Stories of Debt

Hello, I'm your host, Mr. Chuck, a retired accountant turn truck driver, I reduce my debt in a relatively short period of time, debt reduction to achieve financial freedom takes commitment, confidence, determination, stories of debt, real stories of unmanageable debt. This is a problem with many, knowing what has happened to other people will make people realize this is a problem. The second part is how to get out of debt and at times it takes to do so I'm referring to people's stories of the first part of the episode is gonna be people that had debt and didn't do anything about it, and what happened to them. And then the second part of the episode is going to be people with that, and what they did to get out of debt. This is for those who don't want to do everything it takes to get your personal finances under control. If you don't want to do tracking, you don't want to keep your budget. He don't want to keep it up to date, he don't have a debt reduction plan. He think they can just oppose, overlook your debt and I'll go away or maybe just pay an extra 100 bucks a month on it and eventually a go away. Maybe it will, but you can be more efficient at getting rid of your debt. The more you identify your problem and take control of it, the better off you're gonna be. And here is somebody who didn't do that is Rhonda arrest warrant. A few months ago, Rhonda was involved in a minor car accident to place offers and about me go she said but instead the officer informed Rhonda that her license had been suspended and she needed to turn herself into court. Due to an outstanding debt. And the state of Maryland a creditor can use body attachment or a warrant for civil arrest to force someone who owes them money to come to court. If the debtor fails to appear in court and after two requests, the creditor can then ask the court to have that person arrested the debt that was responsible for Ronda sysbench suspended license and silver arrest warrant. Yoga class, something small and simple, caused her a big problem. I tried to cancel Rhonda note about her four year old debt. But the fitness center refuse cancellations had to be in person and account had to be current prior to cancellation. So she was behind on making payments. She just quit paying for it. So she got behind. But in order to cancel her subscription, she had to pay it up current and then cancel it and do it in person and she refused to do that. Screw it. She said my car's broke down and guys are all the way in another country. This is just not convenient. Four years later, Rhonda has been the court twice for overdue debt, yoga debt. With interest and late fees. The mouse was now over $1,000 It's a debt as touch so many other parts of my life. It's just crazy. He got to know the laws of your state. What's the debt laws and what can they do to you that's important. Rhonda wasn't aware in Maryland. I think when I said country, I meant to say County. She wasn't aware of the debt laws in Maryland and what they could do or she would probably taken care of it much earlier. So probably a 40 or$50. I turn into well over$1,000 Probably legal fees, everything else. So don't overlook it. Don't keep your head in the sand and think it's gonna go away because it's not Cameron's medical bills. I had trouble with medical bills I couldn't pay at Cameron. Are we a recent college grad and one of the youngest participants in the Aspen epic focus groups. That is the group or the company that did the survey that did this. Cameron owed $1,000 in medical debt from hospitalization as a college student was lower income or health side support. Cameron took out a private student loan to pay down the medical bills. I was robbing Peter to pay Paul they said this occurrence is more common than one may expect in the past year alone. Approximately 30% of Americans took out personal loans. Words are often used to pay off other loans, debts and bills. These unsecured often high interest funds are made readily Available to some prime borrowers typically in desperate situations, the reason I went to the hospital was because I was suicidal. It's like I'm being punished for helping myself. Cameron said, out of pocket medical costs are often a source of financial insecurity. Even for consumers with healthy credit histories, and 2015. About 20% of households reported having medical debt. Americans currently pay a total of $3.4 trillion and out of pocket medical care, with an average household is expected to pay 15,000 annually and 2023. A 50% increase from 2015 The next time I feel suicidal or the next time I get sick on Monday, what I'm not going to want to go to the hospital camera said that's another way it adds to death. She's been playing she wants to help herself and her debt is banned. She's been published. Panis because she didn't pay the hospital bill. If she would have made some type of attempt earlier on and proves she didn't have income, they probably could have wrote it off. But he got to contact your lender or whoever you owe. Tell them your situation, see what they require. Sign in required documents and you might get relief. Robert student loans Robert I loca construction worker was confused when his fiancee hesitated to marry him. She eventually revealed her dilemma over $60,000 in student loan debt. I was like, Whoa, I don't have that money. Robert said today, the proportional of students taken out educational loads exceed 50% double the rate in a 1980s. Although the medium student loan balance is roughly$17,000, the delinquency rate has steadily risen from 8.7% in 2013 to 11.2% in 2017. As the cost of higher education continues to rise, households are finding it increasingly difficult to manage that company that student loan burning for Robert does not differ differ him from Marion, his finance fiance, now wife with strategy that could only identify as aggressive and or delusional. We paid off 32,000 In two years said Robert, I sold my own car and then we sold her car. We just take the bus and subway everywhere we live in one bedroom apartment we don't go out to eat, we don't have we hadn't been on vacation in three years. It's extreme in some ways. Sometimes there's things there's no sense of balance with two children. And a third one on the way Robert, his wife planned to budget every dollar until the student loans are paid off. Go to college, and that cost you a lot of money.

You borrow the money to go to school.

And before you do that, you must realize how much he gonna make what my career that I'm gonna go into? What's the medium wage? What's my chance of making the least the average way? And how can I afford to pay all of what I'm borrowing off based on what I'm gonna make, I say a doctor,

you're not going to have much of a problem. Maybe a school teacher could be a problem, but good teaching,

you're going to end up getting a master so you're gonna have more debt, you're gonna have more educational debt problem. So be aware of all that before you take out the money and only use your student loans to pay for tuition and books. Don't use it for living expenses, because I know a lot of people do that, over all view of these people's problems is something happened in their life and they didn't have an emergency fund. They didn't have any money set aside to be able to meet that unforeseen expense. So it's important to have an emergency fund as important to know that you're tracking and having your personal finances under control and have a budget, know where your money is going and how much you need at all times. And try to set some aside so that if something would happen, you have a way to take it under control and get rid of it faster, is better than later. The longer you're Wait, the worse is gonna get part to success story. And number one, set a deadline subject, Jr 39 lives in Florida$22,000 in debt payoff. Time 27 months and little under $1,000 A month these days, Jr is a personal financial expert. But when he and his wife were married, they had $22,000 in credit card debt between them paying off the debt as soon as possible as a priority. So the couple created a handwritten list of each card and its balance, interest rate and monthly payment. Doing so gave us tangible Evan evidence of what we were facing, and gave us motivation and courage to try and tackle it, Jr. said. So what did he do the first step he had identify the problem. And he listed out and put it round the name of the card, unpaid balance rate of interest, minimum monthly payment. From here the newlyweds created a detailed budget to determine how much money they had leftover at the end of the month, knowing that what you're earning and what you're spending is key to paying down debt. They are said whether it's 22,000 or $220. That they're paying down $1,000 for per month for 18 months, JR and his wife are only about halfway closer to the goals thanks to the interest rate that continue to drive up their debt. To speed things up, they transfer the balance to a 0% card and use the signup bonus to pay off the balance transfer fee. They gave themself a deadline of nine months and met it or though it took them more than two years to wipe out the debt 27 months to be exact. But they learned a lot about financial responsibility along the way. Deadlines are key because they gave you a finish line for the race Jr said something to shoot for and tangible and to the fight. Part of this story that you're supposed to pick up on is set a deadline for getting your debt paid off. Now I liked this where they transferred it to a credit card with a 0% interest. So what they probably did is got one of those cards paid off. And then they got the offer transfer balance. With a 0% interest for 12 or 18 months we see what they say they paid it off in nine months. Probably have longer than that, but they are just trying to speed it up. And they use the sign up bonus to pay off the balance transfer fee to probably was a new car day was. So they had enough credit still available where they could apply to get this new card, which when they got it they had a signup bonus that they got, which they then use that to pay the transfer fee from another card. That was a high rate of interest. So they had that amount of money on there at a zero rate of interest fairly smart. And they set deadlines for themselves. They might have had a year 18 months with zero interest, but they paid it off in nine months. They could maybe transfer some more on there and pay that off, too. They don't really say but they could a success story number two absolute discipline. Matthew 32 New York 74,000 in debt payoff time, 24 months, that's pretty aggressive. Might you watch the 15 year old TV, delay buying a new car and bypass big cities for his first job in order to pay off his six student loans. He prioritized the high interest loans first and worked his way down. I set small goals to pay off one loan at a time by making multiple payments per month and kept the interest low instead of allowing significant and cruel he said because Matthew had no other debt and his rent was low. They will put extra funds including holiday bonus and tax refunds towards the debt. Matthew focus on needs versus wants and set achievable goals. But he stressed that the process took serious discipline. He even wrote a book about his experience 74,024 months. Okay, the reason he didn't move to a big city for his first job was because it costs more to live in a big city. So he probably took a job where the cost of living was lower, but his income was probably a little bit lower also. I think that was the point of that. He didn't buy anything. He didn't buy a new car. He didn't buy new Teenies he set his budget minimal. He lived basically paid his rent and food and did probably nothing else for two years until his student loans were paid off. And he was the This plan and he stayed focus and he, I think he would have been better off. Because of that. It's not saying if he would have put a least one of those months and put some money into emergency fund and had at least $1,000, maybe $2,000 in emergency fund, in case something would pop up that way. He didn't have any other debt. So he probably didn't have too much of a problem. But he would at least had some extra money available if something were to happen. He was fairly young Rallo college with no health issues, it's hard to say. And then success story three, the snowball tie 32 Houston $100,000 pay off time eight years, which is pretty good. Tie and her husband racked up 100,000 debt after I graduated college they became debt free with the help of financial planner and the Debt Snowball Method from another popular auto author radio host Dave Ramsey. The snowball pros was similar to Matthews prioritize debt from a highest to lowest rate of interest. That's not correct. The Snowball is the lowest balance first, the highest the lowest rate of interest is the Avalanche method. Once the first debt was paid off, we use the monthly allocated mountain rollover the next step on the list paying down the minimum requirement until the next debt was paid off. And then we continue down the lesson two we are debt free. Ty and her husband began helping our people with their free with okay, then I did. Okay, well, this story, I'm think they're saying it's not snowball method, but it should be the Avalanche Method. Dave Ramsey, you make the minimum payment and all your debt. And you pay extra on the one with the highest rate of interest first, until it's paid off. And then you take that money that you were applying and apply it to it because it's increasing every time you pay one off, that minimum payment then is moved to the next one down. The next one you got to pay off. So if you had $100, minimum and a and$100, minimum B. Now once a is paid off, you're putting 200 minimum on be until you pay it off. doesn't say anything in here about an emergency fund. I know Dave Ramsey preaches emergency fund and his baby step method or whatever he's calling it. I don't know. But I know he wants a at least a minimum dollar and an emergency fund had in mentioning that here but they probably had that success for using a home equity loan. Catarina 37, Minnesota 42,000. I don't like this and I haven't started reading the yet because you're using one form of debt to pay off another form. You're not really reducing your data, you just rearranging them. Katherine's MBA left her with 60,000 in student loan debt, as though she landed a solid corporate job right out of school. She initially wasn't rigorous about paying off her loan. Catherine pay the monthly minimums applied her annual bonus and tax refunds to the balance. But it was primary saving for a big trip. I have saved up 40,000 quit my job and travel around the world for 20 months she said student loans went into deferment. despite earning 25% Less at her new job upon her return, Catherine sets a goal to pay off the remaining 42,000 I've earned loan in 22 months. She accompany this by creating a budget spreadsheet and tracking everything she spent. She paid more than she could a lump sum every few months and any extra including tax refund. I still traveled internationally and had fun, but I intentional about how I spend my money and I made trade offs and live significantly below my means down to about 30,000 debt she wrote into a home equity line of credit and continue to pay aggressively. The interest rate on the equity loan was less than half the rate of her student loans and that's tax deductible. Today, Catherine is a certified life coach. She's helped her find the courage to pursue their own unconventional path to freedom including financial freedom by paying off around debt. I guess that was a good move she when she used her equity line of credit on her home to pay off her student loans. It was half the rate of interest what's gonna save her money and also is tax deductible but there are limits to that. So make sure you don't borrow too much on your home where you go over and limit and use that I entrust you pay is no longer deductible. So I asked your tax advisor make sure about that before

you do anything like that. The downside of paying

off your student loans with a low equity line of credit if the government were forgive your loan, he no longer have that student loan. So it's not going to get forgiving. But don't wait for the government take control of your own personal finances and pay it off on your own because they promise a lot and deliver very little. And another success story. Accountability is key. Danielle 27 Connecticut 63,004 years pay off. When then Now, realize that the student loan interest from her grad surgery costs are more than $10 a day. She was determined to pay it off as quickly as possible. She lived at home with her mom her biggest companion to save money. Despite the long commute to work, I kept my living expenses low and made extra payment and shave years off my loans and now said she also started that through car which she gives travelers advice on how to plan and save for the trips. My blogs kept me accountable and helped me connect with other like minded people who wants to gain financial independence while pursuing the things they love. While she realized she had a debt problem, kept her living expenses as low as possible and got it paid off. conquering your demons John 38 Philadelphia 10,000 pay off time one year, John began accruing says substantial credit card debt and college try and depress impress a girlfriend. I thought in order for her to love me I had to buy her things. So I showered her with gifts and dinners out and quickly led to daddy said after graduation John had trouble finding work. during the economic downturn, he became depressed, his fix shopping. I turned to buying things clothes and electronics mainly. This made me feel good. He said he thought he had everything under control and that he would soon find a job. And the meantime, John is open to additional credit cards to take advantage of free balance transfer. He initially used only the new cards, but soon I was using all of them. It took an aha moment for me realize it's a shopping only made matters worse. how long that took. He sought professional help for depression for his spending and started temp work. Taking care of his emotional and mental health help John focus on his debt. Soon John land a full time job and eventually took additional part time gig. He put himself on a strict budget and paid off his debt in one year. His personal experience aspired, okay, he had a problem and didn't know it. But he finally realized that whenever you use a credit card, you have to treat it like cash. If you don't have the money to pay it off, when the balance is due, then you're gonna have a problem eventually, because that balance is gonna get bigger is not gonna shrink, and you got to get yourself and to a problem. I'll be back in one moment with my final thoughts. If you're interested, and this software that I use personally, to reduce my debt, I have a link in my show notes, shop financial.com, copy and paste it. And it'll take you to the website. If you are looking for any spreadsheets or other information that I talk about from time to time, I have links in my show notes. And I always have links to the articles I refer to and my show notes, plus other things like the happy giraffe.org, which is a another organization that helps you with your debt. So feel free to go to my show notes and link and check out whatever I'm putting out there. I appreciate it very much. If you would like to make a contribution to help keep this alive, then I would gladly add stuff that said my shownotes Thank you very much. Okay, what did we learn from these stories? One, you have to be aware of one you have debt too, you cannot overlook it and think it's gonna go away because Rhonda and Marilyn paid a big price for probably what was a small debt, maybe it was 25 or $50. At the beginning, maybe she owed $75 to get it current, and then she could have cancelled it. She She refused to do that. And that cost her well over $1,000. So don't put it off. Don't ignore it. Don't stick your head and be aware of your state and whatever their data walls are, because sooner or later if you put Off paying it, you're gonna have a problem. So let's take care of today. And it'll be a lot less costly. In the long term. It seems that most of these people with debt problems were student loans that could be common. So if you're in college, or if you have a child that's in college, make sure the money that you're borrowing from student loans, is actually going to pay for tuition and books, and not for living expenses, may be housing through the college, it can't be using it to go out to party or to buy food and things like that, because you're just racking up more debt. And that's gonna take you longer to take care of, and it's not cheap interest. I don't know what student loan debt interest is probably six or 7%, maybe three or four, it was like two or 3% When I was in college, but that was a long time ago that Lima was four or 5%. You know, transferring it to a home equity line of credit may not be an option, because your equity line of credit might be a higher rate of interest. The lady that did that was lucky where her student loan debt was higher than what the she get a mortgage on our home or line of credit. On her home, she lucked out. But that may not be true today. And it may not be true in the near future. because interest rates are on the rise, mortgage rates are going up equity line of credit are generally variable, meaning they're always adjusting with up and down. And now that the trend seems to be on the upside, where interest rates are going up. And then when you graduate from college, you have to get a job in your career like the one guy, he didn't go to a big city because he realized that God costing more to live there, which less give him less money to play for his debt. I commend him That was smart thinking he was thinking ahead. So he probably took a job in a different area of the country where it was cheaper cost of living, where he probably didn't make as much, but he was able to live cheaper and get his student loan debt under control. So he was planning ahead, that is fairly important and your personal finances, but you have to do everything. I know all these people that paid off their loan in two years or 20 months, or whatever it was, you know, they were tracking what they were doing. They had a budget, they most likely had an emergency fund of some type some amount. And they then saved it up and applied the extra to that debt. Now a lot of them pay extra every month, I don't recommend that. I say keep building your emergency fund until you have a set amount. And the set amount I'm talking about is $4,000 $1,000, minimum, and then 3000. Then you take to 3000. You apply it to one of your debt, whether you using the Avalanche Method, highest rate of interest to the lowest rate of interest, you pay on the order you pay off, or the snowball method, the lowest bounce of the highest balance the order you pay them off. I say pay off the lowest balance when first so you've sheave some success. And then don't cancel that card, because you might get an offer for a balance transfer for 12 months or 18 months at zero rate of interest like that one guy use where he opened up a new credit card because he still had good credit and had a sign on bonus, which he used to pay the transfer fees to get zero rate of interest, which then he was able to pay off faster because he wasn't paying interest on that set amount of money. So use everything to your advantage. Keep everything under control. Realize you have a problem. Identify the problem listed out that one guy did write it all down who you owe the unpaid balance the rate of interest, the minimum payment and the due date and start making those timely payment the minimum balance and you'll be glad you did so