In debt? Cut back phone extras, put PlayStation on hold
By Michelle Singletary
There was a moment of silence when I told Carlesa Washington, a 24-year-old recent college graduate, to drop the Internet service she gets on her cell phone.
Her bill is about $75 a month. She pays an extra $20 to access the Internet.
"You don't need e-mail on your cell phone if you're in debt," I said. "What do you want more, a home or to e-mail your friends?"
"A home," she replied.
Washington is putting up with my demands because she has volunteered for the Color of Money Challenge. This is the second in a series of columns in which I've promised for the next year to help four people — two single women and one couple — achieve their financial new year's resolutions.
Carl Chandler, another challenger, wasn't happy when I told him he couldn't buy the PlayStation 3 he's been coveting. It costs about $600.
Chandler works hard and no doubt deserves to have the electronic toy. But he and his wife, Tania, are on a mission to get rid of their credit card debt.
"Until every penny of that debt is paid off, you can't afford the PlayStation," I said.
He stayed silent for more than a moment.
"You're right," he says.
Telling grown folks they can't have something when they work hard every day isn't easy. But these participants didn't want easy anymore. Easy credit and easily giving in to desires have caused financial stress in their lives:
I sent them all a budget template I found free at www.financialplan.about.com (click on "Budget Successfully," then select "Budget Worksheet" and tailor the expense categories to meet your situation).
By really looking at her budget, Schleicher realized she was paying $80 a month for a gym membership she rarely used. I told her to cancel it.
Washington contacted the collection agencies that had been hounding her. One creditor agreed to accept less than she owed (mostly forgiving collection fees). That $300 debt is now paid off. Another creditor agreed to a payment plan that will clear that debt by the end of February. The third debt has ballooned to $6,000 with interest and fees. Her next assignment is to work out a plan to pay the credit card debt before year-end, something Washington can do because she is living at home and not paying rent.
All the participants have taken steps to automatically save something from each paycheck. You've got to put savings before your household bills, or may not be anything left to put aside. Save something, even if it's just $20. Schleicher is saving every penny of a recent raise.
Everyone has been keeping a daily spending journal, and all said that has resulted in spending less, because they pay closer attention to what they buy.
And they all say that now they feel in control.
