Debt Addicts Get Clean: How These Teachers Paid Off $48,610 in Credit Card Debt
Michele Lerner, The Motley Fool
17 October 2012
The Post-it note still clings to the wall in the Van Dyke home in Buchanan, Mich. Written on it is a single, significant figure: $48,610.
"We now have zero credit card debt, but we leave that Post-it note up to remind ourselves of where we were," says David Van Dyke, a teacher and musician with The Van Dyke Revue.
Dawn and David Van Dyke, both teachers, accumulated that mountain of credit card debt during several years of spending beyond their means.
It started when they were newlyweds. The Van Dykes moved to Oregon from Michigan, but because they didn't find work right away, for several months they relied on credit cards to cover their daily living expenses.
The couple knew that there would be consequences to their spending, but they focused on the present, not the future. "We knew we were spending too much money but we figured that we were young enough to make up for it later," Van Dyke says.
Their credit card balances continued to increase when the Van Dykes moved back to Michigan where they bought a small home, and then, when their son Jacob was born, they upgraded to a larger home.
By then, relying on plastic was an ingrained habit -- a way of life.
"If we had a choice to do without or to do with, we always did with," says Van Dyke. "We used our credit cards to eat out, to buy new clothes, everything. We just weren't thinking about our spending at all. It seemed like we were just doing what everybody else does and we weren't really aware of how bad it was getting."
The mounting bills eventually became overwhelming. "There was no one moment that made us realize how deeply in trouble we were," says Van Dyke. "We had just gotten ourselves in a horrible cycle so that instead of addressing our debt we would just get another credit card. Bill collectors started to call because we couldn't always pay the minimum on every credit card."
Van Dyke says he and his wife were fighting to figure out which bills to pay on their "half-dozen or so" credit cards, at least five of which were maxed out.
The stress was accumulating, so Dawn Van Dyke made an appointment with a credit counseling organization -- GreenPath Financial Wellness.
"The day we walked into the GreenPath office I was pretty uncomfortable, but they have this giant glass jar of cut-up credit cards and I realized how great it would feel not to have credit card debt," says Van Dyke.
But first, he had to admit to Dawn that in addition to all of their existing cards, he had a credit card that he had been keeping secret from her.
The Van Dykes cut up all of their cards -- including that "secret card" -- and added them to the other pieces in the giant jar. They began to learn to live on an "austerity budget" and committed to paying more than $850 per month toward their credit card balance.
The goal was to have all the credit card debt paid off in six years. At least that was the plan.
Shortly after the Van Dykes started on the new debt-payoff plan, their son Jacob experienced multiple seizures and was diagnosed with epilepsy. "Our son was critically ill and had to be hospitalized in Chicago or in South Bend 13 times during that year," says Van Dyke. Dawn had to quit her job for the rest of the school year in order to care for Jacob.
The setback could have been a lot worse. Thanks in part to good health insurance coverage through David's job, the family was not saddled by high medical bills on top of their credit card debt.
The Van Dykes were determined to stick with the plan.
The Power of Music
During the next four years, the Van Dykes did all they could to achieve their goal of being debt-free.
They kept driving their old, beat-up cars and spent as little as possible in order to stick to their budget. Van Dyke, who in addition to his full-time job as a teacher performs with his band at weddings and parties, sold about two-thirds of his music equipment to bring in extra money.
Extra gigs also helped the family get by. "I took every single gig I possibly could during that time, especially when my wife had to stop working for a while," Van Dyke says.
"It was a terrible four years in so many ways. We thought we might lose our son because he was so ill, my wife lost her brother, and the recession hit everyone around us hard."
Fast Track to Being Debt-Free
Overall economic hardships made the Van Dykes even more determined to rid themselves of the burden of credit card debt.
They received a monthly email showing them their total remaining balance, and as they watched the balance decline, they became more determined to finish paying off their entire debt. Initially, they expected the entire payoff would take six years, but they were able to accomplish it in just over four-and-a-half years because they paid more than the minimum as often as possible.
As the debt shrank, their credit scores rose from the low 600s to 745 and 778 when they finished paying off their debt. And there was an even sweeter outcome: Van Dyke says getting out of credit card debt also helped their marriage.
A New Addiction: Cash
"We went through such a terrible time together with our son and through this financial crisis, but now we've learned to consult each other if we plan to spend more than $50," he says. "We pay cash for everything and check with each other if we want to use the debit card."
Van Dyke says, "Debt addiction is like any other addiction. You have to decide you're going to change."
The couple has replaced their addiction to debt with an addiction to a debt-free lifestyle. They still drive old vehicles, and now that their credit card debt is gone, they are tackling student loan debt from his Ph.D. program and paying down their home equity loan.
Their next goal? They plan to use their newfound budgeting skills to pay off their home by the time they turn 50.