I worked with a customer who was very concerned that she needed to file bankruptcy and borrow from her retirement plan as a result of out-of-control credit card debt. When we first met, she was certain that there was no hope for her situation.
Together we reviewed her debts carefully and created a spreadsheet that listed each balance, interest rate and due date. Seeing all of her debts in one place was overwhelming but allowed the customer to have an accurate picture of where to begin.
It quickly became apparent that the true issue was not the credit card debt but rather her spending habits that created a problem. She explained that she had been through this cycle over and over – paying down all of her debts and then running up her credit card balances again. We started to develop a budget and create a monthly expense plan that worked for her lifestyle and enabled her to make necessary changes without giving up everything that she enjoyed doing.
I helped her to create a debt snowball and showed her how small extra payments would help her to rapidly pay down the debts and reduce her interest over time. Each month we met to review her progress and as the debts decreased and her spending improved, she became more and more excited and confident in her abilities.
Financial coaching helped the customer to understand her finances more and gave her access to tools like budgeting and the debt snowball. More importantly, however, coaching enabled her to take control of her own life and spending again. After 18 months of coaching, she has now paid off all of her high interest credit card debt and continues to meet monthly with me to review her budget and ensure that she stays on track in the future.