Credit Card Debt
Credit Card Debt by Gary Foreman
Not too long
ago they had $30,000 in credit-card debts. This month they paid off the last remaining
balance. But, how did they do it? Cara and Michael's story is an inspiration for
anyone trying to get out of debt. Recently, Cara shared their experience.
began by discussing how they started. "Stop spending. We just said, OK, no
more. We won't buy anything if we can't pay for it in cash. We cut up all the
credit cards. We have an American Express."
went on to explain that they kept the American Express card knowing that the entire
bill must be paid each month. Eliminating the credit cards was a big breakthrough.
"We just stopped spending. If you don't have a credit card with you, you
can't put it on credit."
they stopped adding to the debt level, the next step was reducing the amount that
they already owed. Cara watched her mailbox for credit card offers with low introductory
rates. When she found one, she'd switch to that card. When the intro period was
over and the rate increased, she'd find another card. Cara began to be concerned
that their credit report wouldn't look good because of all the switching. So she
began to approach the credit card companies for a lower interest rate. "I
would negotiate with the credit card people." She'd tell them, "I've
got these other offers and I'd like to stay with your company. But I need the
lower interest rate." Said Cara, "I've gotten some of them to extended
the introductory rate."
grew up in simple circumstances. Her father died when she was three, leaving Cara's
mother to raise seven children alone. Although they struggled financially, all
of the children attended some college. Cara has a master's degree in accounting.
she met her husband, she had about $7,000 in debts and he had some, too. They
moved into a $525-a-month apartment in Atlanta. "My car was paid off. He
had an older car that was paid for. So we really didn't have any expenses. We
did have our credit cards we had to pay."
many people, a big expense accelerated the growing debt. "His car died. So
we wound up getting him a new car. That's where it started. And a month later
I totaled my car. So I wound up getting another new car. We went from having no
car payments to two payments. And both of them were leases.
young professionals they expected and got salary increases. But, Cara explains,
"For each step in salary we also spent more."
we decided to buy a house." They didn't have savings to use for a down payment.
"We borrowed money from family. I even took a cash advance on a credit card.
Of course, when you move into a new house there are all these things you needed
that you didn't know you needed."
the peak, Cara figures they had about $30,000 in credit card debt. She began to
be concerned that they wouldn't have anything saved for retirement. After cutting
up the cards, they began to examine other expenses. "I look at everything
we're spending. That helps because you see what you've done.
do make good money, so that helped. We have an advantage that a lot of people
don't have. Every penny that we've got in any kind of bonus, extra salary that
we've made" went to debt reduction.
Michael and Cara used more than increasing paychecks to get out of debt. They
looked at their expenses and made some lifestyle changes. "We got rid of
our cars. We now have two used cars. We took out a home equity loan to buy them.
I've paid off one of the used cars and a good portion of the other car."
advice would Cara pass on to others who are concerned with mounting debts? "Just
don't buy what you want. If I really want something, I'm going to think about
it for a long time. I'm going to research all the possibilities. Do I really need
it? How much use am I going to get out of it? If there's something that I don't
need, but really, really want, I'll still think about it." They also cut
back on small spending.
path to financial freedom has also been a learning experience for the couple.How
would Cara summarize their experience for others? "The first thing is to
stop spending. Don't put any more debt on the credit cards. If you want something
you'll just have to do without for awhile. Every extra bit that you earn you put
towards the credit cards. Reward yourself once in awhile but do it realistically
and within your budget. Just look at where you can cut. That's what we did."
Foreman is a former Certified Financial Planner who currently edits The Dollar
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