Are you being crushed by debt?
As financial problems of the world weigh you down it can feel like you are the only one who seems to owe everyone…
For some, what started as a small loan to reduce high interest debt over the months and years bloomed into more and more borrowing until you’ve dug a hole so deep it feels impossible to see a way out.
For others everything seemed fine, until WHAM, and one of life’s unexpected overnight surprises leaves you stunned at how much you owe all of a sudden and reeling, scratching your head as to how you are going to come up with the tens of thousands of dollars expected of you.
Regardless of how it may feel when you are smack dab in the middle of your own personal debt disaster, money problems, debt, and all the misery which accompanies these challenges are as old as civilization. Others have faced the same challenges, and have come out the other side.
The following are some of the best case studies where very real people, just like you, facing very real problems share exactly how they got there, and how they stared down their money problems and defeated their debt demons!
How She Got Into Trouble
Marine Rachel Gause shares how she started falling into debt after her daughter was born. It didn’t happen overnight, but eventually she found herself owing a slew of balances across various credit cards, car loans, various personal loans and even a furniture loan. She shares how retirement from the military was looming and she didn’t want to make the change with such massive debts weighing her down.
How She Tackled The Debt
Mrs. Gause revealed as much as $55,848 at one point in credit cards alone — Yikes! She started budgeting using the envelope system, moving from relying on credit cards to dividing cash amongst the envelopes and sticking to her monthly budget allotted. She advises creating a spending plan and creating a budget and sticking to it.
My Reaction to Her Story
Her courage and most importantly discipline should be commended. She faced a mountain of debt in amounts very capable of crushing the spirit and motivation of many less stout hearted souls out there.
The monthly debt service on the credit card balances that large must have been staggering. Moreover, her budget must have been tight, and progress must have felt very slow indeed.
Nine years is a long time to chip away at what you owe… It’s easy to imagine most people opting for the easier path, declaring bankruptcy, wiping her debt clean and then waiting 10 years for that to fall off her record.
She instead took the high road, changed her fundamental approach to money, and should be applauded.
If you are struggling with cutting back, be sure to check out our Ultimate List of Money Saving Strategies Here.
How She Got Into Trouble
Philadelphia resident Alison in her late twenties works as a legal secretary and told BillFold how she accumulated $20,000 in school loans and owed $17,000 on her Volkswagon. She shares how her mom works for one of the credit reporting bureaus, so she avoided running into trouble with credit cards. Her issue was a large student loan, a car loan, and a job which wasn’t paying nearly enough for living expenses plus what she owed. When she started working as a legal secretary she was only making $30,000 a year, and though employed, she determined to eliminate what she owed.
How She Set About Paying What She Owed
First and foremost she made herself essential for the attorney she worked with and was able to increase her salary eventually to $45,000 a year. She reveals she did what she could to keep her costs low, and gave up ‘non-essential spending’.
She keeps a moleskin notebook and writes down each and every transaction throughout the day, and adds everything up at the end of the month.
While simultaneously saving as much as $500 a month she started doubling her monthly payments to her student loans.
Ultimately she reveals she received a windfall (source undisclosed) of $7,000 and applied the full amount to her debt. After her emergency savings grew large enough she used that to pay off the remainder of what she owed in student loans and now continues to save and is working on growing her retirement savings.
My Reaction to Her Story
Alison didn’t face a terribly desperate debt situation but her approach, I think, illustrates a very important point which many people overlook when putting together a strategy to get debt free. It’s such an important point I’ve addressed it numerous times, and will do so again here.
The #1 best way to eliminate what you owe, wipe out unwanted loans, and generally improve your finances, credit score and generally solve your money problems — grow your income.
In her case, she dramatically raised her salary, but even small income increases can often make a big difference. A few weeks, to help get you started and begin building momentum we revealed: The Best Money Making Tips to Make an Extra $50.
Alison found a way to become essential at her work, was rewarded with a higher salary, and she was able to execute the rest of her debt reduction plan in a calm and methodical manner. She essentially grew bigger than her debt problems and thus they didn’t look so large any longer.
(Related Also: 7 Mistakes With Your Money Everyone Should Stop Making Right Now)
How The Newlyweds Got Into Trouble
Common story. Couple falls in love. Couple gets married. Couple, who never discussed money during their courtship, shocked to discover debt skeletons in the closet of their beloved. The husband brought $36,000 of debts from student loans and an auto loan into the marriage. The wife had brought her own student loans totaling $9,000 liked to charge large amounts on designer handbags and new clothes.
Within a few months of getting married they had charged an additional $7,000 on credit cards, and added an additional $1,400 to finance their honeymoon cruise. Total owed consumer debt – $52,000 + $350,000 mortgage. Total annual income $70,000, savings = $0.
“Seeing the numbers in black and white was anxiety-inducing… How had we mismanaged our money so badly?”Newlywed via LearnVest
How The Couple Tackled Their Debts Together
They agreed they needed to get serious about their spending habits and what they owed. Believers in “drawing upon others’ success” they began researching and studying books, blogs, and any information they could get their hands on teaching better money habits. They even attended a 13-week personal finance class provided by their church.
They created a budget, reviewed their expenses and sought out ways they could save money. They began plugging the money leaks in their budget one by one, making cuts to everything from cable packages to restaurant visits and were able to slash up to $500 from their monthly spending. The savings was then used towards paying down what they owed.
Not satisfied to stop just there, the couple sold their car, bought a cheaper used vehicle, and sold off various possessions online to raise money and hurry the process. They began to watch their debt shrink from month to month and 18 months later they could declare themselves debt-free.
My Reaction to Their Story
This is an all too common problem, people not discussing their money matters as if the subject is taboo. There is nothing shameful in either of their approaches to their spending, their debt history or financial challenges. I’ve shared in in detail my success beliefs and approach to personal finance.
It still amazes me each time I hear a couple, choosing to link their lives together via marriage, for better or worse, seems to have discussed every aspect but the financial. In my opinion, a good romantic match includes strategies for handling money that match — or one party being willing to change into something which doesn’t create conflict. That being said, I’m warmed by the research approach, and how they made learning a part of their bonding as a married couple.
They did it together, and created a new approach to money they both shared which was more resourceful and helped them put their debt behind them in under two years.
A sound, measured, wise approach to both their relationship and their finances — they realized their marriage is a shared union (one that includes their personal finances) and adjusted acccordingly, well done!
Resource: Debt Consolidation Plans & Programs
Shared stories of how you faced your personal debt spiral and paid off what you owe can be incredibly inspirational and motivational. We are all unique, and these stories aren’t meant to be a cookie cutter example of – do this and you too will pay off everything you owe.
Everyone has unique elements to their financial problems.
So too, everyone has unique assets and strengths they can draw from to overcome their financial challenges.
In the end, when facing seemingly insurmountable obstacles, a case study is sometimes just what you need to remind yourself, “I’m not alone to face such obstacles”… “Others have been able to dig deep inside for the strength and resources to face it”… and know YOU CAN too.