September 22, 2018
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On a Budget

Reducing debt requires discipline

ReDonna Thompson’s profession creates a quandary: some of her best clients are the ones who go away and never come back.

Thompson lives in Louisville but is the division manager of the Evansville office of Apprisen, a non-profit credit counseling service whose agency is certified through the National Foundation for Credit Counseling (NFCC). Her clients are often married, employed, and making an average income. Yet they still struggle with debt.

“More often, Murphy’s Law has taken place in their life,” Thompson says. “They’ve encountered significant out-of-pocket expenses for medical or other expenses they were not prepared for. A large segment of our clients are dealing with student loan debt. Young people get that first job, and they underestimate their loan payments in relation to their income.”

Thompson says it would help many of her clients if they undertook just one project: preparing a family budget. Planning becomes much smoother when they see how much money is coming in and where it’s all going.

“Be disciplined, and be committed,” Thompson says. “Those are the top two things we stress. This is your life you’re dealing with. This is the real deal. You have to be committed to the process. Having a good budgeting foundation — keeping up with income and expenses — is a great foundation for people.”

Federal Reserve Board numbers in three areas show the challenges facing American families. For the 50 percent of homes that carry credit card balances, the average debt is now $15,000. Average student loan debt is up to $31,000. The median home mortgage is $146,000, and although a reasonable mortgage is acceptable for most people during their working years, many have less equity in their homes now than they did prior to the 2008-09 recession. Throw in unexpected hospital bills, car and truck payments, and second mortgages, and the tab often exceeds $200,000. So is there any solution to breaking out of debt? Thompson thinks there might be.

“I see a better trend in terms of school systems getting on board with financial literacy,” Thompson says. “Schools are beginning to understand the value it creates for students. The schools work hard to prepare young people to graduate and find work, but that doesn’t do much good if they can’t manage the money they are earning. That’s one reason we try to reach high school students and freshmen in college. The earlier you catch them, the better decisions they make.”

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