Breaking the debt cycle -- here’s how to get ahead

Rod Meloni is working with a few different families to help them get ahead during these troubling times

How families are making it work while living paycheck to paycheck.

DETROIT – If you stopped at the grocery store or filled up your car this past weekend, you felt the pinch of the rising prices as the higher prices have more of us living paycheck to paycheck.

We reached out to our WDIV Insiders, and Rod is working with a few different families to help them get ahead during these troubling times.

First is Trish and Jason Keith of Dearborn Heights. They say their biggest problem is managing credit card and college loan debt. They were able to get a consolidation loan at their credit union at interest rates about a third of what they were paying. They also did our “Monitor All Spending” exercise and are now budgeting.

They say they are now finding some breathing room.

Next on the list is Latonya Edwards of Detroit. Her most significant problem is a massive truck payment of $703 a month. We went to work trying to get her payments reduced as she owed $40,000 for a truck worth about $22,000. We’re still working on that.

Edwards has started an emergency fund and increased how much she is putting into retirement.

So far, these families are committed to this program, and that’s one of the things we at Local 4 have learned as you have to be serious about knowing what you have, what you need, and how to budget for that. So when you get to retirement, you aren’t in the struggle that Kimberly Paulin finds herself in.

“It was always check to check for me my whole career,” said Paulin.

A generation of local high school theatre students knows Paulin as she had a long career staging spring musicals and teaching English.

Now she’s 57 years old, and COVID gave her ample reason to retire and take her teacher’s pension and retirement healthcare coverage.

“I would like to not have to stress about retirement,” Paulin said.

With stress born from a pension too small to allow her to retire fully, she’s now a receptionist at a local chiropractic office. She just helped move the practice to this new Walled Lake office.

“My pension pays the bills, and then this job ideally was supposed to be for the extras,” Paulin said.

But sometimes, life gets in the way.

We met at her new office to discuss her finances and discovered that a broken wrist and gall stones threw her into a budget crisis because she couldn’t work for several months.

“I had to have physical therapy, so I immediately hit my deductible, which is $1000, and then I had a coinsurance of $800,” Paulin said.

Without an emergency fund, all of the payments went on her credit cards.

“As soon as I was done with the health issues, my hot water heater went out,” Paulin said. $1300.”

Just like that, her credit card debt exploded. She immediately went to her credit union and qualified for a $25,000 consolidation loan, but there was nearly $7000 more left on her cards.

So the first order of business Is to pay down the credit card debt. We discussed her paying only minimums on the cards with the lower amounts and then attacking as best she could the card with the enormous total debt.

As soon as that card gets to zero, shred it, take on the account with the next highest amount, and so on.

When asked how far she could get in six months, she responded, “I think I can get that biggest card paid off.”

Now, Paulin does a good job consistently paying off the necessities. With her health restored, she is willing to work even more now.

“I work part-time for my friend’s medical billing company, you know, 15 to 20 hours a month,” Paulin said. “It’s a little extra money. It’s not much.”

It is an encouraging sign which shows how she’s committed to getting fiscally fit. The lack of a budget is at the heart of her paycheck to paycheck problem.

Paulin is a member of a credit union, and Rod advised her to use the free budget program they offer. Rod also suggested she track all her spending and income in a month to know exactly where the money goes to help with that process.

She now understands how an emergency fund can protect against a broken hot water heater’s impact. She’s also working to pull together $1000 cash for that purpose. And though she is single and doesn’t have children, she should still have a will and medical advance directives.

This, of course, brings discipline to personal finance, but let’s be clear, we want you to figure out how to have some fun too.

“I would like to have a little extra money so that I could, I love to travel, and I would like to occasionally be able to travel,” Paulin said.

To show just how committed Paulin is to improving her financial situation, she just became a Travel Notary, making a way to make extra cash without a lot of hours.

Living paycheck to paycheck? Here’s how to get off the hamster wheel.

About the Authors:

Rod Meloni is an Emmy Award-winning Business Editor on Local 4 News and a Certified Financial Planner™ Professional.

Brandon Carr is a digital content producer for ClickOnDetroit and has been with WDIV Local 4 since November 2021. Brandon is the 2015 Solomon Kinloch Humanitarian award recipient for Community Service.