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Dear Pete,
I have gotten myself into credit card debt at the age of 69. I owe about $15,000. I haven’t told my husband. I can pay $5,000 but we’ll be out of savings. Help. I don’t know what to do.
Maryann
Pete the Planner: If I were in your shoes, Maryann, I would feel exactly the same way. You very clearly made some financial decisions you felt you could tolerate, and even absorb into your finances, but your prediction or assumption didn’t turn out to be true. So not only are you coping with being wrong, but you’re also deep in debt, and worse yet, you need to break the news to your husband.
I didn’t itemize your problems to salt your wounds. Instead, I need you to understand the three distinct problems you’re facing. Viewing and trying to solve your situation as one problem is a mistake, and if you take that approach your finances will get measurably worse.
Let’s begin with what caused your overconfidence, though it’s not exactly fair to assume you simply didn’t just find yourself in a jam. However if that were the case, your husband would like already know the details. I’m classifying this as an overconfidence mistake because I’m guessing you made the purchases based on your assumption you’d be able to handle the financial ramifications.
Generally, a person can make a bet like you made when they have plenty of cash flow or plenty of savings. Again, I’m confident this was your scenario, because if this was about an involuntary emergency, your husband would be in the know. If you’re able to solve the debt problem, you need to ensure you never make this same mistake again. You’ve just proven your cash flow and assets can’t take it.
So far, all I’ve made you do is promise to never do this again. That’s the easy part. The next two parts of the plan aren’t as easy.
Do not empty your savings account to pay off this debt. It would be another giant mistake. Your goal is to put together a payback strategy using your income, and your income only. Unless you can increase your income or raise some funds to pay off this debt, your strategy will likely involve “carrying the debt” and making the monthly payment a semi-permanent part of your financial life until it’s gone.
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If it’s at all feasible, try to find some way to increase your monthly income during this period. Even if it’s just a few hundred bucks per month. You can also raise some quick cash by selling items you don’t need, want, or use.
Whether you’re able to increase your current income and raise more funds now or not, you should contact your creditors immediately and help them understand your reality. Ideally, they’re able to help you put together a payment plan that won’t leave you destitute. When putting this plan together, don’t let them talk you into parting with your savings. While this situation might feel like an emergency, I don’t want you to use your emergency fund (savings) to deal with it.
Unfortunately, it’s time to address the elephant in the room. Your husband deserves to know the truth. I don’t know exactly know why you withheld this information from him at the time, but you won’t be able to get through this without his support.
Will he be upset? Probably. But you will have already resolved to not make the same mistake twice, and you will already have a reasonable plan to repay the debt.
Try this approach with him: “I need to talk to you about a financial problem which I thought I could solve on my own, but I was wrong, and now I need you to know what’s going on.”
As much as you want to move on from all three problems, you need to allow your husband to come to grips with each reality. You’ve had plenty of time to reflect, and now he needs the space to make his own judgments. This means you’ll need to be more vulnerable and transparent than you probably want to be.
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Consumer debt issues almost always create large burdens, but those burdens are especially challenging when a retired person on a fixed income is faced with the debt. The problem is made worse when the person overreacts and wipes out their emergency fund. Make sure you’re not going deeper into debt, cut back spending where possible, and start chipping away. It may take a few years, but you need to stay the course.
Peter Dunn is an author, speaker and radio host, and he has a free podcast: “Million Dollar Plan.” Have a question for Pete the Planner? Email him at [email protected]. The views and opinions expressed in this column are the author’s and do not necessarily reflect those of USA TODAY.
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