Nearly a decade ago, at the age of 23, Aja Williams became the proud owner of an $80,000 two-bedroom home in Detroit. But two years later when her property taxes ballooned from $768 to $2,500 and home insurance rose from $655 to $1,300, she began to rely on two credit cards. With the high-interest cards charging late fees, one with a 24% interest rate, her debt quickly snowballed. She borrowed $5,000 from family members. Soon, the single mother of a young son, Vincent, now 14, was $130,000 in debt, which included her mortgage and $35,000 in personal debt. “Everything spun out of control,” says Williams, now 32. “There were times when our heat and water were shut off.”
Williams took action by creating a budget and downsizing her lifestyle. Her brother pulled her house out of foreclosure by purchasing it, and Williams rented two rooms from him to share with her son. Employed as a title coordinator, she paid her bills faithfully and also used tax refunds, raises, or any windfalls to chip away at her debt. By 2008, after six years, her entire debt was paid off.
Today, Williams is leasing a house with the option to buy. She’s also pursuing a bachelor’s degree in finance at Wayne State University. Two grants cover just about her entire tuition. She teaches financial literacy classes in her community, sometimes without charging. She’s come a long way. “I learned to delay gratification and stopped using credit cards for a quick fix,” Williams says. “I use cash for everything now.”
It’s a New Year and time to make good on promises to order your finances. Here’s a guide to help you dig your way out of three common debts: credit cards, student loans, and taxes.
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