Jackson — Getting into debt that you can’t pay off is a burden that can give you sleepless nights, cause depression and make you feel like a failure.
Take Tamara (last name omitted for privacy), for example.
“I made a lot of dumb mistakes in my early 20s,” she said. “I purchased a car that I couldn’t afford, and it got repossessed. I had credit cards that I didn’t need to purchase clothes and gifts. In addition to all of that, I needed college loans.”
Recognizing the importance of help to climb out of the debt pit, at the advice of her husband she went to the Consumer Credit Counseling Service in December 2000.
“I gave it a try and it was the best thing I ever did in my life,” Tamara said. “ I thought when I had all those credit cards and the fancy car that I was living the life, but, now I can honestly say that I’m living life, because I am debt free and I can answer my phone without worrying about whether it’s creditors asking for money. I can not express how grateful I am for Consumer Credit Counseling. The counselors are very competent and empathetic. And I am grateful that my husband informed me about the program and that I sought help. Now I’m going into my 30s with the biggest grin ever!”
The new national pastime?
Having trouble managing debt is practically a national pastime in the U.S. There is a national trend towards individuals and families carrying more debt while putting aside less for savings. Bankruptcy rates have increased, as well. Credit is easy to get, and sometimes people are pushed into corners where there aren’t any good choices.
“Tough things happen to good people,” said Chris Burford, CCCS of Jackson program director. “When you have financial problems, that doesn’t mean you have made bad decisions. Most of the time we see good people who have life events happen, and their cash flow is affected. Most people assume that when other people have financial challenges, it is because they don’t know how to manage money. But that isn’t always the whole story.”
Burford said the majority of people who come to CCCS of Jackson have had problems such as a divorce, a job layoff, car or house repairs or medical expenses that put them in a position of not being able to pay their bills.
“We do see excessive spending, but typically it is more life events that are affecting individuals and families,” Burford said. “A mixture of things can trigger cash flow problems. People try to offset cash flow problems by a number of different avenues. Often credit cards are the avenue a lot of them use to pay bills they can’t handle out of their basic income. That is how the cycle begins.”
Burford doesn’t usually see student loans being a major problem. Student loans have low interest rates, and can be used to help individuals get the training for better paying jobs.
“It is a debt, but you can also look at it as an investment in education,” Burford said. “We aren’t seeing a lot of people coming in saying, ‘I have too much debt in student loans,’ and owe no other debt. Most of the time people are managing their income and expenses when they have only a student loan to pay on.”
CCCS of Jackson provides three different ways to get help. Financial counselors can sit down with individuals or families, talk to them on the telephone or even provide help over the Internet. In each case, the most important thing they do is help people prepare a budget to address getting out of debt.
After determining the income, and how much is necessary to meet basic living expenses, a plan is made to repay other debt-usually credit card debt. There are a lot of high rate credit cards out there. And there are cards that start out at zero percent interest. But if the consumer doesn’t pay attention to the small print details, they can eventually end up paying as much as to 31 percent interest. There can also be stiff financial penalties for late payments. That can all add up to a staggering amount. Some people end up paying a minimum each month that only covers interest, without ever reducing the debt.
“We advise people who use credit cards to pay them off in the first month, or no later than three months, or use them for emergency purposes only,” Burford said. “Some credit card companies have a contract where they review a customer’s credit annually or biannually. And if they see some delinquencies issues, they can increase the interest rate on the credit card. If someone has a life event and sees their income is going to be reduced, we suggest strongly they see a credit counselor and come up with a plan.”
CCCS provides four basic services: budget counseling, housing counseling, debt management plan service, and financial education to employee and civic groups. The organization is funded by creditors, clients, contributors and grants from foundations, business and government agencies. In some cases, the credit card companies will make concessions on late fees and interest rates that help the consumer develop a plan to pay off the debt. While at times clients pay a fee for the debt management plan, Burford said historically that is very small.
“If a client comes in and after looking at their budget, they do have funds to go into a debt management plan, a lot of creditors are willing to give them concessions like waiving late fees and lower interest rates,” Burford said. “What we are doing is providing them a better financial package for the consumer. The creditor is interested in getting paid back, but will provide concessions to help reposition them to get a plan together to pay out this debt. It is a win-win situation for all. The bottom line goes back to the clients improving their financial lives.”
Biting the budget bullet
Going on a budget can mean things like cutting off the cable television service, not eating out and reducing grocery bills. All those are savings that help lower basic living expenses that can reduce the difference between the amount of income and bill obligations.
Usually it is a great relief to get on a plan to deal with debt problems. ”Financial stress affects you in a lot of different ways,” Burford said. “It can affect you at work because you aren’t as productive. You think about it all the time. You may have difficulty getting rest. You may not be sleeping well, and can be very emotional. You have to deal with phone calls coming in from creditors. What we try to do is communicate to individual families to take that big step. Go see a credit counselor. Then come up with some options that might be a better road to travel.
“Sometimes the biggest step is saying, ‘I need to go see someone’. If debt is overwhelming, go see a counselor. Get some options. Utilize our service. It doesn’t cost anything to go through a budget process. If you don’t feel comfortable coming in, you can do it by the phone or Internet. There are three options that don’t cost any money.”
Burford finds it rewarding to see many of the clients make a plan, and stick with it. In some cases, people didn’t have financial education while growing up. They may have never budgeted before.
“Some people who have never budgeted before find that a budget helps them pay the creditors and even save money when they have never saved before,” Burford said. “They say they are happier with their family, and have gotten more out of their money than ever before. On our end doing consumer credit counseling, we feel real fortunate just to be here so we can give people information to help improve their financial life. We try to communicate to people: ‘Please utilize our services as much as possible because we want you to move forward in your life. Be proactive in addressing your financial situation’.”
Burford says CCCS is accredited by the Council on Accreditation of Services for Families and Children and is a member of the Better Business Bureau and the National Foundation for Credit Counseling (NFCC). A non-profit 501(c)3 organization, CCCS has an office in Fondren Corner in Jackson and offers around-the-clock help by phone or online. For more information, go online to www.cccsinc.org.
Contact MBJ contributing writer Becky Gillette at email@example.com.