1/8/2013 7:00 PM ET|
How 4 families solved credit woes
Kandy and Russell Hildebrandt
- New Richmond, Wis.
- Debt: $123,000
Russell Hildebrandt, 50, made a promise to his wife before the birth of their twin daughters. "I told her if she wanted to be a stay-at-home mother, I would do whatever it took to make that possible," he said. The twins are now 17, and he's honored that promise, even though it has meant working nights -- and sometimes sleeping in his car to avoid commuting -- to pay off $123,000 in personal-loan and credit card debt.
"Our mistake was that we never cut back on expenses or replaced my income after I left my job," says Kandy, 46. Russell's income, then $71,000, wasn't enough to compensate, and one day in 2004, Kandy was shocked to realize that the monthly finance charges alone on their 11 cards added up to $1,500 a month.
To come up with the $2,300 payment they calculated they would need to get out from under in five years, Kandy offered to get a job -- three times. But "I'd made a promise," says Russell. "I was going to get us out of this debt or die trying."
Already working 60 hours a week as a manager at an environmental testing firm in Minneapolis, 50 miles away, he added a night job as a janitor at a grocery store. By working midnight to 4:30 a.m., he added $800 a month to their income. "During the day, he was a professional. Nobody knew that at night he mopped floors and scrubbed toilets," Kandy says. Sometimes he'd doze off at work; his co-workers were occasionally startled when Russell's head loudly hit the desk. To save on gas the days he didn't work the second job, he would sometimes stay in Minneapolis and sleep in his car.
At home, Kandy stopped buying clothes and cut out fresh foods. Three times a week, she tapped a vast store of defective dehydrated potatoes available to a relative ("our manna from heaven"), originally meant for a restaurant. "I'd use it in soups, casseroles, mixed with eggs for breakfast," she says.
Halfway to home plate, fate threw the Hildebrandts a curveball: Kandy became pregnant with their son Joey, who was born in 2006. "You'd think a baby's the last thing you'd need when you're paying off debt, but he was exactly what our family needed," she says. "He brought a lot of joy and humor into the house."
Driving back from work one day, Russell spotted a for-sale sign on a house with a lovely garden that was almost three times the size of their rented townhome. Although Kandy had her doubts, they went to an open house and met the real estate agent. A few months later, the agent called with the offer of a rent-to-own agreement. The family would pay about $1,000 a month -- $200 more than their current rent -- but 20% of it would go into escrow for a down payment.
In January 2009, just a few months before making their final credit card payment, they moved into the house, which they now own. "One great thing about paying off debt instead of declaring bankruptcy is that it let us save our credit rating," says Kandy. "So we could buy the house with a loan at 5%."
Another benefit: They've permanently changed their spending habits and, with Russell now earning $81,000 at his one main job and contributing to a 401k plan, the family's financial future looks brighter. Still, Kandy keeps an unopened box of dehydrated potatoes tucked away "to remind us where we've been."
- Hillsborough, N.C.
- Debt: $36,000
By December 2010, Molly Buckley was sure she'd found The One. She'd been dating her friend and co-worker, John Stillman, for about six months. She knew he felt the same about her, but she had a terrible secret. "I had this enormous credit card debt I was paying off, and I didn't want to tell him," she says. "Some guys would go running."
Finally, she found the nerve to come clean. During college, she'd charged $36,000. Although she'd spent the ensuing two-and-a-half years chipping the balance down to $12,598, she struggled to make payments.
John didn't run. "She made bad decisions and bounced back from them," he says. "That was one of the things that made me realize she was the marrying type."
Although Molly hadn't had to shoulder her college tuition, she'd put all her living expenses on credit cards, including books, food and clothes -- and a $1,700 pink Fendi hobo bag. "It was the combination of financial need and some big mistakes like that which got me into trouble," she says.
She assumed she'd be able to pay the bills when she got a job in 2007. But her $30,000 annual salary as a high school English teacher barely covered rent and expenses, and she continued to run up debt on six credit cards. When she couldn't make even the minimum payments, "I had a complete breakdown in my room," she says. She called one of her banks, crying, and was transferred to a credit counseling agency called Novadebt. The organization helped her work out a single payment of $806 a month for five years.
That commitment would leave almost nothing after rent and utilities. Once a month, Molly stood in line at a food bank for a box of groceries, which she transferred into bags so her roommates would think she'd been to the store. She befriended the cafeteria staff at school and brought home leftover subs and pizza. When she moved to be near family in 2010, she took four part-time jobs (at a restaurant, an art gallery, a clothing store and in marketing at a radio station), and worked as a freelance social-media marketing consultant. Soon, the radio job became a full-time gig, providing about $27,000 a year -- and her future husband.
John drew up a spreadsheet to help Molly track expenses and do a better job of planning. "I learned that I'm in charge of my spending at the beginning of the month. I can make a plan for where every dollar goes. But once the plan is set, the budget controls my spending," she says. The two married in February, after saving $5,000 each to host 220 guests. Her sister made the cake; a friend catered the meal; their Mexican honeymoon was a $700 (plus airfare) deal from the bargain site Living Social. Now debt-free, Molly is saving for a new car, and she boasts that she'll buy it with cash.
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Key point being made is there is a way out... if you want to. For many, they end up giving up and going Bankrupt. For some, too many lunches at your favorite fast food is just as costly (percentage-wise) as that fancy hand bag. It does not matter what you make as much as it does your current habits.
Other key point is using the "non" profit organization as mentioned in the article. Many of these companies are supported by the larger credit organizations. Credit card companies are more willing to accept reduced rates and payment arrangements from these companies (not to be confused with the "for" profit ones you see on TV. In the 80's it was difficult to ask banks to reduce card rates below their actual cost of funds. Big difference today when the cost of funds are at their lowest!
Consumer Credit Counselors is not for everyone. If you don't have a job or source of income, the math won't work for you and that other route may be your only option.
Kris & Cutis have posted the exact same messages several times.
I'm guessing spam.
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