I’ve been researching this past few months about getting out of a debt. I’m the “typical black dude”, bad debt and all. I’m fortunate enough to be able to “rise above my circumstances” — basically meaning we didn’t grow up with dough, and now i’m making quite a bit. I had no training, however, on how to handle debt. This is an issue, I presume, with many first generation blacks who run into money. You see horror stories of sports figures and entertainers who squander their loot on dumb stuff, never really picking up on how to make the dollar work for them. But I digress.
This move, and the resultant opportunity to be at home every day offers it a chance to actually be involved in most financial decisions in the household, and spend some time learning about household fiscal responsibility. Not that I have no fiscal responsibility whatsoever; it’s just that travelling 5 days a week helped me to be detached on what is really going on, me only knowing whether or not we’re in dire straits, or making it okay. Not being diligent on tracking money out didn’t help either.
When i first started examining how the world we’d get out of our situation, it looked as if we would have to perhaps take a look at one of those “Debt Counselling Services”. The problem with those, I found as I researched further, is that that is about one step removed from bankruptcy, as far as how it possibly affects future financing decsions. Now, we have what I would consider a gang of debt, however, I’ve made a decent salary for the past six or seven years. The problem wasn’t necessarily that we had more debt than we could handle, but mainly, we did not know properly how to manage our debt–to get a real picture of what we can handle, and those things with which we would need assistance. We needed to first find out how the world we’d gotten into the situation, then make (and execute on) a plan on getting out of it.
Two big steps were taken in our household that hadn’t been taken before, or rather had been taken half-heartedly. We took a look at the brutal facts of our debt situation (I think my recent reading of Good To Great may have been a factor in this decision : ). We took a look of how much money we have, how much money we put out, and actually came together with a comprehensive budget.
Another important step was to, in a sense, “let the world know” that we’re on this mission to eradicate our debt. I called creditors to negotiate interest rates. Discover had offered us in the mail a grip of balance transfers to a card i have with them containing a substantial credit limit (It was great timing when I originally acquired this card, thank God!). Due to a default way back when, my interest rate was crazy high. After calling, I was offered a better deal on balance transfers (2% lower than the mail offer, and no expiration with an easy catch), and lowered my rate on my current purchases by over 10%. We were able to transfer our balances over, saving an average of 20% interest on each card. In the case we fail to keep up with the “catch”, the interest goes back up to the new lower rate, which is still about 10% less than what we were paying on the other cards anyway. Ridiculous!
We then put together the plan itself to eradicate the debt in 24 months. It seems like a long while, and we could have made our plan to eliminate it sooner, but given life, and our propensity to stumble from time to time, It is as comfortable as we can make it, without putting us on the road to flippancy. For the first time in our marriage, there was light at the end of the debt tunnel.
If there’s any advice I can give here–it’s the same I’ve read all over–If you’re in a position where you have high interest cards, and can’t pay off the entire balances — pay far more than the minimum for a while, then you’re in a position to call the companies and ask them to lower your rate. This is in a nutshell, what a “Debt Consolidation Service” would do, except they perhaps would get better terms–however I wouldn’t want to have “managed by XXX debt service” sitting on my report.
