By Michelle Singletary
Oprah.com |
From the January 2010 issue of O, The Oprah Magazine
In our latest Make Me a Ten! makeover, a single mother of two who has lost her job and watched her debts pile up gets her own personal financial rescue plan.
"I'm just not sure what happened to my money," says Tisa McGhee, a 39-year-old consultant
from Miami. "I couldn't have imagined that my finances
would turn out like this. At one time it all seemed
so manageable."
Three years ago, Tisa was doing fine financially. Married
and the mother of two daughters, then 9 and 13, she had a
$76,000-a-year job working for a nonprofit and had just
completed her doctorate in social work. She and her husband
were keeping up with the mortgage payments on
their Miami-area townhouse, had paid off their credit
card debt, and were building up a nice emergency fund.
Tisa had started saving for her retirement, and she and
her husband had even begun investing money for their
daughters' college educations. They were doing a lot of
things right.
Then Tisa's personal and financial life began to deteriorate.
In 2007 she divorced and began having trouble
handling the monthly mortgage payment on her own,
especially when the adjustable interest rate jumped
from 7.2 percent to 10.2 percent. She was
in a car accident in her leased Audi and
didn't have insurance to cover the damages.
When she arranged for another car,
she rolled into her new lease the amount
she owed on the previous one. She borrowed
$2,500 for the down payment, putting
it on a credit card offered by the
dealership, and assumed a $516-a-month
payment. The lease is up in the spring—but then she'll need another car.
To make matters worse, student loans
that Tisa took out when she was in college
and graduate school grew from
$65,000 to $86,000. Most of her tuition
had been paid by scholarships or employers,
so she'd used the loan money primarily
to help cover living expenses. "I didn't
need to take out those loans," Tisa says
now, with regret. To get some breathing
room in her budget, she deferred payment
on the loans, and the capitalized interest
is what pushed up the balances by
$21,000.
Next, Tisa's credit started to slide. After
the divorce, "I did a lot of emotional spending,"
she says. "I would buy things for my
girls to make up for the sadness their father
and I had caused." Finally, in August
2009, she lost her job.
Today her savings are depleted, and she
has about $8,500 in credit card debt. "It is
hard to understand what to do when your
finances seem overwhelming," she says.
With two master's degrees and a PhD,
Tisa is clearly an intelligent woman. She
didn't spend lavishly, but she let a lot of
things slip. "I consider myself savvy, but
financially I'm lost," she says. "I want to be
able to teach my daughters how to take
care of themselves."
Tisa wrote to O for help, and the editors
turned to me. I'm a nationally syndicated
financial columnist for The Washington
Post, and I've helped hundreds of clients
straighten out their financial lives. It's
common for smart people, just like Tisa, to
make bad decisions and end up dealing
with multiple problems—excessive debt,
job loss, a costly divorce—all at once.
Even though Tisa's finances are challenging,
she can still get back on her feet.
First she needs to get a job. She has great
earning power and has started building
her own consulting business. But I also advised
her to make some short- and longterm
changes.
Michelle Singletary is the author of The Power to Prosper: 21 Days to Financial Freedom (Zondervan) due out in January. For more information visit MichelleSingletary.com
From the January 2010 issue of O, The Oprah Magazine.
