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A tinge of desperation lingers in Melanye Moore’s voice when she speaks about her nearly $100,000 debt and the accruing interest. “My financial situation is really in shambles, and I don’t know which way to go with it,” she says.
Due to a pending divorce, Moore, a 39-year-old teacher in Chicago, and her three children had to leave their house overlooking Lake Michigan and move in with her father. Her 2002 Chevy Avalanche was repossessed in 2004 with $15,000 still owed on it, and she had to begin taking public transportation when her replacement car was stolen last year.
Just a few years ago, Moore was living a seemingly dream life. She and her husband, a professional athlete on the European circuit, owned rental property, had multiple cars, sent their children to private school, and sprung for violin and karate lessons. Moore, who was a stay-at-home mom with a degree in education, never wanted for anything.
Her good life began to crumble when her 17-year marriage fell apart. She says her husband stopped paying the bills and sending cash, didn’t file their joint tax return, and moved out. So Moore filed for divorce. “I learned that women should always take care of their finances because when you let a man control your finances and that man is gone, no one is going to help you with them after that.”
Now, Moore pays for everything with cash from her paychecks since cutting up her credit cards, unable to afford the more than $25,000 in charges racked up on them. But she has $30,000 in student loans and worries about how she will pay for her daughter, a high-school senior, to attend college.
Although financial experts applaud Moore for getting rid of those cards and not compiling any new debt in two years, she still needs advice about paying off the old debt, which she hasn’t yet tackled.
Moore is not alone. According to the Federal Reserve Board, Americans have almost doubled their revolving outstanding consumer credit in the past decade from $462 billion in December 1996 to $879 billion in December 2006. Most African Americans know they are in over their heads, with 70% of blacks describing debt as a “serious problem,” compared with only 56% of all respondents to a Center for American Progress survey.
So if the bills are adding up, you’re living paycheck to paycheck, and there is no relief in sight, follow this advice to dig yourself out–one debt at a time.
Create a credit card payment strategy. One place to start, after making a budget, says Joseph Ziegler Jr., a debt reduction expert, is to pay off the card with the lowest balance first. If you make a few sacrifices, like skipping happy hour or making one less $200 purchase (think gadgets and shoes) per month, those savings can be applied toward the debt. The same strategy works with lines of credit and personal loans, too.
“Getting the lowest card paid off gives you a sense of accomplishment,” says Ziegler. Then move on to