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Charles Phelan

How did you acquire $560,000 in debt? What did that debt consist of?

The $63,000 was all credit card debt. We also had a mortgage totaling nearly $500,000. The short version is I bought an expensive home just as my business income was about to drop off a cliff. Why did I take the plunge and buy a house in 2010 when the real estate crisis was still going strong? For starters, we were beyond tired with the rental home we had been living in since 2001.

We had been working hard all our lives, and figured in our 50’s it was time to acquire a nice home for the long term. I’m a self-employed debt consultant, with a unique niche in coaching consumers and small business owners on how to settle their debts without paying big fees to get the job done. Business was very good during the peak years of the Great Recession, and it seemed like there was no end in sight to the tidal wave of distressed consumers seeking assistance with their debt problems.

The entire debt relief industry hit the skids in late 2010, right when I was buying my dream home, although I certainly didn’t see it clearly enough to know what was happening at the time. There were a series of factors and changes that turned into a perfect storm, resulting in dropping income numbers month after month, and a shift from profit to steady losses. One moment I had a prime link to my website from a highly ranked article page on a major financial news site, in place for years and generating tons of highly qualified traffic. Then, in a flash the article was gone, scrubbed from the financial site and replaced with a newer article that didn’t feature my link. Result? A 30-40% drop in traffic overnight. Trouble.

What did it feel like to have that much debt?

For the year or so prior to making the decision to sell our home, the juggling act grew to absurd proportions. I was carrying balances on 17 different credit cards, structured in a way to minimize interest expenses. This doesn’t count regular bills like the mortgage, utilities, cable, telephone, car, home and auto maintenance, or medical expenses.

Needless to say, it was intensely stressful to keep so many plates spinning in the air at the same time. I had to keep spreadsheets so I would never miss a minimum payment. I couldn’t skip a beat or the whole row of plates would come crashing down.

How long did it take you to pay it all off?

Once we made the decision to sell our dream home, we had everything paid off within a month.

What resources did you use to help you through this process?

The biggest “resource” that I used was that I checked my emotions outside the door and did the math dispassionately.

Did you face any challenges along the way?

In my case, getting out of the water meant cashing in the equity in my property. Yet I could not bring myself to think in terms of selling my dream home. My pride and ego were in the way, big time. I had made the exact same mistake I warn my clients against. Talk about being the plumber with the leaky faucet at home! I allowed emotions and sentiment to cloud my business judgment.

After running losses for two consecutive years, I became “house poor” by 2013, yet I still failed to take action. In fact, I didn’t actually make the decision to sell our home until April 2014, a year longer than I should have waited. That’s because my emotions kept getting in the way. My stubborn refusal to consider selling this property was rooted in pride. And when I looked deeper, I realized that it was also insecurity about the future.

Making the decision to sell our beautiful dream home was one of the toughest financial calls I’ve ever had to make. But I kept focusing on the relentless mathematical reality of my situation, and I let the numbers lead me to the solution.

What were you doing for a living while you were paying off the debt?

I was/am a self-employed debt consultant.

How did it feel once you paid it all off?

Let me tell you: It feels amazing to go from owing almost $500k on a mortgage, plus $63k of credit card debt, to having no mortgage and no credit card debt less than one month later.

After getting past the move itself, I had expected to feel something of a letdown. I figured I’d feel a sense of loss at having to give up the house. Instead, I felt liberated. The mortgage debt was paid off and the credit card debt was GONE! I had 17 fewer bills each month to worry about. No more worrying about covering the next property tax installment. And I had found a nice place to live in the mountains where I had always wanted to be. Not so bad.

What practical tips do you have for people looking to pay off their debt?

1. Nothing lasts forever, including income sources. Give some consideration to how you would handle a gap in income of 3 months, 6 months, and 12 months.

2. Home ownership is not always better than renting. It may or may not be better, depending on your financial situation. Run your figures to see what your home is actually costing you year-over-year, then compare to renting.

3. Evaluate your financial affairs from the perspective that your assets should be working for you (that is, to generate income and support), rather than you always working to support your assets.

In the end, it comes down to honesty. When you are facing a tough financial decision, the path to a solution begins with an honest look at your situation. You have to face reality, and that is simply not possible until you strip away all forms of emotional pretense and denial.

To learn more about Charles and his path to debt freedom, you can find him – and his debt-slaying resources – at Zip Debt.

Note: This is part of a series called “Debt Success Stories” which features people who were able to pay off a significant amount of debt. If you have a Debt Success Story I would love to hear about it. Please visit the contact page to let me know the details.