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This is part of a series of interviews with people who are either working to improve their financial situation or who have already reached their goals. This week’s interview is with Jennifer, who had fallen behind on her financial commitments and was beset by late fees. She has since gotten current and is working on paying down debt and preparing to save.

Could you tell us something about yourself?
I’m a 30-year-old attorney. I’m not married and have no children. My boyfriend and I have been together almost two years and plan to get married, but we are not engaged yet. I still live in an apartment because I don’t have any money in savings for a down payment or a good enough credit rating to consider buying, but I’m diligently working on my finances with the hope that by the time I get married we will be able to buy a house.

In what way have you turned your financial life around? (Or what are you working on changing?)
In a nutshell, I had three major problems–student loans bordering on default, four maxed out credit cards, and absolutely no savings. I’m earning more money now and gradually finding it easier to pay all of my bills, pay down debt, and still have enough left over to live comfortably, but in order to get where I am I had to radically change my priorities and the way I thought about and spent my money. Over the past two years, I have gotten all of my student loans current and am currently working on eliminating my credit card debt and trying to put a little bit into savings. Building up my savings will be the next task.

Can you give a little bit of background on your story? What were things like for you pre-change?
I have between $100,000 and $120,000 in student loans from law school that I’m paying in monthly installments totaling approximately $1,000, as well as about $6,500 in credit card debt (at its highest, my credit card debt was just over $10,000). I reached my “low point” financially during my first two years working right out of law school. I was earning an annual salary of $58,000 and paying rent of over $1,000. I had also developed some bad spending habits during law school and found those hard to break. I couldn’t make ends meet. I started juggling bills and paying practically everything except rent late, including my credit cards. I would pick and choose what I would pay each month and what I would allow to roll over to the next month in order to have any money left over at all after bills. I could almost always count on at least one overdraft charge every two weeks after my paycheck was gone, and one time a large check went through when I had about $20 in my checking account, resulting in seven overdraft fees.

There were times at the end of a paycheck that I literally gathered up change around my apartment just to go buy a loaf of bread and some peanut butter, and that’s all I would eat at home until I got paid. I either skipped lunch at work or went out for dollar menu items from fast food places most days. My credit cards got maxed out and stayed that way. One credit card accumulated a balance well over the limit. My loans fell far behind. I paid my car note one month late for almost an entire year. I was constantly getting calls from my lenders, my credit cards, and the utility companies. My power was disconnected once. My cell phone was disconnected more than once. I didn’t have the money in time to renew my car insurance (which was sky high because of my bad credit) at the end of my policy period once, so I let it lapse and went without car insurance for several months. I made sure to pay just enough on the loans to keep them out of default, but the past due balances snowballed out of control.

I was very ashamed and didn’t tell my parents or anyone else how dire my circumstances were, and I managed to maintain a busy social life because that was a priority for me. My (now ex-)boyfriend berated me when he would find out about relatively small things like an over limit credit card or a late car payment, so I wasn’t able to confide in him about the gravity of the whole situation. My job was a constant source of stress, so I justified spending the money to go out with friends because I seriously felt like I would go crazy if I didn’t let myself have fun. But the stress of my financial life got to be almost too much to take. I knew I had to figure out how to turn things around, but I felt like my situation was so hopeless there was no way out. I developed an attitude of “I can’t get out of this hole anyway, so what’s the point in trying?” and continued spending money the same way I always had, rather than cutting back.

How much progress have you made?
I have made tremendous progress. The biggest factor in my progress is that I left my maximum-stress, lower-paying job and took a job in another city making $72,000 initially. Over the course of the past three years, my salary has increased to $100,000. Still, it took me a really long time (especially after having to pay for the move and all those expenses that go along with relocating to a new city) to get on track. First I got back on track with my car note and other miscellaneous bills, and then I worked toward eliminating all the past due amounts on my student loans, which took me almost two years after the move.

I have now made about a year and a half of timely payments on all of my loans except the federal loan, and I have been on time with the federal loan for almost a year. After tackling the student loan problem, I started working on my credit cards. One of my credit card accounts had been closed by the creditor and had a balance of $5,800 at its highest–approximately $2,000 over the credit limit on that card. Now, my balance on that account is about $2,500. I have four cards (two closed, two open) and try to pay as much as I can on each of them with each paycheck, rather than only paying once a month. I receive a bonus at my job each December, and I am optimistic that I will be able to use a portion of my bonus to pay off the final remaining balances and be credit card debt free by the end of the year. I’m still living paycheck to paycheck for now, but after eliminating my credit card debt I will no doubt be able to live very comfortably on my salary and still put a good amount away in savings each month.

How do you feel about your financial situation right now? (Or how did you feel after reaching your goal?)
I feel very good about my situation right now and am excited about the future for the first time in a long time. My credit score is still bad, but it has improved slightly since I have been trying to pay down my credit card balances, and I am hopeful that it will steadily improve over the next several months as that debt is eliminated.

What was the catalyst that caused you to take action?
My parents are co-signors on my student loans, so they were getting calls all the time and their credit rating was being affected. I made the loans my top priority as soon as I changed jobs and was earning more. In 2007, I promised my dad that I would have all of the loans they had co-signed on current by Father’s Day, and I fulfilled that promise. After I saw how much progress I could make if I just put my mind to it, I was encouraged and got excited about tackling the rest of the debt.

Did you have any setbacks? If so, how did you deal with them?
There have been many setbacks. I owed over $1,000 in income tax during my worst financial year and had to get on a payment plan. I had to get a forbearance on one of my loans and had trouble keeping up with it after the forbearance period ended. I had to pay $2,500 for car repairs last summer, and my parents loaned me the money and I paid them $500 each month until it was paid off. When things like that happen, I’m not always able to meet my goals of paying down debt and might even incur some additional credit card debt as a result, but as soon as the unexpected expense has passed, I work even harder to get back on track. I still have a social life and live fairly comfortably, but within reason. If I’m running low in my checking account, I will skip a social dinner or night out so that I don’t end up using a credit card. The “old” me would have just charged it.

What has been the hardest part of the process?
Still living with bad credit as a result of bad decisions in the past. I had to learn the hard way how important your credit rating is and the many, many adverse effects of having bad credit. Buying a home is not an option, and I even had trouble renting my apartment because of my credit. I’m afraid to go try to buy a car, but I’m hoping my credit score will have improved enough by the end of the year for me to buy a car then. My car insurance is about twice as much as what my friends pay. I had to pay outrageous deposits on my electricity, etc. when I moved because it is all based on your credit score. The list goes on and on. The less money you have, the more they charge you–it really is such a vicious cycle.

The easiest?
It was very fortunate for me that I changed jobs and instantly started earning $14,000 more per year, and that my salary has significantly increased even more over a relatively short period of time. That has made it easy to keep going and stay up to date on all my bills. Since getting everything current, I have not made a single late payment on anything. I’m now making plenty of money, and that enables me to put large amounts each month toward credit card debt. Without the salary increase, I could have totally changed my lifestyle and managed to make some progress, but that progress would have been much, much slower and a lot more painful. But in addition to having more money, I still had to change my attitudes about money and about spending. If I was still living the way I was before, I would probably still be facing regular overdrafts and maxing out my credit cards on a regular basis.

How long has it taken?
I would say I have been actively trying to turn things around for about two and a half years. The downward spiral all started eight years ago with my first large credit card purchase, which was just over $3,000 I charged for furniture to furnish my apartment when I moved to a new city for law school. I did that because I needed furniture, and my loan proceeds had not come in yet. Rather than paying off the card with some of my loan proceeds, I let the balance sit and proceeded to spend practically every penny of my loan money every semester. I graduated from law school in 2003 without a dime to my name and all that debt, and the rest is history.

What will be your next step?
The next thing I want to work on is building up my savings. I am not currently investing in my 401k plan, but I want to start participating in 2009 in addition to putting money into a savings account each month so that it will be accessible in emergencies. My first foreseeable goal is to save enough for a down payment on a house.

What’s the best financial advice you’ve received?
Well, the advice I wish I would have heeded and didn’t was when my father told me I shouldn’t spend all of my loan money each semester and should live frugally and put as much of that money away as I could. If I had listened, I would have come out of law school with some savings that I could have used to get me out of a bind, instead of watching everything snowball uncontrollably. That aside, I think the best advice I have heard is just not to be overwhelmed by your debt, no matter how much it is, and to focus on one thing at a time and tackle it at whatever pace you can afford, even if it seems like your progress is slow and there is no end in sight. You will start to see results eventually, and it is so rewarding when you do and will keep you going.

What inspiration could you give to someone in a similar situation?
Don’t give up! I know a lot of people coming out of school with large student loan debt often feel overwhelmed, and if they are not earning as much as they had expected, they may begin to feel hopeless, as I did. Do everything within your power to avoid falling behind on loan payments and running up credit card debt, but if you make mistakes, know that they are fixable. However long it takes to reach your goals, it is so worth it just to finally have the peace of mind that comes with being debt-free. Even though I’m still facing student loan payments for the next 15-20 years, they don’t bother me anymore because I’m on top of my finances and have a clear plan for the future.

Would you like to share your story? If you would like to be interviewed via email for a future article, please email me at c o m m e n t s @bluntmoney.com (without the spaces) to let me know you’re interested.

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