Breaking the cycle of debt – here’s how to move forward
DETROIT – If you stopped at the grocery store or filled up your car last weekend, you’ve felt the pinch of rising prices, because higher prices mean more of us live on one paycheck to another.
We reached out to our WDIV insiders, and Rod is working with a few different families to help them move forward in these troubled times.
First up is Trish and Jason Keith from Dearborn Heights. They say their biggest problem is managing debt related to credit cards and college loans. They were able to get a consolidation loan from their credit union at interest rates of about a third of what they were paying. They also did our “Watch All Expenses” exercise and are now in the process of budgeting.
They say they are now finding leeway.
Next on the list is Latonya Edwards from Detroit. His biggest problem is a huge truck payment of $703 a month. We went to work to try to lower her payments because she owed $40,000 for a truck worth about $22,000. We are still working on that.
Edwards created an emergency fund and increased the amount she puts into retirement.
So far these families are committed to this program, and this is one of the things that we have learned at Local 4, because you have to be serious about knowing what you have, what you need and how to budget for that. So when you get to retirement, you’re not in the struggle that Kimberly Paulin finds herself in.
“It was always a check to verify for me my whole career,” Paulin said.
A generation of local high school theater students know Paulin because she had a long career directing springtime musicals and teaching English.
She is now 57 years old and covid gave her good reason to retire and take her teacher’s pension and her retirement health care coverage.
“I wish I didn’t have to worry about retirement,” Paulin said.
With the stress born of a pension too small to allow her to fully retire, she is now a receptionist at a local chiropractic office. She just helped move the firm into this new office in Walled Lake.
“My pension pays the bills, and then this job was ideally supposed to be for extras,” Paulin said.
But sometimes life gets in the way.
We met at her new office to discuss her finances and discovered that a broken wrist and gallstones threw her into a budget crisis because she was unable to work for several months.
“I had to go to physical therapy, so I immediately got my deductible, which is $1,000, and then I got coinsurance of $800,” Paulin said.
With no emergency funds, all payments were made to his credit cards.
“As soon as I was done with the health issues, my water heater turned off,” Paulin said. $1300.
Just like that, his credit card debt exploded. She immediately went to her credit union and qualified for a $25,000 consolidation loan, but there was nearly $7,000 more on her cards.
So the first thing to do is to pay off the credit card debt. We discussed her only paying minimums on the cards with the lowest amounts, then attacking the card with the huge total debt as best she could.
As soon as that card reaches zero, tear it up, take the account with the next highest amount, and so on.
When asked how far she could go in six months, she replied, “I think I can make that bigger card pay.”
Now Paulin is doing a good job of constantly paying for the necessities. With her health restored, she is ready to work even harder now.
“I work part-time for my friend’s medical billing company, you know, 15 to 20 hours a month,” Paulin said. “It’s a little extra money. It’s not a lot.”
It’s an encouraging sign that shows how committed she is to getting back into financial shape. Lack of budget is at the heart of his paycheck to paycheck problem.
Paulin is a member of a credit union and Rod advised him to use the free budgeting program they offer. Rod also suggested that she track all of her expenses and income in a month to know exactly where the money is going to help with this process.
She now understands how an emergency fund can protect against the impact of a broken water heater. She is also working to raise $1,000 in cash for this purpose. And even if she is single and has no children, she should still have a will and advance medical directives.
This, of course, brings discipline to personal finances, but let’s be clear, we want you to learn how to have fun too.
“I wish I had a little extra money to be able to, I love to travel and I wish I could travel occasionally,” Paulin said.
To show how determined Paulin is to improve her financial situation, she has just become a travel notary, which allows her to earn extra money without a lot of hours.
Living paycheck to paycheck? Here’s how to get off the hamster wheel.
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