by Scott Pape |March 20th 2009
I don’t reply to many emails, although, thankfully, I don’t get many emails like the one you’re about to read.
Late last week, when I received the following cry for help from Megan*, my heart sank.
Here’s what she wrote, word-for-word:
Hi Scott
I needed help in my finance situation you sent me a few organisations to go through but to no avail no one wants to help me I am desperately doomed. I still have a good credit rating.
Well I think so, but the last two months I have fell behind in payments but I do notify them if I am going to be late I have been to a couple of banks to see about a personnal loan, then I went to a financial broker, to tell you the truth he was not interested. I have the following in debt:
Loan $25,000
Mastercard $8,200
Visa $6,000
Visa $14,500
I need to consolidate all this, yes I have gone over my head, for the last year and half I have been paying the credit cards but I only can pay the limit, so they are not going down at all . the loan is the only one going down You know the worst part also I have nothing, nothing at all to show for all this money. Really there is nothing to look forward to is there? I do not own anything. As the house is in my husbands name, for me to tell him about my debt well I will be out on the street. I admit I have over spent on my grown up children and the grand kids . so where do I go from here? Disappear maybe, or say goodbye to life. I really know how people feel when you hit rock bottom.
Sincerely,
Megan
Here’s my response:
Megan,
Being in debt is a stressful situation, but it’s worse for you because you’re hiding it from the very people who you rely on to love and support you.
Keep things in perspective. It’s just money.
I’ve seen people in your situation. Two things can happen. You can either go broke, and spend the rest of your life beating yourself up about it, or you can rise to the occasion and begin digging yourself out of the hole you currently find yourself in. The self-esteem you’ll gain from taking charge and overcoming your battles is powerful.
It could be the making of you.
But let’s not get too mushy too soon. You’ve managed to rack up $53,700 in debt. You say you have ‘nothing, nothing at all to show for this money’, well, that’s because you’re probably paying out close to $10,000 a year in interest.
Understand that by only paying the interest you’ll go broke — it’s designed that way.
You won’t find a financial institution that is going to lend you fifty grand to pay off your loans, without lodging any security. Therefore, you’re only option is to talk to your husband, explain that you’ve messed up, lay it all out on the table, and then tackle the problem together. I’m sure if you explain to him how sorry you are, and how depressed this has made you, he will be supportive.
Depending on how much equity you both have in your home (as any divorcee will tell you, the home is fifty per cent yours), you will need to approach the bank and arrange to pay off your debts.
Every day you delay dealing with this, the debt time-bomb keeps ticking. It will be worse tomorrow.
After you’ve dealt with your financial problem, you then need to tackle the psychological problem that drove you to secretly rack up so much debt (and keep it a secret). If you don’t you’ll find yourself back in the same situation.
I’ve seen that happen too.
Managing your money is 20 per cent knowledge and 80 per cent behavior, and the only way to make sure you survive through this tough time and come out the other side stronger is by making a commitment to change things, starting right now. The sooner you do, the sooner you’ll start smiling again.
*name changed
Tread your own path!
Photo: http://www.flickr.com/photos/pagedooley/2577006675/
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