This is the third in a series of stories following three families through a Financial Fix-up. It appeared in The Forum Jan. 12, 2011.
Steve Dockter wasn’t surprised by the numbers spread out before him. His wife, Meghan Dockter, was. “I didn’t realize at all that we were that far in debt,” she said after their financial counseling session at The Village Family Service Center. “I didn’t realize we had that much credit card debt.”
The West Fargo couple is taking part in The Forum’s Financial Fix-Up project, which follows three local couples through a money makeover. To start, the Dockters met with financial counselor Tracy McFarlane.
The Dockters say they were in good financial shape until a medical crisis a couple of years ago. Meghan was put on bed rest while she was pregnant with their third child and then suffered postpartum depression following the birth and couldn’t work. They got off the same page financially, and started to accumulate credit card debt of about $40,000, on top of a mortgage and student loan debt. Their goal is to get out of debt and communicate more.
“It’s a very common thing,” McFarlane said about medical and financial issues. “Life doesn’t go as planned when you’re dealing with those kinds of things. It puts a roadblock in the normal course of everyday events.”
McFarlane led them through a line-item budget. Like many couples, they were uncertain how much they spend on groceries and clothing. McFarlane suggested they track their spending for a month or more.
According to the figures they gave McFarlane, the Dockters take home about $5,300 a month with expenses of $5,500, leaving their budget short each month about $200. Meghan, a nurse, said she wished the numbers weren’t a surprise. “That’s part of the problem. I spend and don’t really see what’s going out,” she said, adding that Steve, a math teacher, is the numbers person. “He’ll just say to me, ‘We’re getting tight,’ ” she said.
McFarlane gave handouts to the couple on how to reduce their expenses (see Living on Less). She challenged them to find areas to cut back to create a balanced budget. She also said The Village’s Debt Management Plan could be a good solution for the couple.
Participants send one payment to The Village, which may be able to secure lower interest rates with the creditors. Participants agree to not use credit cards for the duration of the payback period. The plan charges a monthly fee, and may affect the participants’ ability to get additional credit while enrolled in the program, McFarlane said.
“If your goal is to pay the credit cards off in a timely manner and you’re not seeking any additional loan products or services in the near future, the debt management program can be a great way to pay off those credit cards in a timely manner,” she said.
After the session, McFarlane ran the numbers using the Dockters’ current interest rates and balances. As is, making a monthly payment of $862, it would take the couple 84 months to repay their debt and they would pay a total of $29,839.71 in interest, she said. Making the same payment, The Village’s Debt Management Plan would take 57 months and they’d pay $3,703.42 in interest. “Our Debt Management Plan would allow you to pay off your credit cards 27 months sooner and save you $26,136.29 in interest,” McFarlane wrote to the couple.
Steve said it would be a good option – if Meghan weren’t going back to graduate school this month. He said they’ll need credit cards to make up the difference during the second year of the program, when Meghan won’t earn a paycheck.
This worried McFarlane. “Assuming all your expenses remain the same, that means that you would be putting $2,300 on a credit card every month in order to make your household work?” she asked.
“It’s possible,” Steve said. “It’s not the best way to do it.”
“It wouldn’t be a wise move,” McFarlane said.
Readers can reach Forum reporter Sherri Richards at (701) 241-5556