Do You Owe Too Much? Take the CCCS Debt Quiz, Then Take Control

Did you know one in every three Americans has debt that’s been referred to a collection agency? Urban Institute’s recent study and a report from the Federal Reserve Bank of New York both confirm this sobering statistic. However, Nina Heck, Director of Counseling and Client Services at national nonprofit Consumer Credit Counseling Service of Maryland and Delaware, believes we can all learn from these findings. Here’s her lesson: “The sooner financially distressed consumers recognize they have a problem and get help, the better chance they have to prevent this situation. By taking action, they may be able to avoid collections and protect their credit scores.”

How can you tell if you’re headed for financial trouble? Nina says a person’s money management habits often hold the key. “People may not save or know exactly where their money is going for years. Then they hit a bump in the road – they lose a job or rack up unexpected medical bills – and suddenly they’re in financial crisis. Other times, the road to financial ruin starts slowly and sneaks up one credit card purchase at a time. Either way, the result is still the same: Good people with good intentions suddenly find they have too much debt and don’t know where to turn.”

Concerned you may be in this situation – but still not sure? Take this simple eight-question quiz:

1. Does it seem like you’ve been using more and more of your income to pay your debts?

2. Can you only afford to make the minimum payment on credit card balances each month?

3. Are you near, at, or over the credit limit on your charge cards – or do you use one credit card to pay off the balance on another?

4. Have you missed or made late payments on bills?

5. Have you received calls from creditors asking where your payment is?

6. Do you put off essentials like visits to the dentist because you can’t afford them?

7. Have you had to dip into savings or borrow from family or friends to stay afloat?

8. Do you worry a lot about money?

If you answered “Yes” to two or more of these questions, this is a wake-up call: Odds are, you have a serious debt problem, one that isn’t going to go away on its own. Don’t beat yourself up or feel embarrassed. There are many people in this situation. Take heart and take action instead.

People often have trouble recognizing they have a financial problem. Why? Because how much money we make and how we manage it are often two ways we define ourselves. Take Daniel: Before the financial recession, he was bringing home a six-figure salary each year. Then things became unstable at work, and he left and took a different job, but before long the new company laid him off. It took several months to find a new position. This rollercoaster ride left his family in a financial crunch.

He says, “At first we tried using our credit cards to pay off our bills, but that didn’t work. We were just robbing Peter to pay Paul. Before we knew it, we’d used up all our credit. So we tried a debt consolidation company, but that didn’t work. When we left them, we were even further in debt. We still owed our creditors and we now owed them as well.”

At this point, Daniel and his wife had accumulated more than $127,000 in unsecured debt. “We were so stressed, our finances were driving a wedge between us. One night we sat down and agreed we’d both got ourselves into this problem. We’d have to work together to get ourselves out. We knew bankruptcy was an option, but our credit rating was precious to us. That’s when we heard about CCCS.” After comparing the agency with other groups, the couple came to CCCS for financial counseling and enrolled in its debt management program (DMP).

It took Daniel and his wife five years to pay off their debts. This journey had its share of challenges and setbacks, but along the way, they learned some secrets for becoming and staying debt-free. They have generously agreed to share these with us:

First and foremost, have a plan. Daniel says, “The program provided us with a practical, concrete way to pay off what we owed. We knew that if we kept up our payments to CCCS each month, we’d ultimately get out of debt. Early on, we created a calendar that had 60 boxes representing our 60 monthly payments. We hung it on the wall, and each time we made a payment, we crossed one off. At first, it was scary looking at all those empty boxes, but when we reached the halfway mark, we got excited. We saw how much progress we’d made. We knew we could make it!”

Keep a close eye on your budget. Before Daniel and his wife came to CCCS, they didn’t review their finances regularly and often spent without thinking. “While we were in the program, we had to live on a cash-only basis, so we constantly checked our budget. This made us much more aware of the money we had coming in and going out. Knowing where you stand is liberating. We still follow this practice.”

Little things add up. While in the program, Daniel’s family sometimes found it hard to cover their monthly bills and DMP payment, especially after his wife had to take a pay cut to stay at her job. They succeeded by living frugally and finding ways to spend less. “We got serious about using coupons for groceries. To save on utilities, we made sure we turned off the lights and used the wood stove in the winter. We even stopped using our bank check card. It was just too convenient. Somehow paying cash felt more tangible and helped us keep better track throughout the month.”

You can never have too much savings. Daniel says, “By the time we entered the program, we’d used up all our savings, so I couldn’t help worrying ‘what if the roof needs repair, what if the dishwasher breaks down?’ Now I know if the dishwasher stops working, you can Google instructions for repairing it yourself or ask a neighbor who’s handy for help. But our experience has taught us just how important it is to have a nest egg. That’s why we regularly pay ourselves first. Our goal is to have at least a three- month reserve to cover both our paychecks. We’re also putting money aside for retirement.”

Daniel and his wife made their last CCCS debt management payment this month. They are finally debt free. How does it feel? He says, “Awesome. We have smiles on our faces like kids at Christmas. Best of all when I checked my credit score recently, I was amazed. It was 804!”

Daniel’s parting advice? “If you have money problems, don’t be afraid to swallow your pride, and ask for help.” Nina agrees. She says, “Here at CCCS, we can help you sort through your finances so you know where you stand and provide you with options and a plan that works.” To learn more about CCCS’s services, visit the agency website. For a financial counseling appointment, call 1-800-642-2227. If you’re in serious debt, the sooner you take control, the better you’ll sleep at night.

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Consumer Credit Counseling Service of MD & DE, Inc. (CCCS) is an accredited 501(c)(3) nonprofit agency that helps stabilize communities by creating hope and promoting economic self-sufficiency to individuals and families through financial education and counseling. CCCS MD State License #14-01 / DE State License #07-01