Client Case Studies

Edward and Kathy

Ed's software design consulting business had taken a recent hit. Luckily Ed and Kathy had enough money in their savings account to get them by for 6 months. After their savings depleted, they refinanced their mortgage used the small amount of equity in their home to make ends meet. During this time they relied heavily on credit cards anticipating Ed would pick up some new business. Kathy increased her hours as a registered nurse at the hospital but unfortunately new business for Ed was no where to be found. When his wife finally added up the billing statements, they were flabbergasted. They were close to $45,000 in the hole! Even though they desperately need the income, Ed was daunted by the prospect of looking for a new job since his current business had been so successful for the last 10 years.

Ed started the job search and was offered a position in the same industry, but he wasn't too excited about the money. However, he knew that some income was better than nothing at all. With Ed's new job and Kathy's extra hours they could meet the minimum payment amounts with their creditors, but the interest was so high their minimum payments didn't make a dent in their balances. At this rate it would take them almost thirty years to pay off their $45,000 debt plus close to $100,000 in interest fees. They decided to call and make an appointment with a credit counselor to discuss their options.

The Counselor first asked Ed and Kathy to explain their debt situation. She then congratulated Ed on deciding to take a different job even if it meant less money and Kathy on taking the initiative to work more hours. The Counselor asked them if they kept a monthly budget and spending plan. Ed and Kathy said when they first got married they were so good at budgeting their money, but they had become too busy. The Counselor proceeded to complete a budget by asking them several questions about their monthly obligations and spending habits. The Counselor's first recommendation was for Ed and Kathy to stop using their credit cards and get rid of them.

Further review of the budget revealed that both Ed and Kathy pay a lot of money to drive nice cars. More than anything Ed loved nice cars. They owned one car and leased the other car for tax purposes under Ed's consulting business. Kathy told the Counselor that Ed made all the car buying decisions but she really didn't care what car she drove since her work was only 5 miles from their home. The Counselor quickly looked online for the average retail selling price of Kathy's car and found it listed at $22,000. The Counselor asked them what they would do with $22,000. Kathy said they really didn't need a second car since she could ride the bus to work. This would also save them $75 in gas and $90 in car insurance a month - not mentioning oil changes and necessary repairs. Ed was not too excited about the idea but agreed to discuss it with Kathy over the weekend.

Kathy convinced Ed to put the car up for sale. Ed called one of his friends who worked at a car dealership. The friend told him because his car had very low miles, he could probably get around $23,500 for it. Ed finally gave in. He called their Counselor first thing Monday morning to tell her they decided to sell the car. Ed placed the ad and sold the car for $23,000 in one week. They were so excited they called their Counselor to tell her the great news. She suggested they pay off their credit cards with the highest interest rates first. This still left them with $22,000 in debt. The Counselor enrolled them into a debt acceleration program with an affordable pay-off plan of 4.5 years, or sooner, if they applied even more money to the plan and stuck to it. They were amazed to see how fast they could be out of debt and how much money they would save in interest.

For the next three years they kept in close contact with their Counselor. 42 months later Ed and Kathy were completely debt free. Kathy was able to work less and help Ed with his consulting business.