Being Grown-Up About Debt
by George Mannes

February 9, 2007

Stop kidding yourself: No plan will work until you change the way you think about money

Until last fall, Jessica Jaquez-Trejo and Willy Trejo seemed to be living an idyllic life. The El Paso couple had good jobs—Jessica, 30, teaches reading at an elementary school; Willy, 32, is a product engineer—and together earned a comfortable $90,000 a year. They'd recently bought a three-bedroom home near their extended family. Best of all, two years after a doctor told Jessica that she would never be able to have children, the couple were preparing to celebrate their son Willito's first birthday.

So it came as a shock to Jessica when Willy, who handled their finances, told her they couldn't afford the $500 party she was planning. Says Jessica: "I thought he was just being cheap."

In fact, he was being realistic. Only three years earlier the couple had been nearly free of debt, but now they were drowning in it. In addition to the $76,000 they owed on their mortgage and the $30,000 in loans for their two cars, they owed $19,000 on eight maxed-out credit cards and another $9,000 in student and personal loans. And things were getting worse. Struggling to pay even the minimums,Willy was late on a Visa bill; his already high interest rate of 18% was jacked up to 32% as a penalty.

In the end, Willy reluctantly agreed to a scaled-down party for Willito. But the following week, when Jessica needed money to buy shoes for the baby, Willy, upset, told her that they didn't have any. "Put a balloon on his feet for socks," he said, "and cake on his chest for a shirt."

There they were, earning nearly six figures but unable to spare $20 for baby clothes. The debt is "really overwhelming," says Willy. "I feel like I'm carrying a very big load."

It's a burden more and more Americans share. Since 1990, average credit-card debt has more than doubled, to $9,159, according to CardTrak.com. And it's not just young couples like the Trejos, buying their first homes and starting a family, who are in over their heads. The amount owed by people of retirement age has nearly doubled over the past few years as well. Blame easier access to credit, sure, but also today's "I want what he's got, gotta have it now" mentality. There's no shortage of repayment plans, but you'll never dig out unless you also change the attitude toward money that contributed to your getting into debt in the first place. These strategies should help.

Admit That You're the Problem

Sometimes the reason you piled up debt is big, obvious and out of your control, such as a medical emergency or a layoff. But often it's a series of smaller expenses that seem like reasonable indulgences at the time but eventually add up to trouble. The Trejos, for example, charged the furniture for their new home. Then there was the trip they took to Phoenix in 2005. And the takeout food or restaurant meals (nothing fancy, mind you) that they eat a few times a week. Suddenly they were nearly $20,000 in the hole. "Little things got out of hand," says Jessica.

The bottom line: It's probably not your luck that's at fault, it's your Disneyland ideas about the lifestyle you can afford. "People are still trying to keep up with the Joneses, but they don't know how much in debt the Joneses are," says Gail Cunningham of Consumer Credit Counseling Service of Greater Dallas.

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