Debt

Ask Jean: $100K+ Earnings, $55K in Credit Card Debt, What to Do?

Posted by Jean

“Hi Jean- I watch you often on the Today show and am really in need of serious intervention-to say the least. My husband and I really don’t know what to do or where to go for help. So here goes:
We have been married for 4 years and have 1 daughter, Lucy 20 months.
We have $0 in savings and nothing for her. We both went to college and work-combined we make over $100K. But we have SO much credit card debt that we are overwhelmed and can’t save. I set up my cc for the hardship programs. I have-just in my name $35K in cc debit. My husband has about $20k in his name and he is working to pay them down. Should we go to a consumer credit place, file bankruptcy, get a loan? We just don’t know what to do and we really really want to save!
We got in this trouble from our first home-the taxes were $1500 a month and we just couldn’t afford that along with the mortgage payment so we started using credit to pay the taxes and utilities.
HELP please.” – Stacy

Hi Stacy,
I know how frustrating this is. You are making good money yet feel as if you’re getting nowhere. I’d give a credit counseling service a try — though I’m not sure how much lower this will make your payments (find one at debtadvice.org). When you go on the hardship programs with the card companies yourself, they often reduce your interest rates significantly. The counseling services bring them down to around 6% and they waive late payments and over limit fees. If you’re doing better than that yourself, I’d do two things — first go back to the card companies (your husband should do this too) and explain you’re still having a hard time making ends meet. Tell them (rather than asking them to tell you) what sort of payment you can make and in doing so give yourself room to save $100 – $200 a month. Then save the money automatically. I know it doesn’t sound like much, but every time you pay off a card, increase the amount of your savings by the amount you’re no longer paying to the card company. It will start to add up quickly. Next, go through your monthly spending line by line and see if there is anything you can cut down. Anything you can eliminate gets added to savings, as well. I’m telling you — once you start to see the savings, even small ones, add up, you’ll find strength and energy to do more. As for a loan — the answer is no, no, no. You already have too much debt. We’re paying down, not leveraging up.