Tamara Holleman wants a new car and at first glance, she could easily afford one.
Holleman and her husband work in the medical profession, bring home comfortable incomes, live in a four-bedroom house with two teenage children and already own three cars.
They would be considered the idyllic middle-class family … if this were 2005.
Instead, it’s 2014 and like a lot of middle-class families, the Hollemans tumbled some through the Great Recession, picked themselves up, but still are clawing their way back to the relaxed financial status they enjoyed a decade ago.
They lived through job layoffs, underwater mortgages and credit card debt that peaked at $66,000 before Tamara accepted a personal challenge and found a debt management plan that reversed the family’s financial spiral.
“We were in a downhill cycle that looked like it was never going to end,” Tamara said. “We were charging everything on credit cards and even though it was causing me a lot of stress, I couldn’t stop. I couldn’t see a way out. There was no light at the end of the tunnel to even give us hope.
“But now, we can breathe again. There is excitement because we have hope.”
The seeds of hope were planted in the spring of 2012 when a co-worker asked Tamara to identify something important she couldn’t do without and give that up for 40 days.
Tough choice, Tamara thought. So many possibilities. Eating out? Clothes shopping with the kids? Entertaining at home?
The co-worker protested that none of those were really important and re-issued the challenge: “Give up something that is so important you absolutely can’t do without it.”
That was easy.
“Credit cards,” Holleman replied. “We used them for everything. If I wanted something or my husband or kids wanted something … no problem, I’d buy it and just put it on a credit card.”
Actually, there was a problem: Paying off those credit cards.
When Tamara accepted the challenge, the Holleman’s used nine credit cards and owed $66,000 on them. The interest rates on the cards ranged from 13 percent to 29.9 percent. Tamara, who handled the family’s finances, made the minimum payment due most months and the stress kept building.
“There was one card that we owed $13,000 on in 2002 and because I only made the minimum payment every month and the interest rate was so high, we still owed $13,000 on it in 2012,” Tamara said. “Giving up those cards for 40 days was going to be a blessing.”
No More Eating Out
Tamara’s game plan for living without credit cards meant writing checks at the start of the month for the big bills, then taking a cash allowance for everything else. When the cash ran out, she stopped spending.
“We used to eat out all the time and just put it on the credit card,” Tamara said. “I didn’t have enough cash to cover that so eating out was the first place I noticed where I could save a lot of money. I’d tell the kids we need to start eating healthy so Mom’s going to cook at home.”
The 40 days flew by and the experience convinced Tamara that, with a little help, she could do something about the balance on those credit cards.She called the card companies to try and negotiate with them, but got stonewalled.
“The biggest thing I learned from this was the card companies don’t want to deal with people like me,” she said. “I called them, I sent them emails, nobody wanted to hear my story. I wanted help with lowering my interest rates and nobody wanted to help me.”
She called InCharge Debt Solutions, a non-profit credit counseling organization, for help dealing with the card companies. InCharge enrolled her in a Debt Management Program and negotiated the interest rates on the nine cards down to between three and nine percent.
“Light at the end of the tunnel,” Tamara called it.
Payoffs Happened Quickly
Her husband, who had been laid off for 14 months, was back at work and when the cash flow picked up, Tamara directed it all toward the debt management program. In a little more than two years, they had paid off four of the credit cards. The balance on the remaining five cards will be eliminated in July of 2015.
“There is no more stress around our house,” Tamara said. “When we make that last payment in July, we’re going to have not hundreds, but thousands more dollars coming back into our pockets every month. If we want to go out for dinner or take a long weekend at the beach, I won’t feel stressed about it because we’re spending our own money, not borrowing it from the credit card companies anymore.
“Finally, we can dream again.”
And are you still dreaming about a new car?
“I do,” she said, “but not if I have to pay for it with credit.”
Bill “No Pay” Fay has lived a meager financial existence his entire life. He started writing/bragging about it in 2012, helping birth Debt.org into existence as the site’s original “Frugal Man.” Prior to that, he spent more than 30 years covering the high finance world of college and professional sports for major publications, including the Associated Press, New York Times and Sports Illustrated. His interest in sports has waned some, but he is as passionate as ever about not reaching for his wallet. Bill can be reached at [email protected].