THE FALLEN ANGEL

Joyce and Don killed $40,000 of debt in twenty-four months

LIKE SO MANY OTHER PEOPLE I talked to through the Great Recession, Joyce Fondren knew she was in serious financial trouble.

In 2008, Joyce, then sixty-five, and her husband, Don, sixty-seven, owed $30,000 on an assortment of credit cards and had refinanced their mortgage to get a lower monthly payment. By July 2010, they owed $90,000 on fifteen credit cards, and most of it came from interest charges.

“I was making payments of $300 to $500, of which only $100 or so was going to pay down the debt,” said Joyce. “In addition, I was still charging for food [and] gas. It finally got to the point that there was no money left after bills were paid. I would make a $350 payment, which would give me available credit of maybe $100, which I would use. I was robbing Peter to pay Paul—juggling credit cards.”

Then one night, Joyce and Don had a bit of an epiphany. They were driving their 2000 Ford F-150 pickup from their home in rural Chandler, Oklahoma, to Cimarron Casino near Stillwater, where they went on occasion to forget about their troubles. It was a cool fall night, and Joyce was watching for deer. She saw three cross the road on the forty-five-minute drive.

Joyce and Don turned on their radio to listen to my show, and heard me mention one of my favorite organizations, the National Foundation for Credit Counseling (NFCC.org). Joyce opened her purse, got a pen and paper, and wrote down the website.

At first, she looked at the website for the organization but took no action. But later she made contact with the local affiliate, Consumer Credit Counseling Service (CCCS).

“CCCS contacted all our cards and negotiated very low [6 percent or less] interest and arranged for the debt to be paid off in five years or less. In return we had to contact all our accounts and tell them what we were doing, which was very humbling, and close accounts. We could not incur new debt.”

Joyce and Don had to cut up all their credit cards, not an easy thing to do for a couple who was relying on credit to buy essentials like food and gasoline.

So they decided to make a major ceremony out of it, and on July 14, 2010, one by one, each card went into the shredder.

“My grandson, who was twelve at the time, [manned] the shredder,” Joyce said. “If you have ever watched Survivor on TV, at the end of the show when only two contestants are left, they talk about and remember those who are gone. We did that with each card. For example: ‘This card was used on the trip to Indiana to see our son and all the casinos in between. This one was used to buy our mattress set.’ We would make a comment about the card and then our grandson would send it to shredder heaven.”

Joyce said the last card was the hardest of all to shred.

“It was the first card I ever had in my own name. We owed $15,000 on it. It was the card we used to go to casinos in Tunica, Mississippi.”

And, oddly, there was a problem sending it to its fate.

“It seemed the shredder was worn out with the previous fourteen. We could also imagine my last card hanging on for dear life to not go down the shredder. But, alas, it also succumbed.”

With no more active credit, Joyce and Don, with the help of CCCS, set about paying down their pile of debt. They began sending $1,897 a month to CCCS, which after a fee of $35 per month, would then make payments to each of their creditors at a discounted negotiated rate.

Joyce said the CCCS plan was to pay off the smallest balances first. A little more than two years after they began their plan, Joyce and her husband had paid off five of their fifteen credit cards and expected five more to be paid off within five months.

Their total debt had fallen from $90,000 to $50,000.

Believe it or not, Joyce and Don were a frugal couple whose once tidy financial life spun out of control from a combination of medical bills and their love of the aforementioned casinos.

“I knew all about the dangers of credit cards,” Joyce said. “In fact, I am a math teacher, and one of the classes I teach is Math/Finance. My only defense is that we were victims of excellent credit just a few years ago and so came a deluge of cards.”

The couple raised five children on one income. Then came a series of illnesses.

“It seemed we developed the attitude of ‘Eat, drink, and be merry, for tomorrow we die,’” Joyce said. “The problem is we did not die and we found ourselves saddled with unsecured debt.”

It started when Don felt compelled to retire from his downsizing company at age fifty-three in 1994. It was the second downsizing for the company, and the retirement package was not as good as the first. Future downsizings were expected, and they were worried about benefits for the next group to be downsized.

“Our lives changed more drastically than we realized at the time. Our two older children were ages twenty-eight and twenty-six and on their own. We still had three, ages eighteen, sixteen, and fourteen, at home. College expenses loomed. In addition, I was attending college,” explained Joyce.

Don’s income from his company pension plan was less than a third of his salary. Joyce had assumed he would get a part-time job to supplement their income, but she didn’t realize what a blow it was for him to have lost his full-time job.

In 1998, he went to work as a maintenance supervisor for a college. But between 1994 and 1998, he only had some sporadic temporary work. During this time, Joyce was working on getting a degree to become a math teacher.

They lived off the $100,000 in his 401(k) and went through it all.

Then things started to improve. By August 1999, Joyce had a full-time teaching position and Don was working and receiving a pension from his old company. Her health insurance was covered at work and his was covered by his pension plan.

That’s when the health problems started. He had two strokes, developed diabetes, and had to quit work. He accrued high medical bills despite his insurance. Later he suffered a blood clot in his leg and a second stroke.

“He was actually quite lucky. No serious debilitating side effects from the two strokes. However, we did have serious, debilitating medical bills even with good insurance,” said Joyce.

Joyce had her own medical problems that caused the couple to accumulate bills. But they’re still pushing through. Her health has been pretty good, except for being plagued by kidney stones for forty years. In April 2009, she was hospitalized with renal failure due to blockage of the kidneys by numerous stones. This was followed by quite a few outpatient procedures to get rid of the stones, creating some big-time medical bills.

The couple did not buy things or splurge at restaurants. They drove their cars until they could run no more. They paid their bills on time.

“Casinos were our downfall,” Joyce said. “They enable you to forget your worries.”

After they paid their bills, they would spend their extra cash on casinos.

“At first we had to travel out of state for the casinos. At that time we were not addicted. Then about six years ago, Indian casinos started popping up everywhere. If we spent all our cash on casinos, then we used credit cards for gas, food, whatever.”

Now there is little to spend on casinos.

“We still go, but now we can only spend a little. We cannot borrow money to get us out of a tight spot.”

As for me, I don’t understand casinos. A couple of years ago when I was in Las Vegas, my executive producer Christa DiBiase asked me to play one dollar for her in a Tabasco slot machine on her behalf. Well, I promptly lost it and, boy, did that foul up my mood for the rest of the day!

But with Joyce and Don’s debt clearing, there is reason to celebrate. Joyce’s credit score on CreditKarma.com was up to 720 and on TransUnion it was 679, up from the 500s in 2010, and it showed her paying on time.

And every July 14, on Bastille Day, Joyce and Don remember the day they shredded their credit cards and took a big step toward a better financial future and hopefully many more happy days together.

What can you take away from the couple’s story?

Get legitimate professional help with your debt.

• Whenever people get into trouble with their bills, I recommend they go talk to a local chapter of the National Foundation for Credit Counseling. The NFCC offers free or very low cost credit and debt counseling through affiliates around the country that are branded locally under different names. Consumer Credit Counseling Service was the local affiliate in Joyce and Don’s area.
• One in three people seen at an NFCC affiliate needs simple budgeting help to get their debt under control. I usually find setting a goal of paying down debt in sixty months or less works best for people. Anything greater than sixty months and people tend to lose their focus.
• Joyce and Don, however, needed something more—a hardship debt management plan. With this kind of plan, the NFCC affiliate charges a nominal fee to negotiate a reduced interest rate and lower your payments if you qualify. Visit NFCC.org or call 1-800-388-2227 for more details.

Or do it yourself!

• Did you know that you can negotiate down debt on your own? Begin by figuring out what you owe and what you can afford to pay. Then call up your various creditors and say, “My total debt is X number of dollars and I can afford to pay you X amount every month.”
• Make sure all your creditors agree to your terms in writing or tell them no one will get anything at all. They’re all scared that you’ll bankrupt out and leave them high and dry, so you have the power in this situation.
• When you do agree on a negotiated payoff for all your creditors, make your payments by money order only. Don’t give any creditor access to your checking account or they might help themselves to your funds.
• I should note that this approach will foul up your credit and you’ll get a tax bill from the IRS for each settlement. But if you’ve reached this point in your financial life, your credit is most likely fouled up already and the end result of this attempt can actually improve your situation over time.
• Regarding the tax bill that you’ll get, say you owe $10,000 to one creditor and they take $2,000 to settle up. In that case, the $8,000 that’s written off is considered taxable income for you. Expect to get a 1099 form in the mail that’s considered “phantom income” by the IRS.

Make a credit card payment every fourteen days.

• The method of paying down debt recommended to Joyce and Don by the NFCC affiliate—paying off the smallest balance and then working your way up to your biggest balance—is called the “debt snowball plan.” It’s an idea that’s been popularized by my friend and fellow radio host Dave Ramsey.
• That’s a great way to get the job done, but far from the only approach. I’d like to suggest one other approach that I learned about in the book Invest in Yourself: Six Secrets to a Rich Life by Marc Eisenson.
• Begin by targeting the card with the highest interest rate. Pay more money toward that credit card and slightly less toward the other cards, until the card with highest-interest debt has a zero balance. Then you move on to the next card, and so on and so on.
• Eisenson specifically suggests that you make a separate payment every fourteen days to the credit card company. Work these payments around your statement cycle to avoid paying late fees. Credit card interest is typically compounded daily, so this can get you paid off a whole lot faster.

Stop the pre-approved credit applications in your mailbox.

• In the final summation, Joyce and Don got into trouble partly because they had too much credit at their disposal. If you’re worried about following in their footsteps, there’s a simple fix I can recommend.
• Dial 1-888-5-OPT-OUT (1-888-567-8688) or visit OptOutPrescreen.com and you can have your info removed from marketing lists for preapproved credit and insurance offers from the three major U.S. credit bureaus. It’s OK to enter your Social Security number when prompted for it by the computer system. That’s how they verify your identity and remove you from the lists.
• However, calling the number will not stop your bank, credit union, or brokerage company from selling your information. For that, you must respond individually to the privacy policy statements you receive from each financial institution in the mail. Or you must call the institution or company yourself.

Watch your discretionary spending.

• Joyce and Don still go to the casinos, but they’ve learned to control their spending. Other Americans might not regularly hit the casinos, but there are other gambling threats draining their wallets and they’re going on unchecked.
• There’s a convenience store gas station down near my house that every Friday night is swarmed with people buying lottery tickets. I see people drop $20 at a time on scratch-offs and lottery tickets—and we’re talking about people who absolutely need that money to pay bills and take care of their families.
• But there’s the lure posted on those big billboards on highways pushing that huge jackpot of $140 million or whatever it is. Yet have you ever actually stopped to think about the odds that you’ll hit the Mega Millions jackpot?
• Physicist John Swain (aka Dr. Knowledge) of Northeastern University ran the numbers for the Boston Globe. His findings show that you have a 1 in 175,711,536 chance of winning. Meanwhile, Swain says there’s a 1 in 10,000,000 chance you’ll be struck and killed by lightning.
• To quote Jim Carrey in 1994’s Dumb & Dumber: “So, you’re telling me there’s a chance?!”

Have a positive mental attitude.

• Keep the spirit and don’t give up, or these tips I’ve laid out here and elsewhere in the book won’t work for you. Everybody has problems, but some people choose to make a bump in the road into a molehill, while other people let it loom as large as Mount Everest.
• My late father used to tell me that life is like a boxing match with ninety-nine rounds, and sometimes you get knocked down, get back up, and go on to have a good round. You might be in your eightieth round, but you’ve got to get back up.
• Winston Churchill said it best when he said, “Never give in. Never give in. Never, never, never, never—in nothing, great or small, large or petty—never give in except to convictions of honor and good sense.” You might be deep in credit card debt today, but don’t throw in the towel. You probably didn’t get into debt overnight and you won’t get out immediately, either. But you’ve got to keep working your way out, day by day and piece by piece.