looking for the best way to consolidate credit card debt.
A breakdown of Sara's financial history at the time:
§ Sara was a first time home buyer, a condominium, and had a mortgage which was due to reset soon.§ She leased an expensive car at the time and was stuck in the lease for a few months more.
§ Sara lost her job and took a lower-paying job just as the economy slowed down.
§ Sara paid the minimum monthly amount only. She was literally paying interest only.
§ Her credit card interest rate jumped from 15 to 28% without notice.
Looking for an Answer
One day, Sara cried when she got home one day realizing she had to admit she couldn't afford the car she was driving. She also realized that when her parents were her age they owned a four-bedroom house. If she was to ever get married she wasn't sure they'd be able to afford to raise children. Her parents had always told her she'd do better than they had. So, what went wrong?
Sara's father had been able to pay for his college with what he earned at summer jobs, and then got a top-level job right out of college. Between college and graduate school, Sara had accumulated over $80,000 in student loan debt she was slowly paying off.
Where Sara lived where houses cost several times more than what they did when her parents bought one. Cars had also increased in price above inflation.
Sara realized that the only thing that hadn't gone up was income.
Unable to cope with having less than her parents have, Sara used her credit cards to make up the difference, at least that's what she thought. She had even considered using zero balance credit card debt consolidation as a way to help her pay off her debt. She had heard her friends mention that the best way to consolidate credit card debt was to take out a loan.
What Saved Her?
She gave up on the zero balance credit card debt consolidation. Sara considered taking out a consolidation loan to pay off her credit card debt. She owned the condominium whose property values had increased since she bought it, so she could get a second mortgage, a debt consolidation equity loan.
Sara wanted to get rid of her debt, not trade it in putting her home as collateral.
She also knew that if she ever couldn't pay the mortgage, she would lose her home, while failing to pay the credit card debt would mean a ruined credit rating.
While Sara couldn't make up her mind over whether to take out a loan to pay off her credit cards or not her car was totaled in an accident.
It what at this point Sara admitted that buying another car would be financial suicide and she had to do something fast.
Solving her Problem
Sara knew she had a lack of financial know-how which had helped get her into her the financial mess she was in and she would need outside help to get out.
She heard about credit counseling services which she thought could help her. She found an agency that was a member of the Better Business Bureau and whose credit counselors were certified by the National Institute for Financial Counseling Education. Sara verified that they were a credible organization.
Here's what Sara learned from them:
§ The counselor understood Sara's reluctance to take out a debt consolidation equity loan, and helped her create a budget instead that would let her pay off her debt within a few years. Sara had to give up some of her expenses in order for her budget to balance.
§ The agency had her put money aside for a rainy day. Once she started saving, she began to feel amazing. She realized she had been under enormous stress from always being broke.
§ Sara was also relieved to learn that her $12,000 credit card debt was about average.
§ With her financial budget, Sara could think more clearly about her financial future.
§ She didn't have to do the research to find the best way to consolidate credit card debt because the counselor offered something better.
Sara's had new found confidence which meant that she could afford to raise a child in the future and that all the essentials would be taken care of. It also meant that her children would grow up more financially savvy than she did and with the knowledge they would be far ahead of their classmates.
Learning to create a financial plan her life, by keeping a budget, and having an investing plan you too can stay out of financial disaster, own as little debt as possible and build your own financial security.
Additional Resources:
The Credit Diet: How to Shed Unwanted Debt and Achieve Fiscal Fitness
Trading Debt For Wealth: How To Get Out From Under All Your Debts And Build Wealth For Retirement
The Complete Idiot's Guide to Working Less, Earning More
How To Save Money & Organize Your Finances: Tales of an Urban Consumer
If this website helped you find your financial future we ask you to please give as a way to say Thank You. Not only does it support this site, is is a way to give it forward so others may find their way toward financial security. Please consider giving today. Thank You.
