How Unexpected Debt Helped Me Navigate a Way to Success

Jaimee_Niles_2I’ve worked in financial services for the past 25 years, which has given me valuable insights into the importance of effective money management.

As a result, I’ve followed a very financially conservative lifestyle, committed to living within my means and not incurring any unnecessary debts.

However, the past few years have made it more challenging to maintain this status quo. As a single parent, my budget has had to stretch to helping pay for my son Griffin’s college tuition and related bills.

And, for the past few years, I have also been providing financial assistance to my widowed elderly mother.

When you add in the cost-of-living in my city (which is one of the highest in the nation), it isn’t surprising that what used to be a workable plan with a little left over each month gradually became a paycheck-to-paycheck scenario.

And while I had enough income to handle regular monthly expenses, I wasn’t able to put aside enough money for an emergency fund, which financial experts generally recommend.

The Unexpected Injury

When I suffered an unexpected medical crisis, I found myself pushed from a tight but comparatively stable financial state to one that was far more precarious.

It was the summer of 2012, and I had just returned from a much-needed vacation when it happened: a severe back injury necessitating immediate emergency surgery. And almost as quickly, the medical bills began piling up. Although I have medical insurance, the deductible was quite high.

Then when Explanation of Benefits came in, I learned that some expenses were out of the network or above pre-determined approved amounts.

Before too long, my total out-of-pocket medical expenses reached $10,000.

Fortunately, I was able to use my accumulated sick days for my recovery time, which meant I had an income coming in. But it quickly became apparent that I would not have enough money to meet my regular obligations plus pay the mounting medical fees.

And while I wanted to pay off the providers and the healthcare facilities right away because it was the responsible thing to do, the only way I could do that was to use my credit card, one that unfortunately had a 15% finance charge.

My budget became even more constrained because I now had to make substantial payments on this card or watch the finance charges accumulate.

Digging Myself Out of Debt

I knew I had to find less financially damaging options. I first found another credit card that offered a better rate, to which I transferred the majority of the balance, and then borrowed funds from my 401K to pay off the remaining debt.

It took eight months for me to get my expenses into a more manageable place. Using the resources available from the LIFE Foundation as well as the help of my financial advisor, I’ve become better organized with my financial plan moving forward.

Next Steps for Success

Now that I am back on track, I’m extra cautious with expenses. I realize that life is full of unfortunate and expensive surprises, and know that I need to be better prepared for emergencies and have a better grasp of my current financial state.

I’ve also discussed the experience with my son, making it a “learning moment” for both of us. We both went through all the budgeting and insurance programs, and visited MyMoney.gov, a great website offering resources and information from 20 federal agencies and Bureaus.

Griffin also used LIFE’s Next Generation program, www.scholastic.com/nextgeneration to better understand financial literacy and risk.

It was a challenging experience but one that reinforced the importance of taking control and planning for the future.

 

About the Author: 

Jaimee_NilesJaimee Niles is Vice President of Industry Communications for the non-profit LIFE Foundation. LIFE’s mission is to inspire the public to take personal financial responsibility through the ownership of life insurance and related products. Learn more at www.lifehappens.org.

  • http://www.facebook.com/shaniqua.johnston Shaniqua Johnston

    So the hospital wouldn’t let you pay on a payment plan? If you paid it in 8 months on the cc at 15% interest you could have paid it off at the same time to the hospital with no interest.