If you’ve been paired with one of our Debt Coaches, or hope to in the future, here’s a behind the scenes update on what you can look forward to.
This is an update on the Debt Coaching assignment with Julia A., who’s been paired with Jarim Person-Lynn.
Debt Coach Success Story
Julia & her family have been awesome and extremely motivated throughout the process.
My normal process is to first have a consultation online using a chat service in real time so I can get a snapshot of the person’s current financial situation & financial goals. We chose Facebook messenger and started the consult on a Tuesday.
During the consult, I came to find out that Julia, along with her husband and two kids, were managing the following:
- About $6,000 in credit card debt (with one card in collections)
- Around $1,000 in pay day loans ($270 in interest paid per month)
- $10,000 in student loan debt
- $15,000 in car loan debt
- $11,950 cash set aside in savings
- A six figure annual household income
So naturally, I had to inquire about the healthy sized cash load sitting in savings while juggling so many debts piling up on the other end of her family’s balance sheet.
It turns out that in true motherly fashion, Julia’s immediate financial concern wasn’t even the pay day loan balance she’d been paying $270 per month in interest on.
More pressing to her, was the promise that she had made to her daughter on helping to pay for that upcoming first year of college without burdening the daughter with student loans.
Julia had been piling up a small war chest so that she could do just this. Even at the cost of $270/month in payday loan interest among other debt payments.
Knowing immediately what must be done, and using a debt snowball calculator I send to all of my clients, I began to show her just what type of financial damage she was doing to her household by going this route.
We plugged all of her family’s monthly expenses in addition to all of her debt information for each debt (excluding the one credit card that was already delinquent) and once we were done, she was able to see first hand that with the $1,290 each month she was spending on servicing debt payments, it would take her well over 10 years to climb out of this hole.
Or, she could go a second route. She could use most of her cash stash (minus $2,000 we would keep for her family’s starter emergency fund) in order to immediately pay off some of her balances from smallest to largest.
By doing so, she could get out of payday loan hell tomorrow, completely knock out her credit card balances within the week and use some of the money she will now be saving each month from sticking to a well developed budget (that we put together) to add onto that $1290/month in monthly debt servicing.
With a beefed up & focused debt payoff strategy, she would be completely consumer loan debt free by the middle of next year.
Making Debt Management a Family Affair
The only problem is that Julia would now have to have a difficult talk with her daughter about the need to take out a student loan for her first year, although at the end of that year.
Julia would then have a stronger financial standing needed to cash flow school year #2. After all, trading debt at 400% APR, 29.99% APR and 9% APR for a student loan at 5-6% APR was just something that made too much sense not to be done.
We met up again online a few days later after Julia had that conversation with her daughter. Thankfully the daughter had a great head on her shoulders as well and understood why there had been a slight change of plans.
From there, Julia used that momentum to relieve herself of the debts we outlined in her debt snowball (she just has part of her car loan balance left and student loans to pay off) and knock out a few other action items we listed out to get this plan in action as well.
Finding the Right Tools
Our most recent online chat was a tutorial on how to take everything Julia had learned about budgeting through excel and apply those budgeting categories and transactions to her brand new Mint.com account.
Astonished on how well Mint was able to clearly break out and track all of her and her husband’s spending, she pledged to incorporate both the website and iPhone app into her family’s day to day purchase habits for real & lasting change.
As of now, we are continually monitoring her progress, but at at this moment, I believe she’s on her way.
- Jarim Person-Lynn, Debt Coach
About the Debt Coach:
Jarim Person-Lynn, Author of Brass Knuckle Finance, Financial Activist and Wealth Coach. Jarim Person-Lynn knows all too well how the trappings of debt and poverty can derail the dreams of the inner city youth. Growing up submerged in the flashy L.A. culture throughout the late 90s/early 2000s, he was taught to buy first then think about how to pay for it later. Ultimately he found himself working day and night to pay off someone else’s life.
After a few false starts and partial escapes from old ways of thinking, Jarim got completely fed up with his situation in 2009 and vowed to eliminate the cycle of poverty and the “Keeping up with the Joneses” status quo that had tried to claim him and so many people he knew in his community.