Debt Addicts Get Clean: How These Teachers Paid Off $48,610 in Credit Card Debt

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The Van DykesThe Post-it note still clings to the wall in the Van Dyke home in Buchanan, Mich. Written on it is a single, significant figure: $48,610.

"We now have zero credit card debt, but we leave that Post-it note up to remind ourselves of where we were," says David Van Dyke, a teacher and musician with The Van Dyke Revue.

Dawn and David Van Dyke, both teachers, accumulated that mountain of credit card debt during several years of spending beyond their means.

It started when they were newlyweds. The Van Dykes moved to Oregon from Michigan, but because they didn't find work right away, for several months they relied on credit cards to cover their daily living expenses.

The couple knew that there would be consequences to their spending, but they focused on the present, not the future. "We knew we were spending too much money but we figured that we were young enough to make up for it later," Van Dyke says.

The Van DykesPostponing "Later"

Their credit card balances continued to increase when the Van Dykes moved back to Michigan where they bought a small home, and then, when their son Jacob was born, they upgraded to a larger home.

By then, relying on plastic was an ingrained habit -- a way of life.

"If we had a choice to do without or to do with, we always did with," says Van Dyke. "We used our credit cards to eat out, to buy new clothes, everything. We just weren't thinking about our spending at all. It seemed like we were just doing what everybody else does and we weren't really aware of how bad it was getting."

The mounting bills eventually became overwhelming. "There was no one moment that made us realize how deeply in trouble we were," says Van Dyke. "We had just gotten ourselves in a horrible cycle so that instead of addressing our debt we would just get another credit card. Bill collectors started to call because we couldn't always pay the minimum on every credit card."

Van Dyke says he and his wife were fighting to figure out which bills to pay on their "half-dozen or so" credit cards, at least five of which were maxed out.

The stress was accumulating, so Dawn Van Dyke made an appointment with a credit counseling organization -- GreenPath Debt Solutions.

The Van DykesSecrets Revealed

"The day we walked into the GreenPath office I was pretty uncomfortable, but they have this giant glass jar of cut-up credit cards and I realized how great it would feel not to have credit card debt," says Van Dyke.

But first, he had to admit to Dawn that in addition to all of their existing cards, he had a credit card that he had been keeping secret from her.

The Van Dykes cut up all of their cards -- including that "secret card" -- and added them to the other pieces in the giant jar. They began to learn to live on an "austerity budget" and committed to paying more than $850 per month toward their credit card balance.

The goal was to have all the credit card debt paid off in six years. At least that was the plan.

A Setback

Shortly after the Van Dykes started on the new debt-payoff plan, their son Jacob experienced multiple seizures and was diagnosed with epilepsy. "Our son was critically ill and had to be hospitalized in Chicago or in South Bend 13 times during that year," says Van Dyke. Dawn had to quit her job for the rest of the school year in order to care for Jacob.

The setback could have been a lot worse. Thanks in part to good health insurance coverage through David's job, the family was not saddled by high medical bills on top of their credit card debt.

The Van Dykes were determined to stick with the plan.


The Van DykesThe Power of Music

During the next four years, the Van Dykes did all they could to achieve their goal of being debt-free.

They kept driving their old, beat-up cars and spent as little as possible in order to stick to their budget. Van Dyke, who in addition to his full-time job as a teacher performs with his band at weddings and parties, sold about two-thirds of his music equipment to bring in extra money.

Extra gigs also helped the family get by. "I took every single gig I possibly could during that time, especially when my wife had to stop working for a while," Van Dyke says.

"It was a terrible four years in so many ways. We thought we might lose our son because he was so ill, my wife lost her brother, and the recession hit everyone around us hard."

Fast Track to Being Debt-Free

Overall economic hardships made the Van Dykes even more determined to rid themselves of the burden of credit card debt.

They received a monthly email showing them their total remaining balance, and as they watched the balance decline, they became more determined to finish paying off their entire debt. Initially, they expected the entire payoff would take six years, but they were able to accomplish it in just over four-and-a-half years because they paid more than the minimum as often as possible.

As the debt shrank, their credit scores rose from the low 600s to 745 and 778 when they finished paying off their debt. And there was an even sweeter outcome: Van Dyke says getting out of credit card debt also helped their marriage.

A New Addiction: Cash

"We went through such a terrible time together with our son and through this financial crisis, but now we've learned to consult each other if we plan to spend more than $50," he says. "We pay cash for everything and check with each other if we want to use the debit card."

Van Dyke says, "Debt addiction is like any other addiction. You have to decide you're going to change."
The couple has replaced their addiction to debt with an addiction to a debt-free lifestyle. They still drive old vehicles, and now that their credit card debt is gone, they are tackling student loan debt from his Ph.D. program and paying down their home equity loan.

Their next goal? They plan to use their newfound budgeting skills to pay off their home by the time they turn 50.

Michele Lerner is a Motley Fool contributing writer.

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18 Comments

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John

The first step toward taking control of your financial situation is to do a realistic assessment of how much money you take in and how much money you spend. Start by listing your income from all sources. Then, list your "fixed" expenses — those that are the same each month — like mortgage payments or rent, car payments, and insurance premiums. Next, list the expenses that vary — like groceries, entertainment, and clothing. Writing down all your expenses, even those that seem insignificant, is a helpful way to track your spending patterns, identify necessary expenses, and prioritize the rest. The goal is to make sure you can make ends meet on the basics: housing, food, health care, insurance, and education.

There is a free consumer site that offers advice for people with debt and credit problems called "Bad Credit MD".
Maybe they can help?

February 23 2013 at 12:48 AM Report abuse +1 rate up rate down Reply
jtcola

huh....only $290 paid in interest over 4-1/2 years.....and we haven't even talked about the fee Greenpath recieved yet either.......yeah right. Now Credit Couselors are an ok service to use if you don't have the dicipline to do it yourself but I have no doubt this article is a lie

October 19 2012 at 9:21 AM Report abuse rate up rate down Reply
stzee

This article is a pack of unsubstantiated lies................

October 18 2012 at 8:06 PM Report abuse rate up rate down Reply
stzee

What kind of propaganda is this...................?

October 18 2012 at 8:04 PM Report abuse rate up rate down Reply
themechanicsix

You gotta be a freakin' idiot to run up that much CC debt in the first place. LOSERS!!!

October 18 2012 at 4:08 PM Report abuse rate up rate down Reply
tt87

I'm sure they are both Liberals and support unions and Obama. So why Obama or I hope Romney take the same personal responsibility and reduce our country's debt by spending less and not raise taxes on anyone?

October 18 2012 at 9:34 AM Report abuse -3 rate up rate down Reply
maa2626

If these are the folks that teach our children, how can teach when making bad life choices? Background credit checks should be made just as background criminal checks.

October 18 2012 at 6:25 AM Report abuse -3 rate up rate down Reply
3 replies to maa2626's comment
Unknown Subject

So what did they do other than sign up with a debt counseling service?

October 18 2012 at 5:16 AM Report abuse rate up rate down Reply
HonknDodge

None of these payback stories are that big of a deal. My normal credit card bill purchase is $2,000.00 + each month. That's $24,000.00 + yearly. I put everything that I can on credit card purchases. The big difference between me and them is I pay my entire card balance off each and every month in full. Then for doing this the credit card company actually gives me money back for using their money in the first place. That's the difference between being smart over dumb. And their teaching our children?

October 17 2012 at 4:36 PM Report abuse +2 rate up rate down Reply
3 replies to HonknDodge's comment
Jamie

so what, i've had 1350 out of 1350 payments on time, still owe 45k at 1500/month w/o greenpath.

October 17 2012 at 1:57 PM Report abuse -1 rate up rate down Reply
2 replies to Jamie's comment
themechanicsix

Loser

October 18 2012 at 4:10 PM Report abuse rate up rate down Reply
bigpapapuff425

Assuming your payments are made monthly, that works out to one hundred and twelve plus years you have been making these payments. That's pretty good, old timer.

October 18 2012 at 7:17 PM Report abuse rate up rate down Reply