VOL. 115 | NO. 154 | Monday, August 13, 2001
Overcoming credit debt, buying a home is doable despite all odds
Investing becomes home for Memphis woman
By SUE PEASE
The Daily News
In December 1999, Dana McCullough began investing for the future.
Her goal was to put money into a mutual fund to save enough for a down payment on a house or make enough to pay off her debt.
Two years later, she met both goals.
For McCullough, 30, paying off debt and buying a house seemed unattainable initially.
"When you dont have any money, all that debt looks hopeless," she said.
Before making the decision to invest and save, she had hit some bumps that had slowed her down on the path of financial security.
McCullough, divorced since 1997, was raising two youngsters with no child support, and had been evicted from her apartment in 1998 after falling one month behind in rent.
She found a smaller, cheaper apartment to rent in the Whitehaven neighborhood and decided she wanted to gain control of her financial life.
But then, she saw her credit report.
"It was worse than bad," McCullough said.
"My credit was tore up I couldnt get a paper clip if I wanted to."
She even considered filing for bankruptcy. But her total debt was under $10,000, something she believed she could get out from under with a lot of hard work.
In August 1999, she took a position with International Paper, which greatly increased her salary from her former $8 an hour secretarial position.
She currently is a human resource specialist at IP.
Along with a new job and bigger salary, she teamed up with Kent Mathis, an investment representative with Edward Jones, who worked with her on immediate goals.
The reason she felt investing made sense at the time, was because she could start investing with as little as $25 a month.
Setting short-term goals, she began investing in mutual funds and cash-like items such as certificates of deposit and short maturity bonds.
The amount was small to begin with, but by the time she was ready to buy a house she was investing $500 a month.
Investing to pay off bills and buy a house are immediate goals. Some would say that goes against traditional long-term investing.
"Its not at all unusual for people to have different goals," Mathis said.
What is unusual, however, is for a broker to recognize different goals and work with them, he said.
"Because the typical broker will be very interested in just making you think about your retirement, because the longer he keeps the money the more he makes on it."
"But the theory is that anybody who owns a piece of the world, in this case a house, will have a better life, and she will be a better client to me, the broker."
Not long after McCullough started the investment habit, the markets put on the brakes, a situation that scared many investors, but was even more frightening for a rookie investor such as McCullough.
"I lost some money and I was in tears," she said.
"But, I knew that going in I could lose money."
Along with investing, McCullough tackled her bills.
The small ones were paid off first, the bills for $60 and $105, and then the larger debts came next.
"I started feeling better about myself," she said.
With many of the bills, she was able to negotiate with creditors to settle for a lower amount.
For example, one credit card bill equaling $1,700, she was able to negotiate down to a payment of $650.
Paying off debt was the only step to take, Mathis told her, instead of filing for bankruptcy.
Bankruptcy, in his opinion, is never an option when its a matter of paying off debt.
"The only people who change their life is to do what Dana did and that is pay your stuff off," Mathis said.
And, McCulloughs situation is very typical of many people.
"There are people who make $30,000 a year, who owe $25,000 in credit card debt. There is no sanity to that.
"America has taught us that in order to be successful, we buy. But, in order to be successful, you have to save," he said.
Saving is the key ingredient to financial success, echoed Amy Schaefer, a financial consultant with Salomon Smith Barney in Memphis.
"Its very easy to put off starting to invest. But, you have to get into the mentality of paying yourself first," Schaefer said.
"Time is the biggest thing you have going for yourself. The younger you are and the sooner you can start, the more significant impact your investment will have for your lifelong term."
Placing money in savings vehicles helps for retirement and also in case of emergency.
Schaefer agrees many people live with high debt on credit cards, making minimum payments only.
"Most people arent in dire straits, but it wouldnt take much to put them there," she said.
For short-term goals, Schaefer recommends fixed instruments such as CDs or short-term bonds.
For McCullough, who has put investing on hold until she gets used to her $1,028 monthly mortgage payment, hopes to begin investing again into her mutual funds at the beginning of the year.
Her next goal is saving for her childrens education.
As she gives a tour of her new 3 bedroom, 2.5 bath home in Shelby County, she talks about the furniture she hopes to buy with cash, not credit about where she hopes to hang artwork on the walls, and how each room will be used in her 2,200-square-foot home.
Friends have asked her how she bought a large house on her own. She said she responds with "a lot of prayer."
With a little prodding, she did admit her goals were attained with a lot of hard work on her part.
"I can do it on my own," she said.
"Ive never been on welfare. God blessed me and I was able to do this you dont have to have a man to have a house. And, you dont need to make $80,000 a year to have a house."