KTVU News Feature:
Crawling Out From Under the Weight of Debt

February 13, 2004 – It's not just President Bush and Gov. Schwarzenegger who are dealing with huge budget deficits – American families are racking up a record amount of debt.

In fact, according to Consumer Credit Services of San Francisco, the average American now has $8500 in unpaid credit card bills.

In the past 10 years, incomes have gone up 72% while personal debt is up 123%. And Americans are not putting much away for a rainy day; the average person in the U.S. saves just 2% of their annual salary.

"We were probably behind anywhere from $1200 to $1500 a month," said Becki Wilson of Hayward. "But we were continuously working, trying to pay something towards (our debt) whatever it was, even if it was just a little bit."

Wilson and her husband, Wesley Moniz, are juggling work and family. They both have gone through layoffs. Right now, Moniz has a steady job, but also does temp work for a friend and even fills in for Wilson at her job at the mall so she can spend more time with their kids.

But it's been an economic struggle for the couple. And it's not like they're spending money on luxury items either; they get by with one car, which makes for even more juggling, more stress.

"I don't think we've ever been on a family vacation, unless you count pitching a tent," Moniz said.

The Hayward couple like others have heard it before – pay off your credit cards, contribute to your 401k, get into the stock market. But if you already have a stack of bills, how do you do that?

Erica Sandberg, Consumer Credit Counseling Services, said the recovery process begins by determining just how much you have to spend and then you look for ways to make sensible cuts.

"A good example is a cell phone bill," she said. "There's a lot of people walking around with fairly expensive plans – well over $100 (a month). They may be able to get it down to $30 or $40."

Sandberg says the biggest mistake people make is not knowing where the money goes. She advises her clients to write down every expense, every penny and then you can decide where to cut.

"Living paycheck to paycheck, that is the mentality you need to break," she said. "Almost everybody can save $5 or $10 a month. You just have to be committed. I have seen people work miracles with their budget so they can do this."

After losing her job and going through a divorce, Dolores Jimenez racked up $12,000 in debt. She used credit cards to pay for everything – rent, food, even her car payment. All that debt was consuming her thoughts.

"Sleepless nights, heartaches, headaches," she described what it was like wrestling with her out-of-control debt. "I'm getting paid on Friday, but, you know, I already owe 130% of that check that I'm going to get paid with. That was the eye opener and I felt really, really awful."

After reviewing her bills, Jimenez realized that when she paid $100 to her credit card only $19 went towards the balance. The rest was going to pay off the interest that continued to grow and grow.

"It got me to realize that this is it," she said. "Either I make it or I'm in debt forever or go bankrupt and that's the one thing that no one should do – go bankrupt."

Jimenez took action. She stopped drinking gourmet coffees, brought her lunch to work and eliminated dry-cleaning and cable. She also downsized by finding a roommate and she cut-up her credit cards. It took two years, but Jimenez is now debt free.

While Jimenez is a success story, Sandberg said for others the struggle continues.

"Debt has become more accepted in our culture and it could not be worse," she said. "We're living in a house of cards and eventually it's going to crumble."