4 simple steps to getting rid of credit card debt
It'll require sacrifice, but your son can pay off that debt himself
Dear Opening Credits,
I have a son who has about $18,000 in credit card debt. He has a Jeep paid off. He can borrow against it and pay about $13,000 of it off and maybe sell a boat for the rest. Do you think this is a good thing to do? -- Mary
If I had a nickel for each time parents asked how they could help their kids deal with their debt -- well, I could pay off your son's bill and finance my own daughter's college education. I suppose it's all part of being a caring mom. When we see our child having a hard time, our first instinct is to jump in and do what we can to alleviate the pain.
Is it the best idea, though? Not necessarily. I get that you want to give your son some guidance about how he can deal with that debt, but it would be far better for him to reach out instead. Though you don't reveal his age, I presume he's at least 18 -- and an as adult, he should be the one to pursue the answers he needs. More importantly, he needs to figure out a way to not get into the same situation again.
That said, while your boy has clearly made some financial mistakes, they are solvable. And since you're his mouthpiece, I'll tell you what to tell him.
1. Suspend use of the credit card. If his intention is to delete the balance, it doesn't make any sense to keep using it and acquiring more debt. Don't close it formally; just tuck it away in a private and secure place for a while.
2. Sell the boat and anything else of value he doesn't need. Notice I said "need," not "want." Unless your son is a fisherman or takes people out on paid charter tours, that item is absolutely unnecessary. Hanging on to $18,000 is horribly expensive. If the account's annual percentage rate (APR) is 17 percent, the interest alone is about $255 per month! That is a dreadful waste of money. Therefore, he should sell what he can and put the proceeds toward the balance.
3. Forget borrowing against the car and look into getting a much less expensive vehicle instead. The last thing your son needs is another loan to deal with. So how about selling the Jeep and trading down to a nice, simple used car that's a few years old? Or he could try a motorcycle, scooter or, heck, even a bicycle? What I'm proposing may seem outrageous to him, but it's not. Plenty of people make far more difficult and painful financial choices every day.
4. Develop a plan to eradicate the remaining balance. Once your son as reduced his balance by liquidating extraneous stuff, he still may have some debt to deal with. Now he has to come up with a feasible plan to pay it off ASAP. Credit card debt should be considered a short-term loan only, so I would like him to be debt-free in 12 months.
Well, let's say he's able to knock his debt down to $8,000. By sending $730 each payment cycle, he'd be out of the red in a year. If he's young and healthy and has few other obligations, he just may be able to swing it. For example, with a full-time job making $10 per hour, he could net $1,300 or so per month. After paying the credit cards that fixed sum, he'd have $570 to live on for the rest of the month. Sure, it would be tight, but I bet he could do it.
After conveying this information, resist the urge to help your son further. Nothing teaches better than a bit of suffering. Downsizing from a cool car to a rickety bucket isn't fun. Nor is living hand-to-mouth, selling precious possessions and working really, really hard. When your baby clears up the debt with such effort, he'll be a man who will not only be proud of himself, but who will be less apt to repeat past mistakes.
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Published: September 22, 2010
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