I’m a divorced single mom of two teenage boys who is drowning in credit card debt. I only make about $12.50 an hour. I own probably about $13,000 on several credit cards — and am barely able to make the minimum payments. I don’t want to declare bankruptcy. Now, I’m thinking of getting a part-time job at Target or something and putting that money toward my credit cards ’til they are paid off. What do you think? Laura
It’s interesting that you use the word “own” when referring to your credit card balances. To me, that — as well as your statement about not wanting to file bankruptcy — indicates an impressive level of responsibility that many people who are in over their heads would like to distance themselves from. And indeed you do own it — both the debt as well as whatever items you charged.
I am willing to bet that you used the credit cards to make ends meet and that most of it went toward the basic requirements of raising kids. Even a little here and there adds up quickly, doesn’t it? But now to pay it off for good, and to not ever get into this situation again, this is what I want you to do:
1. Suspend use of the cards. Since the plan here is to repay the balance, it would be silly to get into any further debt. Don’t close them; just take them out of your wallet and tuck them away some place safe.
2. Pursue that part-time job! If you were to work 20 hours per week, you’d net somewhere around $1,000 per month. Now, hold that figure in your mind …
3. Take $750 of the grand and reserve it for your debt payments.
4. Make sure you’re not overspending by going though every expenditure carefully. Delete what you don’t need or care about and keep the rest. Apply the $250 that’s remaining from your income and add it into your monthly budget to cover necessary bills. Deposit the remainder into a savings account.
5. Back to the debt: Starting with the account with the highest rate of interest, send them the bulk of that $750 and pay the minimums on the others. Once the first account is at a zero balance, pay most of the one with the next highest rate — and so on and so forth. If your average interest rate is 17 percent, it would take you just 20 months to be in the free and clear. And during that time, if you were saving a bit, you’d graduate with a small amount set aside for emergencies and enjoyment!
As for those cards, after you’ve covered your debt, you can resume using them, as long as you feel certain that you’ll repay the balance in full. Never again fall into the trap of charging to make ends meet. Either cut down on spending or add to your income — or you’ll be right back where you started.
Finally, you don’t mention the exact age of your boys, but if they’re older teens, consider asking them to get their own part-time jobs and contribute a little for their personal expenses. Not everyone agrees with me, but I think it’s an excellent way for kids to learn the value of the dollar. It also helps them understand what it means to be a united family. Do talk to them about credit as well. Be honest and open about what you went though, and share your philosophy about ethical borrowing and repaying. Soon, they’ll have their own cards, and by knowing the right and wrong way to charge now, the fewer mistakes they are apt to make later.