Escaping Debt

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Day to day living can be a struggle for some, and the lack of resources can make it tough to pay the bills on time.

WAND's Eric Steltzer met with a new mother dealing with this, and a financial consultant who says making some small changes can pay dividends in the future.

Sarah Bodzin is a mother, teacher and wife. She just had a baby in August; and bills are piling up fast.

“They tell you that you need to have so much money saved away. That you need to have so much in your bank account. Sometimes it's just hard when you need to run out in the night for diapers or what not and not know how much money you have.”

Looking through her bills,

“There's our dog bills, hospital bills for our dogs to keep them up to date.”

She knows she needs to plan ahead to get them paid on time.

“Here's your bills because you are not cheap. No, you're not. I cry too sometimes. It's ok.”

When those tears dry up.

“You know the price to have a baby? Priceless, that's right.”

More bills are right underneath.

“I have three different creditors for student leans. I have two federally based and one outside loan that I took out. An $18 thousand dollar loan right off the bat” says Bodzin.

We showed Sarah's interview to Financial Advisor Mellissa Watson; and in her notes, she says to have a debt elimination plan. 

“If you get in trouble, put together a plan. A lot of people say you should base that off interest rates. Another school of thought is pay the smaller balances off, so you're making accomplishments and showing progress along the way” says Watson.

Also if you plan to save – look at your employer's retirement plan. If they match contributed money – give when you can.

Also have an emergency plan, or as Mellissa calls it, a lifeboat drill.

“You want to make sure you have things in place to make sure your house, and your car are covered, but also other things as well like your life insurance policy. If you do hit an iceberg is there going to be life insurance to cover your family” says Watson.

In Sarah's case, that means knowing what bills to pay, so there's less interest. It also means investing in her family's future.

Her husband is working two jobs, and they're playing a balancing act with good and bad debt.

“Having a house -- having a mortgage -- is not bad debt. Everybody wants to have a home, and being able to manage that debt going forward is important. The bad side of debt is revolving credit cards. If you have high debt on those cards, it means you're spending is out of control and it's time to look at what we're spending and why there's so much on cards, and to stop doing that" says Watson.

As for the bills, she says they need to get paid on time. That's because she wants to take her little girl to Disney World.

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