Editor's note: Join columnist MP Dunleavey and a group of women as they seek to strip away the myths around money, liberate themselves from debt and find financial sanity. Follow the continuing quest of the Women in Red every other Wednesday in Dunleavey's column on MSN Money.
Sherry Matulock still remembers the day she paid off the last of her credit cards, about four years ago. "I was so proud of myself," she says.
But that debt-free feeling didn't last.
A year later, Matulock, 33, the director of recreation for an assisted-living facility on Long Island, slipped back into the hole. "My father was sick; there was a lot going on," she recalls. And the emotional spending began.
Before she could say "MasterCard," Matulock owed $5,000, then $10,000 and ultimately $15,000 on her credit cards. That, on top of her student loan, car loan and a small personal loan, spelled grim financial news. By early 2007, Matulock's debt totaled nearly $60,000.
But she fought back and beat the debt demon, with the undying support of the Women in Red and an unexpected assist from financial expert Jean Chatzky.
Everyone who is in debt wonders what it takes to get out of it. Matulock's story reveals one woman's winning formula, composed of just a few simple ingredients.
Here's how she did it.
Hitting bottom is the first stepAs her emotional spending spiraled out of control, Matulock knew she had a problem brewing.
"Almost every morning before work, I'd be on the computer ordering things from The Gap and Old Navy. The packages would show up, and my boyfriend was like, 'What's all this stuff?' And I'd say, 'Don't worry about it!'"
Even when she was paying $400 a month to one of her cards -- and charging another $500 -- "they were just numbers. None of it felt real to me. I knew I was going through a hard time, but I couldn't admit it."
Matulock was forced to face financial reality when she opened one of her credit card statements and the minimum payment was $1,000. Not only had she gone over the limit, incurring fees and penalties, but her interest rate had skyrocketed to 28%.
She panicked. "That was my slap in the face," Matulock says.
Matulock was desperate to get her life and money back under control. The same week, she saw a story about an online community of women digging their way out of debt together. "I said, 'Wow, do I need that!'"
Rescued by some Women in RedMatulock did hardly any work that day.
"I just sat at my desk, reading through the entire thread about the Women in Red Racers."The Racers are a group within the Women in Red message board. They were founded by Becky Purvis, a teacher in North Carolina, and others. The Racers are the lifeblood of the WIR, with their determined focus on "racing" to pay back debt. (So far, they've paid off $4 million.)
Matulock joined the Racers on the spot. The Racers' method is deceptively simple:
- Calculate how much you owe, down to the penny.
- Share the debts you plan to pay off with the other members of the WIR on the message board. (People use pseudonymous screen names to protect their privacy.)
- Keep an account, on the board, of how much you pay down each month. Acknowledge any setbacks (they happen).
- Ask for advice when you need it, give it when it's asked for and enjoy knowing that you're all in it together.
- This is a race in which everybody gets to be a winner.
Within a year of joining the Racers, Matulock had paid off $15,350.20 of her credit card debt.
It wasn't that she found extra money for card payments or got a whopping raise or even a second job. Matulock made astonishing progress mainly by following the first and most basic step: Quit using plastic.
And, she discovered, there truly is strength in numbers.
"I was focused, I was organized, and I knew I wasn't alone," she says. "Being part of the Women in Red meant so much more than I realized."