Day 269 of my Financial Freedom Countdown
I was reading the article QA with Lynette Khalfani-Cox and in the interview with CreditCards.com Lynettee discusses how she paid off six figures of debt in three years. In case you didn't know Lynette is a former Wall Street Journal and CNBC reporter and is now a money coach and financial expert for Oprah Winfrey, Fox Business, Dr. Phil, and CNN.
In the interview Lynette reveals that despite making a six figure income salary she still racked up six figures in credit card debt. The good news is she paid it all off in three years.
Her story is very much like my own. I racked up six figures of credit card debt while making a six figure salary and although Lynette paid her debt off in three years, I have a five year plan and would love to knock it in three just like she did. Anyway I was thinking what it would be like if CreditCards.com was interviewing me and what I would say.
CreditCards.com: Tell me, what do you blog about?
FinancialElite.com: I blog about personal finance. My intent is to motivate people to get out of debt, encourage them to manage their credit and debt wisely. I discuss all kinds of topics, from investing and real estate, to saving money and budgeting. Credit and debt are my two favorite topics because I have struggled in those areas. Not only once, but twice. So many people struggle in these areas all their lives.
CreditCards.com: In your blog "Financial Elite," you share with people your struggles with debt and your financial troubles. Why?
FinancialElite.com: Being in debt sucks. I am trying to show people that there are a lot of people in debt and you know what? You can pay it off. It's easy to get in debt, but it's hard to get out. It's just like losing and gaining weight. You have to exercise and eat right to keep in shape. When you are in debt you need to find ways to spend less and usually make more money along with it. But you can do it if you work at it.
CreditCards.com: You made over six figures, but still ended up with $100,000 of debt. What happened?
Financialelite.com: People get into debt for many reasons. Some stroke of bad luck is often a cause -- laid off, getting divorced, becoming disabled, death of a spouse.
The rest tend to be overspenders or were never taught any money managements skills. I think I was a combination of a lot of things. Having a finance degree and working in the financial industry, I had a lot of knowledge on how to manage money. My first wife was an overspender and I got caught up in the vacations, treating people to dinner, buying expensive gifts for friends and relatives that we couldn't afford. The thing is the first time I was six figures in debt I was only making about $40,000 a year.
When we divorced I decided to use what I know and get things under control. I had just under $100,000 of debt and I was determined to payoff every penny. I got a second job, sold things like CDs, sold my furniture, sold parts of my toy collection, and donated tons of stuff.
Things had almost immediately turned around for me once I decided that I needed to get rid of this debt. I had basic cable, a dial up modem, wore clothes that were to big for me (I started getting myself into shape not only physically, but financially as well).
CreditCards.com: So it was hitting rock bottom that made you say, "I need to change this?" You were divorced during the time you were paying off the debt, so it must have been difficult.
FinancialElite.com: Lots of consumers have debt problems after a divorce, but in my case I always felt it was my marriage that led to the debt problem. I never put my foot down hard enough to put a stop to the spending that was ultimately the problem, but getting divorced began the turn around. I will never tell someone to get divorced to fix their financial problems. Marriage needs to worked on just like your finances. I never asked for the divorce, but I may never have gotten a grip on my finances if I hadn't.
I also started to get cut off from my creditors at that time too. My cards were maxed and out and I would try to get my interest rates lowered and the credits were coming back not only raising my interest rates in some instances, but quite often they would close my accounts as well.
The bottom line was I hated the debt. I used think of all the stuff I could be doing if I didn't have all these payments. I wouldn't have to worry if I was going to have to file bankruptcy or not. My biggest fear was being late on a payment, which is the one thing I was proud about, I was never ever late on any payment to anyone.
CreditCards.com: Paying off $100,00 in credit card debt in five years may seem impossible to some people. How did you do it?
FinancialElite.com: It wasn't like I miraculously got out of debt. It was through perseverance and working on it diligently that made the difference.
Like I was saying earlier, I revamped the spending habits I developed with my ex-wife and stop all frivolous spending. I stopped eating out and did with out as much as I could.
Negotiating with creditors didn't work that well the first time around with six figures of debt. This time it has been great. Many of my creditors have lowered my interest rates as low 0.00%. I also put every bit of extra cash I received towards the debt. It may have been a bonus at work, a tax return, a gift of cash, or even saved up spare change. Anything extra went towards the debt. Paying only the minimums on the credit cards was getting no where fast and I knew the more I paid the sooner I would get them paid off.
As the economy improved in 2002 so did my income. I started paying more and more towards my credit card debt. As one would get paid off, I would start working on another. Soon I had a run away debt snowball and the balances really came down fast.
I had some stock options that had finally become worth a descent amount and I cashed them out and put them towards my remaining debt. After five years of chipping away at my debt every single penny had been paid back.
CreditCards.com: If someone is reading this and feeling overwhelmed, what is your advice?
FinancialElite.com: Keep the faith. Most people have less debt than I have and I paid off six figures of debt once and I am working on doing it again. I have another five year plan and I am almost through the first year. I know it is tough, but it does get better. Since starting my five year plan I am beginning to see the same results this second time around that I had seen the first time. Things do get better in time.
Having debt doesn't mean you are a failure. Your life isn't over because you are in this hole. Everybody faces a tough time and it is always darkest before the dawn.
The main thing I want people to get out of this is, you can do it! I have done this once and I am doing it again. Make a plan and keep working on it. If you keep chipping away at the debt, you will dig yourself out of the hole.
I said I would never be in that kind of debt again, but it did happen again. I am not filing bankruptcy, I am not going to lose my home, and I am not going to default on any of my debt. I am going to pay back every penny and once again have financial freedom. The only thin I am going to lose is my debt.
[This post is written and copyrighted by Financial Elite (http://financialelite.blogspot.com/ ).]
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