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How Financial Wellness Programs Tackle Debt Relief

Consumer credit card debt has towered into a trillion-dollar industry for many years. It has trapped countless individuals and families in a debt cycle. But it doesn't have to be that way. Financial wellness programs like Your Money Line exist to guide your employees to better financial futures.

To understand, let's take a look at an example household:

The Wayne household is saddled with unsecured credit card debts, to the tune of  $12,000. Maddison and Scott Wayne live in a lovely single-family home they purchased four years ago. The arrival of their first child Dalton came two years after they bought their home. It has been a time of joy for the family. However, the increasing expenses just never seemed to stop. The Wayne’s feel as though they never catch a break financially. To name a few things, they have had to come up with the funds to cover everything from exorbitant childcare expenses, replacing hand-me-down and worn furniture and appliances, vehicle trouble, day-to-day expenses, and so on. They relied on their credit cards to help fund any gaps between their income and their costs.

When the expenses started to mount, they reasoned that because they each earned a decent and consistent income - the credit card purchases and bills were easy to manage. They felt like they were good consumers who always repaid their debts. They were also proud of their investments to beautify their home into a welcoming space. These home updates included growing nice grass and installing a beautiful landscape. The Wayne’s were sure that their young son Dalton would one day grow to appreciate all of their efforts as they never had such experiences growing up. Then one more thing came up; the seventeen-year-old furnacing system needed replacement. A repair would not work this time to fix the longstanding issues.

The Wayne’s were shocked to hear the average replacement costs of $10,000. Although they had a little money saved to help buffer their primary checking account, it was far too little to cover even a third of the expected costs. They could not take the risk of wiping out their small savings. They shopped around but found almost identical prices. They had a few other ideas to try; a personal loan from their credit union mixed with loans from other family members. Scott had a cousin he considered well off and who could be a lifeline in the family’s time of need. Scott had seen this family member come through for others as well. They reasoned that if they got family-friendly loans, high credit card interest charges could be avoided, creating breathing room for them.

Just as Scott and Maddison were about to take action, Scott’s job announced a massive layoff with one week's notice. This threw the Wayne’s into a panic! How would they manage their day-to-day expenses with one income, and how long would this unwelcomed season last? Additional loans and financing were just not something they could afford now, along with paying off their existing credit card debt. Scott no longer felt confident in approaching his family members for financial help.

Weeks went by, and Scott was still not fully employed. He managed to take a few odd jobs to bring in income, but this was nowhere comparable to his numbers before the layoff. The Wayne’s decided to put off paying a few of their credit cards to preserve what they had, and they still had the menacing furnace replacement on their plate. They felt ashamed to talk to family and friends and felt alone in their new reality.  While internet browsing for “ways to make ends meet,” the Wayne’s noticed ads announcing, “get debt relief now” and  “secrets to get out of debt.” They felt a wind of caution and hope.

Curiosity and desperation led them to contact one of these debt relief agencies, which informed them that they could help the Wayne’s take care of their past debts and get into a better place financially. The Wayne’s were nervous about what felt like new territory to them. As they looked over the contract the agent sent over to sign, worry and anxiety began to set in. They just weren’t sure that they were making the right choice. They decided to sleep on it and make a decision in the days ahead. Maddison was distracted by her finances while at work. She could not stop worrying about how their situation had spiraled so quickly.

She decided to check her online human resources portal for any mention of help or guidance. Maddison reasoned that she could not have been the first person to experience this wave of financial distress and started to look at her Human Resources (HR) benefits guide. To Maddison’s surprise, she had free and confidential access to a Financial Guide through an employee financial wellness program. Maddison reached out and scheduled an appointment to talk to someone about their situation. She invited Scott to the conversation, and they began to look at their options.

This was the first time that the Wayne’s felt they could speak openly about their finances with someone else who would not judge their decisions and actions.

Maddison and Scott worked with their Financial Guide in several ways:

  • Speak openly to a supportive voice in a difficult season.
  • They came up with a realistic budget to reflect their household situation even with Scott’s income fluctuations.
  • Identified their most vulnerable financial areas
  • Provided resources to help bridge some of their financial needs
  • Designed a process on how they would check in and work with their Financial Guide
  • Plan for surprise expenses
  • Create financial goals and plans 
  • Help measure their progress over time

As the Wayne’s continued to work with their Financial Guide, they learned about various options for getting out of debt and how each option worked. They learned about the differences between debt settlement plans, debt management plans, and do-it-yourself approaches. Their Financial Guide helped them understand and explore the pros and cons of each option for their unique situation. The Wayne’s felt they now had a plan to find financial stability and continue to build their lives despite the challenges. They felt encouraged by the future they could have.

Their Financial Guide helped them explore critical issues and questions to address with the agent at the debt relief agency, including:

  • Explaining the full scope of services offered
  • Understanding the fee structure, creditor relationships, and obligations when using debt relief plans
  • The risks associated with the debt relief options

When credit card balances reach overwhelming levels, consumers tend to seek out fixes like consolidation loans and debt relief. It may feel like a much-needed lifetime to those struggling financially because of choking credit card debt. However, caution must be exercised while pursuing debt relief as all debt relief measures are not created equally. Some can significantly prolong the time spent in debt, ruin credit histories and create barriers to future financial opportunities.

A proper Financial Guide is an ally and friendly thinking partner for help navigating the peculiar world of debt relief options. To learn more about financial wellness services, contact us today!