How I Got Into Debt (Then Climbed Out of It)
Posted on November 02, 2011 by Melissa Cappleman, One of Thousands of Money and Finance Coaches on Noomii.
I’ve been where you are - in debt and not sure how to get out of it. It’s so easy to wander into debt & here’s my story of how I got back out of it.
How I Got Into Debt (Then Climbed Out of It)
Most of my clients feel they can easily relate to me and that’s largely due to the fact that I’ve been where you are – in debt and not sure how to get out of it. It’s so easy to wander into debt, and here’s my story of how I got back out of it…
In April 2005 I was living in Denver, working full time, and decided to buy a house. I made sure I could afford the mortgage payments, but before I knew it, I needed all sorts of “improvements”. The driveway didn’t seem adequate for a single woman living by herself, so I added a garage. I needed a central AC due to my mold allergies, so to afford my home renovations, I took out a second mortgage. During all of these ‘renovations’ I was also working to fund an adoption. However, the garage renovation was starting to run over cost & my spending sprees were out of control. I was running out of money fast.
I had student loans, my car payment and, of course, credit card debt, in addition to my first and second mortgage. I took the advice of an older colleague and took out a IRA loan which I used to get rid of most of my credit card debt. That seemed like the perfect solution until later on I received a large tax penalty for not putting that money back into my IRA. I was taxed at my current tax rate PLUS 10% just for good measure. Let’s just say that was a lesson learned – your friends, though well intentioned, don’t often give the best financial advice.
I took out a 401K loan and my family helped me fund the remaining costs of my adoption. Soon my son Luka came home with me. Though I have the utmost joy of loving and caring for my new son, my financial situation was getting worse. Child care and diapers were costing me about $1,200 per month and I still had mortgages one and two, as well as my student and car loans. Needless to say, I was neck deep in … diapers.
In February 2007, I discovered the Dave Ramsey podcast by accident, which started me on a direct path to debt elimination and my current career. When I received my annual bonus in March, instead of splurging, I used it to pay off my car. Soon, I received the title in the mail from the bank (without a congratulatory letter) and I never felt better about managing my own financial situation. I thought – “Well at least I own my car because I may have to live in it!” I gave myself a big pat on the back.
I was now a regular listener to the Dave Ramsey show and it made me think I could really do this – get out of debt. When Luka went to bed and all the chores were finished each night, I actually had a lot of free time, so I decided to pursue financial coaching as a second income to help fund my second adoption. My credit cards and car were paid off, and I had momentum.
In 2009, I was hit with several bombshells – in January I was laid off from my position at a financial services firm and in August my Mom passed away. These events prompted several decisions that have gotten me where I am today. I had no steady income and my family was in California – why was I still in Denver? So I decided to sell the house and we relocated to Los Angeles. After a month of showing the house and no offers, I just decided it was time to go. Five hours into our drive to California, the realtor called with an offer. We negotiated it to just $2000 under the asking price and sold! When the money finally came through, I used it to pay off that first and second mortgage and in March of 2010 I was officially debt free!
Getting out of debt has given me so much flexibility to do what I am passionate about. I can’t explain this feeling to you, but I will help you feel it for yourself. I am now a Certified Dave Ramsey Financial Coach living in Los Angeles and I have always run my business on a cash basis. I’ve kept my expenses lean while building my business (I rented the least expensive one bedroom apartment in the most reasonably ‘non-scary’ neighborhood. Now I have an office, all the appliances and home comforts I need, and I am funding my second adoption, all with cash.
This is my story and I’m excited to help you write yours. If you are truly committed to getting out of debt but aren’t sure how to do it, I am here for you. Just give me a call for a free phone consultation and we can start from there!
