Former SolveYourDebts.com client, Tabetha, is approaching her one-year anniversary of being debt-free. After being on a debt management plan for four years, she feels proud that she was able to pay off her debts in full while also gaining valuable money management skills.
Back in 2019, Tabetha found herself buried under $20,000 of debt that she was barely making minimum payments on. Every month, it felt like she was sinking deeper, and the stress was overwhelming. However, through credit counselling, she discovered a path to financial stability that changed her life.
The Debt Trap
Like many Canadians, 54-year-old Tabetha of Quispamsis, NB found herself in a never-ending cycle of credit card debt. She had multiple different creditors and was only making the minimum payment, which wasn’t making a dent in any of the debt.
Despite making just the minimum payments, she found that her creditors were constantly raising the limits on her cards — from $5,000 to $10,000, then $15,000. “I was like, how did this happen? I don’t make that kind of money.”
Tabetha says someone told her not to ask the bank to lower her credit limit because it would ruin her credit score (this is only true if you utilize a large portion of the credit available). Despite telling herself she wouldn’t use the additional credit, it became too tempting.
“You have the mindset of paying off the credit card after buying something, but then they tell you that you only have to make the minimum payment, and before I realized I was in debt a whole lot of money,” she recalls.
Tabetha thought about her options. She knew if she stopped paying the creditors then she’d be hounded by collections. Someone suggested bankruptcy but she didn’t want to do that because then she would be left with nothing. So, she considered credit counselling.
A Turning Point
“I contacted SolveYourDebts.com to see what they had to offer,” she recalls. She met with Jacalyn, her counsellor, who explained how everything would work. Jacalyn went through Tabetha’s finances and told her that based on her income and expenses, her debt management plan would have her paying $630/month to her creditors.
“I was surprised that I had the extra money at the end of the month to pay my creditors, as I always felt I had no money,” Tabetha recalls. “It wasn’t until she put it on paper that I saw there was a surplus. I was a bit scared the first month, but we found it every month for four years and it’s all paid off now and it feels really good.”
Tabetha says the credit counselling process was a learning lesson to never spend money the way she did again.
“Credit counselling made me realize that spending money is an addiction. I was spending money left, right and centre – on everyday items or something that I wanted, or just to get by. If I was sick from work and didn’t get paid, then I used credit cards to make payments, even for bills. At the time, I thought it was working great, but I didn’t realize how quickly I would get into debt and how hard it would be to pay it off.”
A New Financial Outlook
Today, Tabetha has a credit card with a $1000 limit and she’s told the bank not to raise it beyond that. She also has a line of credit with a much lower interest rate that she uses for emergencies. She doesn’t carry a balance on either.
Credit counselling is extremely effective at helping people get and stay out of debt, primarily because it provides people with financial education.
When you have the knowledge, skills and confidence to manage your money, you are more likely to make better financial decisions that will not only get you out of debt but keep you out of debt. Credit counselling has a repeat rate of less than 1% versus a repeat rate of 22% for insolvency trustees. In fact, one in five Canadians who filed for bankruptcy in 2018 was doing it for at least the second time.
“Credit counselling opened my eyes and has taught me how to actually manage my money,” says Tabetha. “My behaviour has changed. I’m not spending money on just wants; I’m spending it on things I know I can afford when I get my paycheque.”
Tabetha says she’s training herself to use the line of credit first before credit cards, and only when she needs to, like if she’s booking a hotel room online. She then pays it off immediately. And since she now has a budget, she’s aware of how much money she has at the end of each month to spend on wants.
“I know I have $500 at the end of each month to spend whatever I want. I try and stick with that. I know I can’t go over that.”
Tabetha encourages those who are struggling with debt to look at credit counselling as an option.
“Definitely don’t look at bankruptcy yet, reach out to SolveYourDebts.com first,” she says. “I’m glad I didn’t declare bankruptcy first. I know my credit isn’t great, but it wouldn’t be with bankruptcy either. Bankruptcy would have taken everything.”
If you’re struggling with debt and want to seek advice from a credit counsellor, contact us today for a free consultation.
