I was $2 million in debt — now I’m wildly successful –
It’s a new year, and a new chance to get your finances in order. Here, 34-year-old Patrice Washington, an Atlanta-based personal-finance expert and author of three books, including the upcoming “Real Money Answers for Every Woman: How To Win the Money Game With or Without a Man” (Jan. 19, HarperCollins), tells Haley Goldberg her own story of hitting financial rock bottom — twice — and how she strategized her way out. [Scroll down for video]
As my phone rang with calls from my anxious employees, I watched the banks close one by one on the TV in my hospital room at Cedars-Sinai Medical Center in LA.
I was in the midst of a 10-week hospital stay while pregnant with my daughter, Reagan, and my real estate company was in danger of collapse — both of my babies were in trouble.
“If you keep stressing out about the mortgage industry, you’re not going to leave here with a baby,” my doctor warned me. A maintenance worker had to drill the TV off of the wall to keep me from turning the news back on.
It was 2007, and the million-dollar company my husband and I launched four years prior was going south. We were grateful to leave the hospital with a healthy baby girl — less so about the $400,000 in medical bills after maxing out my health-insurance coverage.
For the next year, we paid our employees out of our own pockets, but eventually closed the company in 2008. Between business statements and our personal expenses, my husband and I realized we had accumulated $2 million in debt.
I knew other people in the real estate industry who committed suicide during the recession — they’d lost so much that they just couldn’t even imagine going on. But I could. I had been in this situation before, when, at age 22, I found myself with $18,000 in credit card debt.
I had just graduated with a 3.8 GPA from the University of Southern California; after a talk at my church about personal finance, I pored over my credit card statements, adding up the charges and interest. I cried as I tallied the final numbers, but vowed to make things right.
First, I stopped using my credit cards altogether. This got me budgeting. I didn’t have cable for almost two years, and I bought generic-brand food and did my own nails. I even got a weave to cut hairstyle costs. Just with those changes, I was saving about $400 a month.
Two years later, I was debt free. I thought, “That will never happen again.”
But here I was, with so much debt $18,000 looked like nothing. I had done this before, though; I believed that with the same strategies, I could again crawl out.
My husband and I started setting up payment plans with our creditors and scraping together change to buy milk for Reagan. Gerald got a job as a manager at Taco Bell so we could have health insurance. I hounded the hospital where I had given birth, explaining my situation, and got them to forgive $250,000 of what I owed.
“This is not the $18,000 credit card debt that you had as a kid,” a mentor finally told me. “You’re in the big leagues now, and you can’t nickel-and-dime your way out of $2 million.”
After two years of pinching pennies, we still weren’t making a dent in our debt. “This is not the $18,000 credit card debt that you had as a kid,” a mentor finally told me. “You’re in the big leagues now, and you can’t nickel-and-dime your way out of $2 million.”
In 2011, we filed for Chapter 7 bankruptcy — wiping out all the debt we had accrued. We had wanted to pay back everything we had signed our names to, but the debt would have loomed over us forever. Though it wrecked our credit, bankruptcy gave us the reset we needed.
Now an expert on living with less, I used that knowledge to rebuild my life. I launched a personal-finance consulting firm in Atlanta, giving others the money advice I learned the hard way. Gerald is the president of a media company, and I make about $300,000 a year from my books and personal brand. By sticking to our plan, my credit score rebounded — it’s now 740.
In hindsight, our mistake was putting all of our eggs in one basket. All of our money was in real estate; today, we have investments in restaurants, retail and social media sites.
Though it’s been a long journey, I know that my experience can now be a blessing to someone else. Had I not found my way out of debt twice, I wouldn’t have the same passion for what I do, and compassion for those who are experiencing hard times of their own.
Washington’s 5 tips to get your finances in shape
Start with a game plan
Figure out your financial goal. Is it to raise your credit score? Get out of debt? “Breaking big goals into smaller steps [lets you] complete tasks on a daily, weekly or monthly basis,” Washington says.
Study your debt
While the figures can seem daunting, it’s important to know the ins and outs of your debt — like interest rates — before you try to pay it off. “You have to get to know your circumstances to create the game plan,” she says.
Ask for forgiveness
“No matter whom the creditor is, and what the debt is for, you have the right to at least request that your account be reviewed for savings benefits,” says Washington, who got more than half of her hospital bills forgiven at the height of the recession.
Charge for a hobby
Washington used to volunteer to teach personal finance, but made a career out of it by charging money. Look to your own hobbies — like baking or writing — if you need additional ways to make bank.
Weigh the cost of bankruptcy
If you can only settle your debt by filing for bankruptcy, know the cons: a dive in your credit score and a lack of trust from future creditors. “Bankruptcy was truly not our first choice,” Washington says of her own decision to file for Chapter 7.
Source: NY Post