Our Expert: Thom Fox has been working as a personal finance educator, helping people get out of debt for 16 years. He is the author of Learn Now or Pay Later, a guide to money management.
How Midlifers Get Into Money Trouble
In explaining how so many people at midlife are floundering financially, just when we should be hitting our stride, Fox ticks off a series of stats: 85% of college students are moving home with mom and dad because there's a 50% unemployment rate for recent grads. On average, they owe $25,000 to $30,000 for schooling, plus $3,000 to $4,000 in credit card debt. "What we're seeing is that mom and dad are no longer bringing in a joint income of $100,000. Maybe it's $60,000 now. The kids can't handle their obligations and the parents get in trouble trying to help."
Going broke trying to help your kids is just one of the icebergs to hit in today's turbulent financial seas. "It's a perfect storm: employment is down, so are retirement accounts, and real income has been flat since 2001. People don't have a good command of financial literacy, how to make informed choices and where to get help."
How To Get Out Of Debt
Job one, says Fox, is to embrace the situation, good or bad. "Get out of denial." Then you need to get smart. "Read financial blogs, and use programs like Planwise, which help people map their financial future. They make it easy to set goals and input your information." He also recommends Beyond the Purchase, where you can take quizzes and understand the psychology of your spending. Only then can you adjust it to live within your means.
If you need further help, he recommends reaching out to a nonprofit credit counseling firm like Cambridge Credit Counseling Corporation where he is a community outreach director. "Look for a place with experienced staff. At our office, the average counselor has been here 10 years." A credit counseling firm can personalize a plan for going forward.
Why not do it on your own? Sometimes a counselor can see opportunities you have missed. "We had someone a year ago who came for counseling. She had a plot of property that could be farm land. Six months later, she's enjoying revenue from that land and has created two jobs, people she hired to work the land."
If you're in danger of foreclosure, or underwater in your house, you can reach out to a house counseling agency. "They're everywhere, they're nonprofit, they're free."
One final bit of advice: invest in experiences rather than things. "When you spend money on experiences it's more fulfilling and costs less over time. Buy a pair of jeans and you've forgotten you have them by the time you finish paying them off on a credit card." Bottom line: you have to have command over your financial life. "People think, 'I'll hire a counselor to do it for me.' No, we help you do it yourself. It's easy to create a spending plan with an app."