Why You Should Tackle Your Debt as Soon as Possible

Show Notes

• Guest: Sarah
• Host: Adam Walker
• Publication Date: February 27, 2024

Highlights

1:09 | Sarah talks about her relationship to money while growing up and the lessons her parents taught her.

3:30 | Sarah explains how her spending and debts quickly got out of hand as a young adult.

9:19 | Adam and Sarah talk about her tipping point, when she knew she needed help with her debt.

15:22 | Sarah stresses the importance of pushing through the shame and guilt and getting help as soon as you know there's a problem.

Episode Transcript

Adam Walker: Debt. We've all heard of it. Most of us have it. Debt is an almost unavoidable reality of life. But what happens when it starts consuming life? The experts at Money Management International believe that financial challenges aren't meant to be faced alone. On this podcast, we hear stories of people's whose lives have been changed by MMI's role as their toughest coach and loudest cheerleader. Their stories are unique, personal, and inspiring, so stay tuned because we're sharing each guest's Long Story $hort.

My guest on the show today is Sarah, an MMI client from Atlanta, currently living in Kenya. Sarah was referred to MMI by a friend after she found herself over 70,000 dollars in credit card debt. Through working with MMI, Sarah was able to get her interest rates lowered from around 19.6 percent to 8. 4. And since she started working with MMI, she's paid off over 70,000 dollars in just under four years.

Sarah, welcome to the show. So Sarah, let's start with your debt story. can you just kind of walk us through, I'd said the intro, you had about 70,000 dollars in credit card debt, like just walk us through what led to that point and at what point you realized you needed to do something about it.

Sarah: Okay. Thank you, Adam. This is interesting because my parents are so good with money. They're incredible money managers. And I think they took the standpoint from when I was younger they tried to be a good example, but they were never like adamant that "okay, let's see your budget, this is how much money you get, this is- we're putting it in this pocket or this bucket." Or "let me see what you made let's sit down and do this." They you know, definitely encouraged responsible spending and definitely led by example and they're my dad retired at 51 and they have zero debt and they've had zero debt for a very long time, multiple cars. They haven't had a mortgage in decades. And they were always very cognizant to never live above your means, definitely below your means. And I guess when I went to college, the first thing, how it started was I wanted a cell phone, so I never had a cell phone before. As always, I had been very independent and never asked my parents for anything. Obviously was quite ashamed to tell them that I was in any sort of debts. And they weren't necessarily sending me a monthly allowance. I had saved quite a bit of money before I went to college, but then when that money ran out and I started having these expenses like, "Oh, I want to have a cell phone and be able to maintain that" as well as, "Oh, I want to go off campus to have dinner with my friends or be able to do things."

I found myself like, "Okay, like this money, I'm going through this money really quickly" and being able to put it on a credit card seemed like a reasonable thing to do, but then when you max out a credit card and then you're like, "Oh, I, I've got to have money to live and I know how much money I have, it's okay for this time" and you were, it just became easier and easier to justify it.

And I remember at one point, people were sending me more and more credit card offers and I would apply and then I got approved. Because I was always very cognizant of never being late for a payment. Yeah, I was never ever late for payment. And, so I would get a credit card in the mail and be like, "oh, you're approved for 5,000 dollars."

And here I am, a 20 year old in college, as a full time student and don't have a job. And I'm like, "oh wow, 5,000 dollars." I didn't see it as this is for emergency funds and this is it, you get a flat tire or something like that. This is "Oh, somebody gave me 5,000 dollars to go shopping with."

And I remember my dad coming to visit me and we went to the mall and I went in a store and bought, I don't know, it was a couple of bags full of things. And he was "wow, like, how are you getting that money?" Because he was surprised. And I said, "Oh, I'm finding odd jobs here and there," which it was true. I was babysitting, some friends had people who needed people to take care of the kids. And I remember I took us out to dinner and he's like "wow, that's really nice. Thank you again." So it wasn't me saying, "Oh, daddy, I'm in trouble." Like I need, this happens, like several times.

And then there came to be a breaking point where I just was so stressed out. And I remember breaking down to my mom and just be like, "I don't know what to do." And at this point, I think I was like 11 or 12,000 in debt. And this is as a college student. So it's not like you have that earning capacity. My mom was like, I will basically- she transferred all of the debt to one card that I was basically paying her to pay the balance off and I think it was like a 0 percent APR or something. But then, and you would think over time that you would learn right? And there was a period of time that I did really well. I would say the subsequent years of college, I definitely made a concerted effort to not live above my means and to not have a credit card.

And I think at one point I did get an American Express and I was very diligent that I was paying that off every month. And I did, I was able to do that, I think for the most part, like in through 2008, like I was always paying things off like in a timely fashion. I wasn't carrying balances or anything back like that. And then I remember that I was traveling a lot. I love to travel and like big trips like people were like, "how can you afford to do that?" And I actually I wasn't in debt for traveling at all I was like I said, I would buy my plane tickets and plane tickets to Europe were- you could find them for 500 or 600 dollars. And I was earning tons of frequent flyer miles and staying with friends. So all that travel, I was totally paying for and affording and still contributing to my 401k. I was working in a nonprofit when I graduated from college. And also still babysitting and dog sitting and house sitting, which you could make tons of money from paying my taxes, of course, like I was making a lot of money from just doing normal stuff. And I was working part time at the nonprofit and really just enjoying life. I can't remember a specific turning point where I found myself buying frivolous things and I had savings, I had a 401k. I think it was maybe 2008 I remember using my credit card to buy a rug in Turkey and it was a very obviously expensive rug that I couldn't pay for in cash, but I had gone to Paris and Turkey over a long holiday. And, I remember thinking, "Oh my gosh, I know if I don't get this rug, I'm going to regret it." And I didn't have, I think it was like 3,500 dollars or it was between and 4, 000 dollars. And I was like "Oh, I really want the rug. So I was like, okay, fine." And then I made a plan how I could pay it off. And then there was another card that I had that I had again, zero balance on. And I always made a point, and this is something that I've adhered to my whole life, but I never have been in a housing or a car situation that was above my means; I always lived far below my means and that. So I wasn't obsessed with, "Oh, I have to live in, this fancy dancy high rise where, rent's 4, 000 dollars, 5,000 a month." I always made sure that wherever I lived was well below my means. And my first big girl car out of college, I had a Lexus ES, paid it off in two years, something like that. And then I got a Volvo, same thing, paid it off in two and a half years and it was newer. I always had like really nice things, but I was able to pay off. So then I just started justifying stupid purchases and it was like, "Oh, I want to buy this. I'll go ahead and buy it."

Or "I want to go here and I really want to go. So I'll go ahead and get the plane ticket." And then it ended up, and I think a lot of it was the circles that I ran in and it wasn't trying to impress people because I didn't really care about impressing people. It was that it was kind of like just normal.

And so if I wanted to do something, I did it. I really wasn't thinking about the implications. And you wake up one morning, you're like, "how the heck did this happen?" Because I'm, I remember being at one point, I didn't, because I had the apps for all the banks on my phone and just being like, "wow, I don't know how I'm not making any sort of impact on the balance when I'm making eight and 900 monthly payments towards one card and it's not getting lower." Another really big problem that was caused or that a problem that I faced that ultimately resulted in me living way above my means was not even my needs. It was me being in relationships where I was like taking financial responsibility for the other party. I had an incredibly wealthy boyfriend that I was with for close to five years. And actually one of the wealthiest families where he's from, not the United States. We didn't live in the same place. And so more often than not, when I would go to visit him, I couldn't, we couldn't stay with his parents, so we would always get hotel rooms, I would say 90 percent of the time I was the one paying for the hotel room for the weekend.

Many times I even paid for him to fly to Atlanta. So I think in 2018, I started to really get very stressed and it wasn't like I hadn't been previously, but I think there comes a point where you're like, "I can't keep living this way." Like I really cannot.

Adam Walker: Was there like a specific thing that triggered you to make you realize "Oh, I've got to do something different?"

Sarah: I think there were so many different like financial crises just that were happening, ongoing, right? Where people are like, interest rates and you start thinking, " If I were to lose my job tomorrow, what would I do?" What I was spending from probably, let's see, 2019 on, I was paying for it because I could afford it and I was paying cash, but it was catching up with what I hadn't paid for that was really paralyzing me. I had a lot of health problems in 2018. I've had a lot of health problems ongoing, but, I had reached out for financial coaching and the person that I had gone to basically was like, I know, the owner of, there's a startup bank and they're offering credit cards. Why don't you just go to them and talk to them and see if they can just lump this in their, new promo thing where it's 0 percent APR?" I'm like, I don't need another credit card. That's the last thing I need. And at this point, most of my balances were like staggering. They're within the, I'm very close to maxing it out and obviously when you're not paying off the balance and then the interest is accrued, how much is going towards fees? You're like $250 in APRs a month. Or, the interest fees. so if I'm paying $800, then I've also charged, say, not like a gone out and made a purchase, but my auto pay for my cell phone is 175. And then I'm getting 350 in fees. I'm making what? 175 dollar payment against the principal? Give me a break.

And, you get those statements where it says, "if you pay only the minimum amount, this is how long it's going to take you to pay off the entire thing." And you're like, "okay, it's getting to a point where this is literally a mortgage." And so I actually knew the president of Consumer Credit Counseling, which is now in one way, and I had known several people who actually store for the agency. And the nonprofit that I work for, we had engaged them and some of our financial freedom courses for the consumers that we served. And I originally, I think how it got to be involved with them was through one of John Hope Bryant's summer things. And, I had gotten to know him quite well.

And there's all these things that I'm encompassed by that are tools and resources that I'm not utilizing myself, which I, myself, probably more than anybody else that I was around could heeded the advice. So I called in and I remember that summer I was like, totally at a breaking point because I'm like, I can't keep living like this.

I really, I just, I can't do it anymore. When I spoke to MMI they walked me through everything and it was very difficult making those phone calls to all the creditors, getting the absolute most current balance and relaying that to MMI. Making sure it was all accurate, and then just in my mind being like, "okay, this is it, you will not be spending any more money that you don't have. Whatever you're spending is the money that's in your bank account or not. And if you don't have it, you're not going to go somewhere else to get it." Just exhibiting a certain level of discipline. And again, it was hard at first because you see the chart of what you owe versus what you've paid. And, But it also is really helpful, especially towards the end.

And whenever I got any extra money, I would look at what the highest balance or highest balance and highest APR was that had been negotiated by MMI and would try to pay that off. And so I could have just adhered to the payment plan that they set forth. I can't remember exactly. It was 1,700 a month. Which again, that's a mortgage, right? It was more than my rent. You're just, thinking, "okay, if I weren't paying this off. What could 1,700 dollars go towards?" And I was quite discouraged at first. But then when you think in the grand scheme of things, "okay, five years, right? Five years." And then It was up to me then if I wanted to go out and try to earn money, extra money here and there, or I wanted to do eBay or whatever, I could pay it off quicker, which as you know, I did.

I started in July of 2019 and it was paid off in full March of 2023. So yeah, and I remember making that final payment. I was like, " Yes!" And it was very satisfying looking at that pie graph they have and you see the blue and the red and the one growing, the other diminishing. It was very encouraging and motivating. And everybody was incredibly encouraging and supportive. And even when I said when I would call in and be like, "Hey, I want to pay off this one in full," like I know when I paid off and I forgot what exactly happened, but, I paid off one that I had 8,000 left, I made like a 9,000 dollar payment and paid that one off. So I eliminated, but instead of going back to MMI and saying, "Hey, this one's paid off. Can we take that out of the monthly payment that I would be making normally?" I never reduced that payment. I kept it at the same as if I hadn't paid off one and another and another. And that also enabled me to pay it off much quicker. So instead of going out and being like, "Oh, I have 3,000 extra dollars. Let me go here or let me buy this." Or it was, "okay, which card can I pay down the quickest? And which will make the most sense?" So if you just start thinking differently and it's been an incredibly valuable lesson and, also how frivolous we have the tendency to be.

Adam Walker: Right. Yeah. So, I'm curious, having been through this experience, you found yourself in credit card debt, you worked hard and made, like you said, like big lump payments to get out of that debt. You worked with MMI and it sounds like it was a great experience there. What advice do you have for someone that may be in credit card debt, is considering getting help, doesn't know what to do next? What would you say to them?

Sarah: I would say, don't put it off. Because that's, you tell yourself, put it off. For example, if I would have made the call to MMI two years prior, I would have probably had half the debt that I had when I went to them or at least less.. And again, because you justify it and you don't consider the implications long term, it just becomes easier. And there is a lot of guilt and shame behind it, especially like for me coming from my family and my parents being responsible and encouraging good money management habits and me just not listening or doing my own thing like I often do but, and, just when you look at like average credit scores or where other people that you work with that you've known or that you've grown up with are where they are you're like, "oh man," and you just you have a tendency to compare yourself. But you're the only person that has to know and you're the one who has to get up every day and look yourself in the mirror or go to sleep at night or not sleep because of these financial woes .And the only way that you're going to be able to overcome them is to hit it head on to address it. Don't avert the situation because it's only going to make matters exponentially worse.

Nothing's guaranteed. You can lose your job. And that was another really big consideration for me is because I knew I wanted to change careers. And so I actually stopped my, let's call it quote unquote, real nine to five job in August of last year. And I was like legitimately concerned.

I'm like, "okay, I knew I didn't want to get another job immediately." And it was still a sizable payment and it's more than a half a year that I was still making payments to pay off my debts without a job. Because it's not like you can- and that is one thing that people do need to understand is that MMI is incredibly helpful, incredibly supportive, but if you don't make that payment when you have decided to like the implications with your creditors are far worse than if you were to make a late payment not under a debt management plan. And it's something that you need to take very seriously and that you need to be ready for. Because if you default on that, then it's very difficult to recover from that. It gave me a lot of motivation. And so again, if people are struggling, even if you're in a waiting period or there's a gap, look at your assets.

I went to my closet and I made thousands of dollars on eBay, thousands to supplement my income. So it's kind of like where there's a will, there's a way. Or if you need to go find like odd jobs to make up the difference, do it. Because ultimately, it will pay off and you cannot put a price on your financial freedom, your livelihood. it's, your life.

Adam Walker: That's great advice. Great advice. Sarah, it's been a pleasure getting to chat with you and just hear your story. I think there's a lot of wisdom that we can all gain from it. And I really appreciate you taking the time to share that with us today.

Sarah: Absolutely. No problem. Thank you for having me.

Adam Walker: This guest is a real MMI client whose success is the result of hard work and dedication. While MMI cannot guarantee results, taking early action can increase available options and improve long term outcomes. Thanks for listening to this episode of Long Story $hort, brought to you by Money Management International.

To learn more about how MMI helps people from all walks of life get unstuck and out of the vicious cycle of debt through personalized solutions that inspire hope, visit MoneyManagement.org. This episode was produced by Edgewise Media. Script writing and production by Clara Jennings. Editing by Brandon Ellis. And show hosting by me, Adam Walker.

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