BALANCE SUCCESS STORY
Client Pays Off Major Debt And Adopts New Finance Practices
The 2009-2010 economic downturn still affects many people, but for a client—a couple with $70K in debt—discipline and persistence was the key to getting back on their feet financially. It was a long, hard road, but they did it. The best part (besides paying off the debt, of course) was adopting better personal finance habits, and in the process has changed the way they view money forever.
Here’s where it began: In the late-2000s, two teachers who married later in life were overspending in many areas—from vacations to shopping to supporting their local nonprofits. Then the downturn hit… and so did the debt payback time. They put the brakes on spending, but that didn’t stop the many creditors they owed. “We knew about agencies that consolidated debt but also knew there were a lot of sharks out there,” the client said. “We had debt consolidators calling us from 6am to 11pm every day. We couldn’t tell the difference from the ones looking to make money and the ones that were not.”
In the midst of this financial difficulty and nowhere to turn, the client’s credit union gave him a brochure on BALANCE counseling. “I had no idea that this service was even available…We had nowhere else to turn and it was a life raft,” he said. “When you find yourself in a debt situation, you take desperate measures and you really don’t have to.” “Working with these counselors, there was no judgment and a lot of professionalism,” he said. “They were able to negotiate my debt and consolidate from 12 lenders to one with better interest charges,” he said. “Ultimately the money hemorrhaging stopped.”
As of October of 2014, after 3-1/2 years, the couple was able to pay off their debt—and it’s changed their lives in many ways. “We made paying off this debt a priority and made some sacrifices along the way. As a result we feel a sense of accomplishment. We’ve also arrived at some new habits in the process and are very grateful,” he said. “It’s changed the way we see money and spending as part of our values.”
He also pointed out that their finance difficulties have been a real growth experience for them as a couple. “We faced this crisis together, and it was a gift in the long run. We had to look at issues around marriage and finances.” he said. “You have to ask yourself: Is money giving you what you want or is something else missing?”
Now that the couple is retired and living on a fixed income, planning and priorities are a key part of determining how they spend money. “Our future looks bright.” he said.
Five Practical Ways to Reach Personal Finance Goals
Ready for the new year? It’s time to get your finances in order. Here are some ways to get you started.
Calculate Your Net Worth
Calculating your net worth, including all assets and liabiilities, will help assess your financial state and what it will realistically take
to achieve your personal finance goals. With a firm baseline, you’ll be able to understand and prioritize your current budget and spending habits (and where you might need to cut
back and save more).
Break Down Spending Habits
Do you have a monthly budget (or not)? Maybe you have an idea of what you spend each month but it’s not documented. Guessing your expenses is usually inaccurate as we often forget certain purchases (including the ones we wish we didn’t make). Rather than “guestimate” how much you open up your wallet, create a spreadsheet with categories like housing, entertainment, and other budget areas, and try to fill in each expense every day. That will give you a real sense of your spending habits and a good reality check.
Evaluate Your Current Bills
Once you know where exactly your money is going, you can figure out where to trim the fat. For instance, do you really need a landline AND A cell phone—will a mobile phone suffice? Can you cut back on your electric bill each month by being more mindful of leaving electronics on? Are you buying lunch every day at work instead of making it sometimes? All of these costs add up and you could pocket big savings annually by taking a tough look at your habits. It might not be fun to cut back but when the savings start adding up, you’ll be thankful.
Automate Your Savings
Make it easy to save your money by automating the process of putting away money each paycheck or other intervals that work with your budgeting schedule. Start by knowing what you want to save over the year and calculate what it will take each month. Voila! The work is done for you—sit back and watch the savings grow each month. Being goal oriented about the process helps.
Pay Down Credit Cards
Speaking of saving money, now is the time to get the debt off your credit cards or pay them down, if you can handle it financially. Think of it another way: It might be more advantageous to have a zero balance on a credit card than to pay interest for the next six months—do the math. (Don’t forget to get your free credit report and make sure there are no inaccuracies from the prior year.)
Listen to our podcast on getting onto the path towards smart money management.
What's Your Financial Wellness IQ?
As we start the new year, take this quiz to see where you stand financially and help address any problems shown by the results. The first step toward a financially stable tomorrow is facing the situation today.
Ready to begin? Answer True or False to the following questions, and then tally your score. See scoring beneath the quiz to determine whether or not you are a good candidate for financial counseling.
- I normally pay only the minimum amount due on my credit card bills.
- My credit card balances increase each month.
- There are arguments in my home about money.
- I sometimes hide purchases from my spouse.
- I frequently charge items that I used to pay for with cash.
- I have thought about filing for bankruptcy.
- I have begun using cash advances to meet my obligations.
- My credit cards are near the limit, so I’ve begun applying for new lines of credit.
- I do not know the total amount that I owe.
- I skip paying my bills some months, or pay late.
- I have depleted my savings.
- I am consumed with worries about debt.
- My debt interferes with my job and/or home life.
- Collectors have begun contacting me.
- I have taken money from my retirement account to satisfy debt obligations.
- If I lost my job, it would mean an immediate financial crisis in my life.
- I use balance transfers.
- I have no emergency savings account.
- Next month’s bills arrive before I’ve paid this month’s.
- I do not open my bills when they arrive, or soon thereafter.
Most people answer “True” to two or three of the above questions. If True was answered more often than three times, you might consider financial counseling. BALANCE offers free and low cost assistance, whether the problem stems from needing more financial education, debt concerns, meeting your mortgage payment, or a host of other personal finance concerns. Discussing it with a certified counselor/3rd party will add insight to help you to resolve the situation.