Out of Financial Stress into Financial Wellness
A SELF-CARE SERIES Article from Novant Health EAP & Work Life Services
FACT: Since 1990, consumer debt has more than tripled from $214 billion to over $750 billion.
The savings rate has steadily declined, and is now below zero. The number of people filing for
bankruptcy has jumped 125%, with over 1.6 million having filed in 2003. That's more people
filing for bankruptcy than for divorce. An analysis of Federal Reserve data shows dramatic
increases in credit card debt among middle- and lower-income households, and among older
A rising tide of credit card debt is threatening the American Dream for Novant health
Employees and their families. More employees are turning to the Employee Assistance Program
to find help for stress related to high-cost credit card debt. Interest payments are barely
manageable for some while feel hopeless to achieve a state of financial wellness.
Every year the average indebted household pays over $2,175 in interest charges. Even
while the prime rate has fallen to an historic level, average credit card rates have continued to
climb since 2001, rising from 15.82% to 16.44%. Penalty rates routinely top 29% and late
payment fees rose from just over $7 billion in 1996 to $10 billion in 2003.
What are the Signs that You are in Financial Trouble?
Financial problems, from high credit card debt to a bad credit rating are not always the result
of poor money management. Sometimes financial situations are beyond our control. Regardless
of the cause, financial worry about money problems can impact your work life, your family life
and possibly your health.
Many times we don’t see the signs of serious financial trouble until it is too late. There are
several warning signs that indicate debt problems may be getting out of control. If your
household is experiencing more than three of the warning signals listed below, it is
certainly time to look for ways to reduce expenses. To get started, place a checkmark by the
indicators listed below that you are experiencing:
Addressing the Debt Crisis in America. Debt Education & Counseling Association, 2004. Found on the World Wide
Web at: http://decainfo.com
□ Being unclear about the reality of the financial situation. Not knowing account balances, monthly
expenses, loan interest rates, fees, fines, or contractual obligations.
□ Increasing the total balance due each month on credit accounts.
□ Using savings to pay normal bills such as groceries or utilities.
□ Depending on overtime, moonlighting or bonuses in order to meet normal expenses.
□ Finding it impossible to restore money to savings once savings are withdrawn to cover bills?
□ Seeking rescue from family, friends and community agencies to cover basic expenses.
□ Living with a view that “What’s one more expense? I can always file for bankruptcy.”
□ Panicking when faced with an unexpected expense, such as car repairs?
□ Hoping that personal checks don’t clear the bank before payday.
□ Borrowing from friends and relatives to cover basic expenses?
□ Experiencing intimidation or exasperation while answering or avoiding collection agency phone calls.
□ Spending a growing percentage of take-home pay on loans and credit card payments.
□ Making the minimum payment on my credit card balances.
□ Receiving second, third, and fourth notices about overdue accounts.
□ Creditors have threatened to sue, repossess personal property or hire a collection agency to recover their
□ Wages are being garnisheed to pay for outstanding debts.
□ Utility companies have cut off service because of outstanding bills.
□ Paying one creditor one month and another creditor the next because there's not enough money to pay
□ Paying excessive interest or service charges because bills not paid on time.
□ Renegotiating loans to cut monthly costs or looking for a consolidation loan to pay off old bills and a few
□ Looking for new credit card offers with promotional lower rates to transfer current credit card debts to.
□ Looking for a consolidation loan to pay off other consolidation loans.
□ Intentionally using the overdraft or automatic loan features on checking accounts, or taking frequent cash
advances on credit cards.
□ Not talking to a spouse or partner about money or talking only about money.
□ Financial problems always creating chaos, affecting my health, job or marriage.
□ Giving up to depression, despair or helplessness.
Debt reduction is an admirable goal and worthy of your energy and attention if you want peace
of mind and a secure financial future. First and foremost, you cannot be successful with your
debt reduction plan if you continue at your current spending rate. You must spend less and pay
more to get debt relief. “Impossible to dig out.” you say? Read on.
What You Can Do For Yourself2
“Looking closely at our options helped us realize that we still needed to try
self-budgeting before taking more extreme measures. We think that
perhaps we were giving up too soon." — Alicia A.
Review your specific obligations that creditors claim you owe to make certain you
really owe them. If you dispute a debt, first contact the creditor directly to resolve your
questions. If you still have questions about the debt, contact your state or local consumer
protection office or state Attorney General.
Contact your creditors to let them know you're having difficulty making your
payments. Tell them why you're having trouble – perhaps it's because you recently lost your job
or have unexpected medical bills. Try to work out an acceptable payment schedule with your
creditors. Most are willing to work with you and will appreciate your honesty and
Budget your expenses. Create a spending plan that allows you to reduce your debts.
Itemize your necessary expenses (such as housing and health care) and optional expenses (such
as entertainment and vacation travel). Stick to the plan.
Try to reduce your expenses. Cut out any unnecessary spending such as eating out and
purchasing expensive entertainment. Consider taking public transportation rather than owning
a car. Clip coupons, purchase generic products at the supermarket, and avoid impulse
purchases. Above all, stop incurring new debt. Consider substituting a debit card for your credit
Use your savings and other assets to pay down debts. Withdrawing savings from low-
interest accounts to settle high-rate loans usually makes sense. Selling off a second car not only
provides cash but also reduces insurance and other maintenance expenses.
Look for community resources such as your church, synagogue, or other religious
organization. Some United Way funded agencies may be of help. These and other community
agencies are listed in the Yellow Pages under “Social Service Organizations. “
Where Can I Turn for Credit Counseling?
Credit Counseling and Debt Management
If you are unable to make satisfactory arrangements with your creditors, nonprofit consumer
credit counseling and debt management agencies can often help work out payment plans with
your creditors. They also provide education and counseling to families and individuals. In these
programs, a credit counselor works with the client to develop a budget to maintain basic living
expenses and outlines options for addressing one’s total financial situation. These counselors
The Center for Debt Management, Managing Your Debts: How to Regain Financial Health, 2001. Found at
can usually offer a strategy for getting out of debt and staying out of debt, without using more
If creditors are pressing you, a credit counselor can also negotiate with these creditors to
repay your debts through a debt management plan. Under this plan, creditors often agree to
reduce payments, lower or drop interest and finance charges, and waive late fees and over-the-
limit fees. After starting the plan, you deposit money with the debt management agency each
month to cover the negotiated payment amounts. The agency will distribute this money to your
creditors to repay your debts.
Supported mainly by contributions from community organizations, financial institutions, and
merchants, nonprofit consumer credit counseling agencies provide services free or at a low cost
to individuals seeking help. To contact a credit counseling agency, look in your telephone
directory yellow pages or contact EAP & Work Life Services for a referral.
Important Questions to Ask When Choosing a Credit Counselor3
If the organization you were working with shuts down, you may be able to work a payment
plan on your own directly with your creditors. But if you decide that you need additional credit
advice and assistance, or if you are considering working with a credit counselor for the first
time, asking questions like these can help you find the best counselor for you.
1. What services do you offer?
Look for an organization that offers a range of services, including budget counseling, savings and
debt management classes, and counselors who are trained and certified in consumer credit,
money and debt management, and budgeting. Counselors should discuss your entire financial
situation with you, and help you develop a personalized plan to solve your money problems now
and avoid others in the future. An initial counseling session typically lasts an hour, with an offer
of follow-up sessions.
2. Are you licensed to offer your services in my state?
Many states require that an organization register or obtain a license before offering credit
counseling, debt management plans, and similar services. Do not hire an organization that has
not fulfilled the requirements for your state.
3. Do you offer free information?
Avoid organizations that charge for information about the nature of their services.
4. Will I have a formal written agreement or contract with you?
Don’t commit to participate in a DMP over the telephone. Get all verbal promises in writing.
Read all documents carefully before you sign them. If you are told you need to act immediately,
consider finding another organization.
5. What are the qualifications of your counselors? Are they accredited or certified by an
outside organization? If so, which one? If not, how are they trained?
Try to use an organization whose counselors are trained by an outside organization that is not
affiliated with creditors.
Federal Trade Commission. For People on Debt Management Plans: A Must-Do List, March 2005.
6. Have other consumers been satisfied with the service that they received?
Once you’ve identified credit counseling organizations that suit your needs, check them out with
your state Attorney General, local consumer protection agency, and Better Business Bureau.
These organizations can tell you if consumers have filed complaints about them. The absence of
complaints doesn’t guarantee legitimacy, but complaints from other consumers may alert you to
7. What are your fees? Are there set-up and/or monthly fees?
Get a detailed price quote in writing, and specifically ask whether all the fees are covered in the
quote. If you’re concerned that you cannot afford to pay your fees, ask if the organization waives
or reduces fees when providing counseling to consumers in your circumstances. If an
organization won’t help you because you can’t afford to pay, look elsewhere for help.
8. How are your employees paid? Are the employees or the organization paid more if I sign up
for certain services, pay a fee, or make a contribution to your organization?
Employees who are counseling you to purchase certain services may receive a commission if you
choose to sign up for those services. Many credit counseling organizations receive additional
compensation from creditors if you enroll in a DMP. If the organization will not disclose what
compensation it receives from creditors, or how employees are compensated, go elsewhere for
9. What do you do to keep personal information about your clients (for example, name,
address, phone number, and financial information) confidential and secure?
Credit counseling organizations handle your most sensitive financial information. The
organization should have safeguards in place to protect the privacy of this information and
A Word of Caution on Bankruptcy
Bankruptcy cannot clean up a bad credit record and will be part of your record for up to ten
years. It can, for example, make it more difficult to get a mortgage to buy a house. It usually does
not wipe out child support, alimony, fines, taxes, and some student loan obligations.
For the first time, financial counseling and education will be mandated by the new
Bankruptcy Code, which can benefit consumers considering bankruptcy. Prior to filing for
bankruptcy, you would be required to receive a briefing from an approved nonprofit
budget and credit counseling agency. Prior to completing the bankruptcy process and receiving
a discharge, individuals will be required to complete a course on personal financial management.
Call EAP today to talk about financial stress
or for a referral to a Credit Counselor:
Note: None of the information in this article is intended to be offered as expert financial or legal advice.
Referrals can be made to legal and financial professionals who can provide professional advice for your