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Life Without Credit – it Can Be Done

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For the past six years I’ve indulged myself, using credit cards for anything I couldn’t afford on my disability income. The credit cards were all maxed out, putting me over $13,700.00 in debt. Making minimum monthly payments on my high interest-bearing cards, my balances trickled down. I was even using my Walmart card to buy groceries.

In December 2013, my disability income was reduced by almost $100.00 per month because my Medicare premium is no longer being paid by the state. I panicked because I knew I’d be hard-pressed to pay the minimum payments on all the bills and all my other expenses.

I decided to check into a debt management plan. I checked first with one of the companies that make deals with my creditors. They would literally cut my debts down by fifty percent. However, there’s a catch. I would make monthly payments to the credit negotiating company, which they would hold in an escrow account, not paying my creditors until enough money was in my escrow account. I decided against that because I knew I would be plagued by collection calls. After all, creditors expect payments each month.

Then I contacted a debt management company (Money Management International) that pays my creditors every month. They were able to negotiate lower interest rates and a payment schedule that I can afford, provided I follow a budget. I will be debt-free in five years instead of the twenty-three years if I were paying the creditors on my own. I groaned at the thought of not being able to use any of my credit cards. All my creditors closed my accounts. I also groaned about following a budget. Now that a couple months have passed, I’m discovering that it’s an exciting challenge. I keep track of every dollar I spend. The first month I overspent on food. I have budgeted $200 a month and spent $275. This month I’m not going out for fast-food very often. My new philosophy is “How low can I go?”

I’m also able to transfer funds to my savings account, which is amazing for me. I’ve never been a good saver – just a good spender. I now recognize the advantages of having cash quickly on hand to cover unexpected expenses such as car repairs.

This is how I am able to put money in my savings account. For example, when I spend $6.00, I deduct $10.00 from my checking account, and note $4.00 for transfer to savings. That makes it simple for me. It adds up surprisingly quickly.

Saying good-bye to using credit cards was a big step, even though I couldn’t use them very often because I was close to the limit. I feel much better now mow that I know it can be done. If you’re in a similar situation, drowning in debt and making minimum payments, you might want to consider a debt management program.