How I Got Into Debt – Then Climbed Out Of It

posted by Melissa Cappleman
January 25, 2012

Most of my clients feel they can easily relate to me and that’s largely due to the fact that I’ve been where they are – in debt up to my eyeballs, and not sure how to get out of it. It’s so easy to wander into debt, and here’s my story of how I got back out of it…

In April 2004 I was living in Denver, working full time but with no idea how to budget finances, when I decided to buy a house. I made sure I could afford the mortgage payments, but before I knew it, I needed all sorts of “improvements” to my new house. The driveway didn’t seem adequate for a single woman living by herself, so I added a garage. I needed a central AC due to my mold allergies. To afford my home renovations, I took out a second mortgage. During all of these “renovations” I was also working to fund an adoption. However, the garage renovation was starting to run over cost and my spending sprees had gotten out of control. I was running out of money fast.

I had a student loan, my car payment and, of course, credit card debt, in addition to my first and second mortgage. I took the advice of an older colleague and took out an IRA loan which I used to get rid of most of my credit card debt. That seemed like the perfect solution, until later on, when I received a large tax penalty for not putting that money back into my IRA. I was taxed at my current tax rate PLUS 10% just for good measure. Let’s just say that was a lesson learned. Your friends, no matter how well intentioned, don’t often give the best financial advice, or even how to budget finances for themselves.

How I got out of debt fast

I took out a 401K loan and my family helped me fund the remaining costs of my adoption. Soon, my son came home with me. Though I had the utmost joy of loving and caring for my new son, my financial situation was getting worse. Childcare and diapers were costing me about $1,200 per month and I still had mortgages one and two, as well as my student and car loans. Needless to say, I was neck deep in… diapers and debt.

In February 2007, I discovered the Dave Ramsey podcast by accident, which started me on a direct path to debt elimination and my current career. When I received my annual bonus in March, instead of splurging, I used it to pay off my car. Soon, I received the title in the mail from the bank (without a congratulatory letter, by the way), and I never felt better about managing my own financial situation. I thought, “Well at least I own my car because I may have to live in it!” I gave myself a big pat on the back.

I was now a regular listener to the Dave Ramsey show and I began to think I could really do this – get out of debt. When my son went to bed and all the chores were finished each night, I actually had a lot of free time, so I decided to pursue financial coaching as a second income, and to help fund my second adoption. My credit cards and car were paid off, and I had momentum.

In 2009, I was hit with several bombshells – in January I was laid off from my position at a financial services firm and in August my Mom passed away. These events prompted several decisions that have gotten me where I am today. I had no steady income and my family was in California – why was I still in Denver? So I decided to sell the house and we relocated to Los Angeles. After a month of showing the house with no offers, I just decided it was time to go. One hour into our drive to California, the realtor called with an offer. We negotiated it to just $2,000 under the asking price and sold! When the money came through, I used it to pay off that first and second mortgage – and in March of 2010 – I was officially debt free!

I have been debt free since March 2010

Getting out of debt has given me so much flexibility to do what I am passionate about. I can’t explain this feeling to you, but I will help you feel it for yourself. I am now a Certified Dave Ramsey Debt-Free Coach living in Los Angeles, and I have always run my business on a cash basis. Now that I know how to budget finances, I’ve kept my expenses lean while building my business (I rented the least expensive one bedroom apartment in the most reasonably “non-scary” neighborhood). Now I have a home office, all the appliances and home comforts I need, and I am funding my second adoption, all with cash.

This is my story and I’m excited to help you write yours. If you are truly committed to getting out of debt but aren’t sure how to do it, I am here for you. Just get in touch with me to set up your free phone consultation and we can start from there!

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