Trying to out of Debt? Afraid that this is the way it is always going to be for the rest of your life?

Do you feel that the only way to fix your debt situation is playing the lottery?

All of this “stuff” is great, but the hard honest truth is that we all know already how to get out of debt and that IS the Hard Honest Truth.

As a person that has gone through this, (and still going through this) I have found that people do not talk about the feelings of depression, of stupidity, FEAR, feelings of being out of control.

For Pete's Sake, People are killing their families and themselves because they are losing what they consider to be everything . We are NOT defined by what we have….let this sink in., we are NOT defined by what we have. We are defined by who we are.

You need to try and get past the fear of being in over your head and whether or not you like the idea you need to STOP using credit cards if you cannot afford to make the payments.

I have not used a credit card in over two years. Not by my choice, but by the credit card companies. If someone had said to me back then to stop using my cards I would have laughed fearfully because that was how I was paying for my groceries, gas, and anything else that I could pay. I felt that I couldn't survive without them. The shocking part is, I could not only survive, but I am so much happier and we are slowly paying off our debt.

Do you know what a great feeling it is to wake up the day after Christmas knowing that I would not be getting a bill in the mail for all of the presents that were purchased.

Has our lives changed? Yes and No.

Yes in the respect that we have learned that all the items we thought we needed, we really did not.

No in the respect that we are still the same people. We are still Joseph and Kelly. Our children are still who they are. We are learning to manage our money better.

STOP using your credit cards. If you do not stop and your spending continues, the credit card companies will do it for you. Practice now, while you still have them. Use them only for absolute true emergencies (and NO, going out to dinner is not an emergency).

Before you make a purchase, ask yourself this question...Is this a Need or a Want? You will find very quickly that your need column is much smaller than the want.

I have asked myself this question for so long that I have come to a place in my journey that I have so much around me that I want to get rid of it. Most of what is around me were my wants.......and I am embarrassed at all of the "wants" that I have purchased and either no longer use or enjoy.

Human instinct calls us to take care of our needs. Basic needs would be food, water and shelter. If we do not meet those needs or are struggling to meet those needs than emotions kick in and many times they are not the good ones..

You can start changing your situation right now by how you view your situation.  First and foremost.....Failure is an event NOT a person....  You have not failed....just stepped off the road and have taken a stumble.  Maybe some of you tumbled all of the way down the bottom of a canyon but you can climb back out.  It will just take a while.

This change in mental attitude should give you a moment of forgiveness and grace on which to devise a debt-management strategy.

Do you need help with your debt load?

Are you in over your head? Are you scared? Overwhelmed? Well ya can’t unscramble eggs, so lets get to work.  First, the past is the past.  You cannot go back, not even one second.  That part of your life is done.  Sounds simple enough, but how many people do you know that do not move forward because they are so busy looking back?   Going forward is the first step in changing yourself.  No matter what you WANT to believe, this mess is no one's fault but your own.  It is not your parents, your kids, your relatives, your friends....Over the next several weeks, I will be blogging on setting up a budget, working with what you have (or don't have) and how to work at being happy the WHOLE time you are doing this.  You will start to feel better.  You will start to feel more empowered because you are doing something.

Take a deep breath.......and lets go.

My Journey into Debt

To begin, I have to give a bit of history of my past and current financial situation. I share this information not because I want people to be a voyeur into my private life, but maybe someone else out "there" has gone through, is going through or will go through similar situations.  Notice I also didn't say "our" Journey into debt.  Yes there was another person riding along with me, but I also had a voice.  I could have said no to purchases, no to trips/vacations, and all of the other non-essentials that were purchased.  I take full ownership of my part in this mess.

My birth began in a very poor family in Maine. The seventh child born out of ten. At the age of five, was placed in foster care where I remained until my high school graduation. The day after graduating, hopped onto a greyhound bus and headed for “the big city” of Boston! All of that is another story I will tell later, but it at least gives you my beginning.

My first job in a suburb of Boston was as a live in Nanny. That lasted 3 months before I couldn’t take it anymore and got a “real” job as a receptionist. My initial salary was $12,000 a year and can I tell you, I thought I was living the good life. I had my own apartment. I was even able to buy my first car (who needs food when you’re still in your teens?); and had hip clothes on my back.

Being 18 and growing up in the poorest regions of Maine, I never had money before. So I started reading books on setting up a budget. My first budget was very crude but worked for me at the time. Even on $12K a year I was meeting my bills and had a little extra to spare for the night life.

The older I got the more credit cards I got and slowly, I started paying for groceries, gas, clothes soon everything via credit cards. I now needed my spare change money to pay the credit card bills. The journey to my debt began when I started using plastic instead of green!

ARE CREDIT CARDS BAD?

This to me is a big no. In today’s society, we need to establish a good credit ranking before we can do anything. It is the excess wanting that makes the credit cards bad. In trying to keep up with the Jones we spend more than we need. Here I am today at 41 realizing that there really is not much that I need anymore except to being debt free.

By the time I got married at 28 I had put myself on another strict budget and was almost credit card debt free. My soon to be husband had 23 credit cards in his name. BEFORE we got married I sat down with him and asked if I could “control” the finances, by putting HIM on a budget also and giving him a weekly “allowance’. This was not an easy conversation and it took many future ones to convince him that this was the way to live our lives. The way I finally convinced him was to say “give me three months” and see what happens.

After being on a budget for three months, I was able to give him money (cash) to spend….boyfriend happy…..and 4 credit cards were paid off…..girlfriend happy. We saved and scrimped and paid $14,000 on our wedding from our own pockets. ONLY BECAUSE WE WERE ON A BUDGET! This was the SMARTEST time of our live.

Our arrogance grew, as did our paychecks. We decided we didn’t need budgets anymore. It took a few years but once again our debt began to climb. This time though it wasn’t small change. We were in debt for thousands of dollars.

COMING NEXT:   Setting up a budget and why they are important even when you are good with your money.

The Fair Debt Collection Practices Act was passed in 1977 to protect consumers from abusive debt collectors. Here's a closer look at the rules a third-party debt collector must follow when collecting a debt.

Contacting a debtor.
A collector may contact you in person, by mail, telephone, telegram or fax. However, a debt collector may not contact you at inconvenient times or places, such as before 8 a.m. or after 9 p.m., unless you agree. A debt collector also may not contact you at work if the collector knows that your employer disapproves of such contacts.

Contacting a third party about your debt.
If you have an attorney, the debt collector must contact the attorney, rather than you. If you do not have an attorney, a collector may contact other people but only to find out where you live, what your phone number is and where you work. Collectors usually are prohibited from contacting such third parties more than once. In most cases, the collector may not tell anyone other than you and your attorney that you owe money.

Giving written notice.
Within five days after you are first contacted, the collector must send you a written notice telling you the amount of money you owe, the name of the creditor to whom you owe the money and what action to take if you believe you do not owe the money.

When a consumer doesn't owe the money.
A collector may not contact you if within 30 days after you receive the written notice you send the collection agency a letter stating you do not owe money. However, a collector can renew collection activities if you are sent proof of the debt, such as a copy of a bill for the amount owed.

No harassment
Debt collectors may not harass, oppress or abuse you or any third party they contact.

Debt collectors may not:

• Falsely imply that they are attorneys or government representatives.
• Falsely imply that you have committed a crime.
• Falsely represent that they operate or work for a credit bureau.
• Misrepresent the amount of your debt.
• Give false credit information about you to anyone, including a credit bureau.
• Send you anything that looks like an official document from a court or government agency when it is not.

Debt collectors may not state that:

• You will be arrested if you do not pay your debt.
• They will seize, garnish, attach or sell your property or wages unless the collection agency or creditor intends to do so and it is legal to do so.
• Actions, such as a lawsuit, will be taken against you when such action legally may not be taken or when they do not intend to take such action.

No unfair practices
A debt collector may not engage in unfair practices when they try to collect a debt from you.

Debt collectors may not:

• Collect any amount greater than your debt, unless your state law permits such a charge.
• Deposit a postdated check prematurely.
• Use deception to make you accept collect calls or pay for telegrams.
• Take or threaten to take your property unless this can be done legally.

Source: Fair Debt Collection, a brochure for consumers from the Federal Trade Commission

We purchased our first home in 1997. We were not sure at the time if we could afford it. I mean we were paying $790.00 for a two bedroom apartment and we would be paying $1200.00 for a mortgage. Now we laugh at how scared and nervous we were considering the debt we would start piling on in the next few years after the purchase.

My husband had gone back to school to finish up his degree and was still working full time. I had a full time job and both of us were making good money. Life was still great at this point.

Being the smart people we were (dripping with sarcasm) we decided to take a second mortgage to pay down credit card debt and pay off his school loan. Our thought process has nothing to do with interest rates but more having one bill. We swore up and down we would NEVER use the credit cards again or the line of credit that we had.

Well guess what? NEVER is not a very long time.

Pretty soon, we HAD to have that new car and the new TV. Our baby needed only the best and we wanted it all NOW.

Credit debt began to climb again. Yet, we were STILL making it.

I became pregnant and as a couple looking out for the best for our children, decided that I would quit my nice paying job and stay home with my new son and daughter. Things would be tight we said but we could do it if we managed the money. (NOW I AM ROLLING ON THE FLOOR LAUGHING)

Long gone were those early days of budgets.

Several years go by, and we are still managing everything. My husband finds a dream house in the same town we live in. (I am now pregnant with our third child) and I say “ok, let’s go for it”.

Now for the math. We had originally purchased our first house for $126,000. Going rate for 1997 housing in the town we lived in. It was a beautiful three story three bedroom Victorian. We updated it and modernized it to our standards.

By the time we sold our house and between the first and second mortgages we owed $385,000 on the house. (Is this sounding like any of you at this point?)

Our “new” home was going to cost us $325,000…..Still making a profit you say? Let’s do some more math. Our “new” home had been vacant for over 10 years. Roof was so damaged that it rained into the third floor. The whole house needed repair so by the time we were done, we needed to update all electrical, put in new kitchen, replace roof, fix landscaping, replace 36 Windows and 32 light fixtures. Converted from oil to Natural Gas and have asbestos removed from the basement. (I can see all you contractors doing the math in your head right now with dollar signs in your eyes) None of these calculations included the realtor fees.

Trust me when I say that there was less than no money left. We are now over $500,000 in debt.

Believe it or not, with juggling the money and bills, we were still doing pretty well. In 2003 I started a gift basket business out of the house. I did pretty well for a small time business. In 2004 I decided I wanted to open a retail store. I spent a year researching, completing a business plan, scouting locations and looking for vendors. With my husbands support I opened Kelly and the Angel Gift Shoppe in February 2005. The first year was pretty successful for a new business. I had great feedback and press from the local community. Even the Mayor’s office supported me. “My store was what the town needed” they said.

On the lean months I “borrowed” from our personal account and on the good months I played catch up. During this time, my husband decides that he is going to start a “hobby” of buying houses and flipping them for profit in another state. He supported me so I gave him all of the support I had. (After all he allowed me my dream, right?)

Fast forward to 2006. Gas and Electricity Soar began to soar. We are still at war with Iraq and the economy is in the beginning stages of collapse. Consumers are not spending money at “frivolous” shops such as mine. I am unable to get a loan, use all my credit cards to stay a float. I am no longer able to keep up with the bills and the creditors start calling BIG TIME.

We are now approximately $650,000 in debt. There is no such thing as a budget anymore. One month we would pay one bill to keep it off our back, and let the other bills “wait”.

Fear, panic, sleepless nights were the norm……

I did not see any end in sight of this crisis.

Peace be with you.

Kelly

Coming next:   How to keep your Sanity and sense of humor during Debt Crisis.

If you are in the middle of debt hell my heart is with you. The telephone ringing incessantly has to be the worst of it. For those of you that are or have been in the same hell know exactly what I am talking about. I made the choice in the beginning to answer each and every call that came in. If I was not home then I would return the call as soon as I could. The conversation would always go the same way. THEM: What are your intentions in clearing this debt? ME: I have no funds at this time. THEN depending on the kindness of the creditors would depend on the next response from them. Several times I was called an idiot or lazy etc. When I would hang the phone up I would feel like I was the biggest loser on the face of this earth. How could I have gotten myself in this mess?

Who are the worst debit collectors that call? Allied Interstate probably tops my list. The FIRST day on receiving a message on my answering machine they not only contacted me, but also my husband’s sister in Atlanta, my sister in Boston and my sister in Beverly. Allied Interstate did not even allow me one day to return their call before calling everyone else. When I confronted Allied Interstate on their calling practices they denied everything. I was told that I was the only number that was called. Even when we told the woman on the other end that we had her voice on my sister’s answering machine.

One of the most frightening situations that occurred happened with Bank of America. In 2007, my husband called from work and asked what in the world did I buy for $2,400 and why did I take it out of his expense account. Needless to say, I told him that I didn’t buy anything. After some VERY quick research, we found out that Bank of America had taken $2,400 out of our account due to non-payment of some of our BUSINESS debt. Just like that. All of the wind went out of my sails and for the bazillionth time I began to panic.

Now, before many of you jump on the wagon and say DAMN, those people have that much money in their account? Yes we do. Every week in fact and it is gone every week. My husband travels during the week for his job. We no longer can have a credit card and we have to pay cash for everything. His company would reimburses him weekly (thank the Lord). To help better manage the money and for him to use it solely for work, we set up a separate bank checking account just for his traveling expenses.

If you or anyone in your family is in the same boat, I encourage you to do the same also. Every bank that I know of will set up a second checking account and link it to the main one. This has so saved us from dipping into our personal monies for travel expense and we can easily track expenditures.

Now, back to Bank of America. At the time, my husband asked me to call our Attorney while he visited the local Bank of America in the State he was in. Our Attorney was unable to help. He said that somewhere in all of that wonderfully confusing fine print that Bank of America has their customers sign, is a clause giving them the right to take the money if we were in default. NOTE: I have since found out since writing this blog from my friend who is a Vice President at a credit union in Boston that ANY financial institution that you have loans/credit cards etc., AND a checking savings account will do the same thing in regards to taking money out of your account if you are in default on any of the loans/credit cards. I highly recommend that you find a bank that that you do not have any loans/credit cards with and open a new account until you can sort out your finances.

When my husband arrived at the bank, he told me that the woman at Bank of America Branch office was actually very kind and called the credit department at the bank. Somehow he convinced them to settle on the three accounts and “return” $1,800 of the $2,400. Due to the settlement he had to make payments until December of that year to “make good” of the settlement deal that was struck.

We have since switched all of our accounts to a bank that we have no loans or credit cards with so that we can avoid this situation in the future.

Best to all of you that are in debt crisis. There is so much that I have learned over these several years and I will attempt to relate my stories over time. Keep the faith!

Peace be with you.

Kelly