I am a natural-born budgeter, but having a grand time on next to nil was a skill I honed during lean college (and beyond) years. For this reason I was a perfect fit as a personal finance advisor at a Consumer Credit Counseling Service, a nonprofit organization that helps people live within their means while also getting out of debt. I was there for ten years, the first couple of which I worked directly with stressed out borrowers. Seven appointments per day, five days a week translated into meeting with thousands of clients. Here’s what I learned.
- Creditors aren’t (usually) the bad guys. Oh trust me. They can seem to be, but the person who borrowed the money and did not pay is ultimately the problem. And it could be you. You’ve got to accept this. As horrible as it is to receive nasty phone calls from people who want you to send the money they are doing it for a good reason. You owe it. Now own it.
- Most people are ostriches. By far the most common reaction to escalating or immobile debt is to stick your head deep in the sand – until someone (that creditor) kicks you in the place that sicks up. You are not alone in this. But what I’ve found time and time again is that when people do eventually face their financial truths, its almost always less horrible than what they fear. Additionally, there are almost always options for resolution. Not all of them pleasant, maybe, but there are ways to fix money and credit problems. So take this into consideration when your debt is too high and your bank balance is too low. The faster you face it, the better.
- Credit counselors can be awful. Unfortunately, not every person who is hired to be a credit counselor is as committed or talented as I was. Oh no. Some don’t care or are just plain bad. They treat clients as they would a fast food counter job – fast, basic, bland. While all are trained internally and eventually receive a certification to perform a detailed financial analysis, plenty don’t know how to budget any more than you do. Does this mean you shouldn’t go to one of these organizations for help? Not at all. But don’t hesitate to request a different person to help you out if you feel that you’ve been stuck with a dud. Ask for a senior counselor who has excellent reviews.
- It’s easier to repay debt that then to stay out of it. When you finally made the decision to increase your debt payments by either earning more or cutting down expenses, you are in power mode. You’ve got a goal and you’re going to reach it! Then you do it. Your accounts are at a zero balance. But will they stay there? Typically not. Open and accessible credit cards are just aching to be used. It doesn’t take long before debt creeps up again. It’s very similar to a person who has shed unwanted pounds via diet and exercise. Chances are the pounds will reemerge. The only way to stop the debt cycle is to be more vigilant to sticking to a budget after you’ve paid every creditor off. And its hard. Not impossible, but hard.
- Your financial life is your business. Emotion clouds financial decisions. You wish, want, or feel guilty. You’re depressed, anxious, or terrified. These are normal, but in the end damaging psychological responses to numbers. In the end it boils down to this: can you pay your debts or can’t you? If you can, what’s the plan and do you really have the capability to stick to it? If you can’t, what’s the most that can happen to you? Be as stoic and rational as Spock – then you will make the right decisions. I remember counseling an elderly woman who was desperately attempting to satisfy her creditors when she didn’t have enough money for food or utilities. I said, “Mary, you would repay them if you could, right?” “Yes,” she tearfully responded. “But you can’t. They will be OK if you don’t, but you will not if you do.” That’s business – and the right approach.
Finally, don’t go into one of these agencies expecting miracles or for the counselor to take over and do everything for you. If you’re overspending on clothes, vacations, or whatever by $1,000 every month, no counselor or agency will save you. That is your job.
