When Credit and Debt Get in the Way

a woman upset with her financial situation

High credit card balances and low credit scores lead to paying too much interest. They also make saving hard. With a My Secure Advantage (MSA) Money Coach, you can develop strategies to reduce debt and start saving.

Take Olivia, for example.

The Problem
Before working with an MSA Money Coach, Olivia didn’t know how to improve her credit score or how to save money when all of her cash was going towards credit card debt and a high-interest auto loan (over 10%).

At first, Olivia was afraid that the Money Coach would judge her for not watching her money or would lecture her on frivolous spending. To her pleasant surprise, instead of lectures, she received non-judgmental financial guidance.

The Tools & Tasks
During Olivia’s first meeting with her MSA Money Coach, she learned how credit scores work. In addition, she discovered that MSA offers credit monitoring and ID theft protection. Olivia and her Money Coach made a plan for moving her score from the fair range to the excellent range.

They reviewed her credit report and talked about the five factors that influence credit scores: payment history, credit utilization, length of credit history, new credit and credit mix. They focused on how Olivia can effectively manage these elements to increase her score.

For Olivia, figuring out how to pay her credit cards down so her ratio of debt to credit limit was less than 30% provided the most benefit. It helped to raise her credit score, which in turn helped her move toward her personal goal of achieving a good – even excellent – score.

Ultimately, the plan included paying off credit cards to free up money that went toward her financial goals. They used the debt stacking strategy, focusing on one credit card debt at a time but continuing to pay minimums on all of the cards.

Additionally, Olivia created a manageable budget using tools provided by her Money Coach. Olivia used MSA Wallet – a secure, online budgeting tool – to view her new budget and all of her financial accounts on one easy-to-read screen. This new budget focused on restructuring cash flow in order to reduce debt while also giving her enough flexibility to save more.

Her Money Coach also introduced her to SMART goal setting. With her coach’s guidance, Olivia was able to set specific, relevant and achievable goals that are measurable and time bound. Together, they set benchmarks and clearly defined desired outcomes so success could be measured. This would help her see progress along the way and stay motivated.

The Solution
Olivia and her Money Coach worked on creating a budget that would allow her to reach her financial goals without being too tight on spending. Olivia was relieved that her Money Coach never said to “STOP SPENDING MONEY!” Instead, she felt empowered to better control her cash flow. “I have noticed that my spending habits have changed just by having her around,” says Olivia. “I am more cognizant of what, where, and how I am spending.”

Olivia’s Money Coach also showed her how important an emergency fund is. As part of the budget, Olivia and her Money Coach created a savings plan where she saved a small amount of money from each paycheck. As she paid off debt, she was able to save more and more. Having some cash set aside has brought her peace of mind. Now she no longer has to panic when an emergency expense crops up. She has a cushion to fall back on, and she continues to build emergency savings with every paycheck.

Raising awareness of her spending habits, gaining a betting understanding of her credit score, and systematically paying down debt ultimately helped Olivia achieve her initial goal of boosting her credit score, which opened the door to other possibilities.

As her credit score steadily climbed, it brought Olivia’s dreams of buying a vacation cabin a lot closer to becoming a reality! With her improved score, she is more likely to get a much better interest rate on her loan for the property.

She and her fiancé are so excited at the prospect of having their own quiet retreat – a goal they have been working toward for the past several years. Not only will it provide a quiet place to reconnect and relax, but it will also be a lasting reminder of all they’ve accomplished by taking the steps necessary to decrease their debt, improve their credit score and adjust their cash flow to put money towards their dreams.

With debt under control and emergency savings set aside, Olivia also focused on more short-term goals, like saving for a special trip to Disney World for her fiancé’s birthday. Saving for the trip allows her to avoid using her credit cards and running her debt back up.

As Olivia moved toward her goal of saving enough to go to Disney World, she could see not only her accomplishments of that goal, but also the bigger picture of her new spending habits and improved financial management.

The Results
While working with her Money Coach, Olivia’s credit score jumped, making her eligible for much better financing options, and her credit card debt went from over $10,200 to $2,435.

Through MSA, Olivia learned the importance of keeping high-interest debt to a minimum, prioritizing her goals, and planning not only for the short-term but also for her future.

By putting smart, attainable savings goals into action, she learned the value and methods of smart financial management, and also developed healthy financial habits that will carry her into retirement.

Olivia had plenty of good things to say about her Money Coach:
“[My Money Coach] is the best! I look forward to our conversations,” she says. “I was very hesitant to call at first; I was afraid I would get someone who was out of touch with my needs or only wanted to scold me. [My Money Coach] is the opposite! She genuinely cares about what I have to say, what is going on and remembers details! She is supportive of me and my dreams. I have a feeling if we met each other on the street we would be really great friends! She gets it!”

Altering your spending habits and trying to reach financial goals can be a challenge. Imagine having someone by your side who not only has the knowledge and experience to help you create a plan that works for you but who also makes it a positive growth experience. That is what a Money Coach can do for you.

If you need to get your financial house in order, call MSA today. Take it from Olivia, who says “My only regret is that I waited so long to contact MSA!”