Once Mahoney pays off her card, she said she’s going to turn her focus to rebuilding savings. And maybe, she will finally get a financial adviser. “That’s next on my to-do list,” she said.
Cynthia Davis has a strategy for managing holiday wish lists: She pays cash or takes advantage of payment plan options when shopping for her high school son, who often wants expensive computer equipment.
It helps her spread the cost out without going further into debt, said Davis, 52, of Perris, California.
Davis has worked as a social worker for 26 years. Delivering for DoorDash and operating a side bakery also have helped her generate enough income to pay the bills, especially during the holidays.
The biggest debt she carries is her student loan, estimated at $300,000, from college and graduate school. She recently had to start her $450 monthly loan payments. Davis is still hoping for a program that forgives the loans, especially since she is a social worker, and has applied for forgiveness. She also had to spend a lot on lawyers during a custody issue.
Her credit card debt is smaller ‒ about $1,000 on two cards. But Davis still carries a balance and pays high interest rates because she has to prioritize bill-paying in her budget.
She tries to pay more than the minimum each month on the cards, which have interest rates of 27% and 29%, but “you know, it’s just never enough,” she said.
Davis said she often got into credit card debt because she didn’t have the best money skills growing up.
“You’re like ‘Oh, I got a credit card and I could use it’ without thinking ‘I’ve got to pay it back,’” Davis said. “I’ve just now gotten to the point where I’m better at my credit.”
The single mom recently moved into a house that her parents bought, but she helps with the bills. She also has a new car and insurance payments since her son recently began driving and outgrew their smaller vehicle.
Her son’s Christmas requests have gotten more expensive as he has gotten older ‒ plus his birthday falls in early December. He enjoys building computers, and one year, the price tag was $1,200. After adding in a new desk, the total cost came to about $2,000.
Now she either waits to buy the present until she has the cash, or she uses payment plans to break the cost into four installments.
“Then I only have to put a little chunk of money down on it and it’s almost like layaway,” she said.
This year, Davis’s parents will give her son some money to spend on computers for Christmas.
Now that he’s older, her son also understands that “Mommy is Santa Claus,” she said.
“If we can’t get it now, we work on it and we get it later,” she said.
She’s holding off on working for DoorDash because she doesn’t feel as comfortable in the new neighborhood she moved to.
Her bakery business, however, remains a valuable side hustle, even though the ingredients add up and cut into her profits.
“It helped me put a down payment on a car,” she said.
Betty Lin-Fisher
When the dream darkened, credit counseling saved them
This Christmas, Walker and Kayla Dunn will toast the end of a four-year nightmare of credit card debt.
The story began in 2018 when the Dunns made a time-honored real estate play. They bought a fixer-upper in Midland, Texas, for $280,000. Then, they set about remodeling it into their dream home.
They planned to cover the renovation costs with $30,000 in personal loans. When the work was done, they would refinance the mortgage at a larger sum and use some of the proceeds to repay the smaller loans, along with any other debt they had taken on.
“We started with a blank canvas,” said Walker Dunn, 42. They lived in the home as they overhauled its interior, preparing dinner in the dining room while they rebuilt the kitchen, and washing dishes in the half-bath.
When their personal loans ran out, they leaned on credit cards with high limits.
“Me and my wife, we both make really good money,” Dunn said. “On paper, we looked very stable.”
And then, the dream darkened.
On Thanksgiving week in 2019, Kayla lost her job. With one big salary gone, they leaned harder on their credit cards, finally maxing them out. They struggled to keep up with the mortgage and the personal loans.
“It kind of hit us all at once,” Walker said. “Going over the budget with my wife, I was like, ‘There’s no way we’re ever going to catch up.’”
They contemplated bankruptcy. Instead, in late 2019, they sought credit counseling from Money Management International. They entered the program with $55,000 in debt across 14 accounts, with interest rates ranging as high as 28%.
Credit counselors helped them get on top of their debt, negotiating the interest rates down to an average of 3%. Even then, the monthly payments added up to about $2,300, akin to a second mortgage.
In 2020, at the height of the pandemic, the Dunns requested mortgage forbearance, a temporary pause on payments for homeowners in duress.
Under the terms of the forbearance, however, they could no longer refinance their mortgage to pay down their credit cards.
They put the house up for sale. It sold for $365,000 in the autumn of 2020, delivering a modest profit to the struggling family.
Kayla got a new job as a financial analyst in San Antonio. Now, the Dunns were a two-income couple once more. (Walker works in business relations for a maintenance company.) They moved to San Antonio with their children, a girl and boy, now aged 10 and 8, “and basically started all over,” Walker said.
The Dunns cut back on family vacations and put off home improvement projects to keep up with the aggressive monthly payments.
Today, they are working through the last of their debt, spending a scant $300 a month. They expect to be debt-free by year’s end.
They have learned some lessons. Walker winces at the money he charged on top-flight appliances for the abandoned dream home: Never again.
“If you want to do home improvements, pay in cash,” he said. “That’s my mantra from now on.”
In the past few years, the Dunns have felt strapped at Christmas. This year will be different. The couple may even splurge on a few big-ticket items for the kids.
Even so, Dunn said, the family plans to shop smart: “watching items that are on sale, looking for deals before we buy.”
Daniel de Visé
Offers free spin