By Daniel Rodriguez | Dr. Budgets
Is credit card debt bringing you down? There is a way out. Read on to learn how Jane* managed to become debt free. Here is her story…
Background
I bought my condo during the housing boom, and, as many people at the time, I had a five-year fixed interest rate. After five years my mortgage payment almost doubled, so I started putting more and more of my everyday expenses on my credit card. When that card maxed out, I got another credit card (and then maxed that one out too).
Deciding to Work with Dr. Budgets
I heard about Dr. Budgets about 1 1/2 years after my mortgage payment had doubled, at the age of 28, and decided it was time to change my financial future. I had just succeeded in obtaining a home loan modification, which reduced my housing expenses significantly. I had been trying to pay down my debt on my own for about six months without any success, and I knew I would do better with a budget coach.
Working with Dr. Budgets
Things improved dramatically after I started working with Dr. Budgets. My budget coach asked me to set a specific financial goal. I told him that I wanted to pay off all of my credit card debt by my 30th birthday, which at the time was only 18 months away. I knew this was an ambitious plan, but I wanted to start my 30s with a clean slate! I knew what the credit limit was on each of the two cards (and I knew I was close to the limit on both), but I had never added those two numbers together to know how much credit card debt I actually had. Perhaps I was scared? My budget coach created a debt repayment plan for me, and through that I learned that my total credit card debt was $18,000. Wow.
The next step was to find enough savings within my spending to achieve my goal. Some of the suggestions were easy, such as eliminating bank fees. Others were more challenging, like reducing my purchases at Target and not going out so much. The most significant change was one that I couldn’t do by myself – my budget coach suggested that I stop adding to my credit card debt. I had been keeping my credit cards in my wallet “in case of emergency,” but that made it too easy for me to whip out my Visa anytime I wanted something. My budget coach recommended I place both of my credit cards in a drawer and only use my debit card and checks for monthly expenses. I inherently knew that I should do this, but prior to working with Dr. Budgets, I just didn’t do it. I needed a budget coach to hold me accountable to myself.
The other thing that we did was identify areas where it was important for me to spend money…yes, SPEND money! With a goal of paying off $18,000 in 18 months, it’s easy to focus on all the things I COULDN’T buy, but my budget coach asked me to tell him what I REALLY WANTED to buy. Since I had big birthday coming up, I wanted to celebrate all of my friends’ birthdays in a BIG way. My budget coach helped me to develop a spending plan that allowed me to have enough in my “gift budget” to make that a reality, while simultaneously paying down my debt. Every time I wished to splurge on myself, I remembered instead that I’d rather send flowers to a friend for an upcoming birthday. After a while, it became easy!
Success!
After putting my credit cards away and following my healthy spending plan, I immediately began to make progress toward my goal. Working with Dr. Budgets made a huge difference! Yes, at times I struggled to stay within my budget, but my budget coach would be there to nudge me in the right direction again by re-focusing me on my goal. That monthly accountability kept me on track; it is just too easy to spend money when nobody is watching. I paid off one credit card within a few months, and paid the balance on my second card the day before my 30th birthday…and I couldn’t have done it without Dr. Budgets. I had at least some credit card debt throughout my 20s. My 30th birthday was that much sweeter because I was entering the next decade of my life debt-free! Today I am still out of debt, I have increased my 401(k) contributions to 10% of my income, and, for the first time ever, I have an emergency reserve fund (actual savings!) to help me stay out of debt! I am now saving for a car, which I hope to buy soon. Thank you Dr. Budgets!
Conclusion
Thank you for sharing your success story, Jane. It motivates us to continue helping others reach their financial goals! If Jane’s story resembles your own and has inspired you to act, give us a call at (619) 800-3030 to schedule your complimentary consultation.
*For client confidentiality, we changed the name of the person to “Jane.” Everything else is factual.