It didn’t happen overnight; it took almost 20 years to accumulate $109,000 in consumer debt and five years of help from a nonprofit credit counseling service to get me out of debt.
It started early. As a pre-teen, I remember my mom and dad acquiring their first credit card. For a middle class family it was a way to add a little wiggle room into the budget.
They did their best to teach me the personal finance basics, giving me an overview of banking and how to balance a checkbook. They gave me a credit card when I went to college to be used only in emergencies. I remember not wanting to disappoint them with overspending with it, or maybe it was just the fact I didn’t want a watchful eye on how I was spending.
So as many 18-year-old college students do, I applied and was approved for my own credit card. I remember the feeling when receiving it in the mail. The embossed letters with my name and the words”Member Since” printed on the front. Somehow those letters made me feel important. That was the beginning of a perpetual cycle of overspending, managing minimum payments, and not having a plan for my money.
How Credit Counseling Helped Me Pay Off $109,000 in Debt
This is the story of how Brian Brandow paid off $109k worth of credit card debt with the help of a credit counseling service.
Fast Forward – Continuing to Overspend Via Credit Cards
Several years after graduating from college, now solidly in a career in IT and making a nice salary, I continued to overspend. I used my credit cards to finance vacations, emergencies, and anything else I didn’t have cash for. As my overall balance began to creep up on my single card, I applied and was approved for my second, now having two cards at my disposal the perpetual cycle of overspending continued to grow.
When I met my soon to be wife, the two credit cards came in handy to support a budding relationship. Date nights out included flowers, movies, and dinners that were typically put on the credit cards.
Why not, doesn’t everyone do it?
We soon got engaged, got married, bought a house, had children, and continued to dig a bigger and bigger hole using debt as our shovel. We justified it by managing the minimum payments and telling ourselves we work hard so we deserve it.
It’s this mentality that after 20 years found us with five credit cards, $109,000 worth of debt, all while making a six-figure income.
How could this be?
We made too much money to be living paycheck-to-paycheck.
Rock Bottom Moment – No Cash and No Available Credit
While planning a summer vacation I quickly realized that we had no cash or available credit to fund the trip. After trying to increase the credit lines on all five of our credit cards, and being denied, I knew something had to change.
I like to refer to this as our rock bottom or “aha moment” with money. It was a wake-up call for me for sure.
How could I, being a husband and a father of three children let things get so out of control?
Backed into a corner we had only one option, fix the problem.
There had to be a get out of debt quick plan that I had overlooked over the years or maybe I was absent from high school or college the day they taught that lesson. While researching personal finance I found there was no such plan, only common sense advice about money. So with my new found information in hand, I outlined these steps with my family to get out of debt.
- Mentally agree we need to change our bad behaviors. We had to come to terms with our overspending.
- Build a plan. We came up with a budget. Organizing our money is key.
- Communicate and agree on the plan. We involved the entire family because the changes would affect everyone.
- Define a ‘why’. Having a goal will help keep us motivated. Our why was to build a better financial future for our family.
- Stop building new debt. We can’t be successful in getting rid of old debt if we continue to add new debt.
Additional Help – Credit Counseling
Now that my family and I had a blueprint to tackle our debt, I wasn’t sure if we could accomplish it on our own. We had to face the fact that our past track record was not very good.
I had often heard of debt settlement programs advertised on the radio. I turned my research to them. Could that offer additional help in our case?
During my research, I also found information about credit counseling and debt management programs. I dug in to understand the pros and cons of what these different options had to offer.
It was quickly apparent that the debt settlement programs were not for me. Debt settlement works by stopping payments to your creditors altogether, building up a percentage of your balance in an account, and having a third party negotiate with your creditors (for a fee) and settle the outstanding debt. This has all kinds of negative effects on your credit report.
Personally, I was the one who spent the money on the credit cards and felt obligated to pay it back.
A Debt Management Program (DMP) was just the opposite. A credit counseling company works with you to aid you in your debt repayment. They offer complimentary counseling to educate you on money topics and will negotiate with your creditors to lower interest rates on your accounts.
Reducing interest rates is a big benefit. That fact alone allows more of your monthly payment to go towards the principal balance and gets you out of debt sooner. It was clear to me a credit counseling DMP was a good fit for me and my family.
I found a company through my local credit union. All it took to get started was a phone call and about 20 minutes of my time. But, that call changed the course of my family’s life forever.
I reviewed the debt management plan laid out by the credit counseling company with my family. We would make a monthly payment to them and in return, they would pay our creditors. The benefit was that we went from five payments a month to one, and our DMP company reduced our high-interest rates of 18-20 percent down to 2-5 percent. This allowed more of our monthly payment to attack the principal balance each month.
Further, the DMP gave us the structure and organization we needed to be successful in the early months as we learned to live within our means. Over time with further education, we were able to gain control over our overspending and added additional money to our monthly DMP payment to pay off our debt even faster. We averaged an $2,180 monthly debt-repayment for 50 months and I’m happy to report with the help of a credit counseling company and a DMP, we are now debt-free!
Isn’t your family’s future worth a phone call?