Ever wonder how some people deep in credit card debt manage to come out on top financially? This is the hypothetical but realistic story of Emily, one person who dug herself out of $10,000 in credit card debt in just a few years. Never a big spender, Emily was shocked when she noticed that her two credit cards had a combined balance of $10,000. What happened?

• Emily took a lower-paying job when the economy went bust at the turn of

  the millennium.

• Hoping her lower income would be temporary, Emily didn't sell her house to

  get one with a lower mortgage. She didn't sell her expensive car to buy a

  cheaper one, since she would get much less than she had paid for it. In

  reality, the thought of driving a less-nice car was painful

• Emily paid only the minimum monthly credit card payment most months. She

  was paying interest, and interest on interest, buying the privilege of having

  the credit card company hold onto her debt another month.

• When one of Emily's credit card balances got within a few hundred dollars

  of the credit limit, her interest rate on the card skyrocketed from 17 to 27%

  .

Emily considered taking out a loan to pay off her credit card debt. She owned a condominium whose property values had increased 40% since she bought it, so she could easily get a good low-interest second mortgage.

But a loan scared Emily: it would mean admitting her debt would not go away soon. Besides, Emily wanted to get rid of her debt, not trade (her unsecured debt for secured debt). Plus, she knew that if she ever couldn't pay the second mortgage, she would lose her house, while failing to pay credit card bills would just mean a ruined credit rating.

For about a year, Emily argued with herself over whether to take out a loan to pay off her credit card. Then catastrophe hit: her beautiful car was totaled in an accident. While shopping for a new car with friends, Emily finally had to admit to herself that buying another car like the one she had had would be financial suicide.

Finding an Answer

Emily cried and cried as soon as she got home from the car dealership that day. It wasn't just that she would have to admit that she wasn't someone who could afford the car she had been driving. When Emily's parents were her age, they had already bought a five-bedroom house; Emily's one-bedroom condominium was already a stretch. If she ever got married to a man with the same financial picture as she had, she wasn't sure they'd be able to afford children. Growing up, her parents had always told her she'd do better than they had. What went wrong?

Emily did not have to think hard about what went wrong. Her father had been able to pay for college with what he earned at summer jobs, and then got a manager-level job straight out of school. Between college and graduate school, Emily had accumulated $70,000 in student debt that she was still slowly paying off. Houses in Emily's town, even adjusting for inflation, cost several times what they did when Emily's parents bought one. Cars had leaped in price about as much. The only thing that hadn't gone up was income. Unable to cope with having less than her parents had, Emily had used her credit cards.

Solving the Problem

Emily knew that since her lack of financial skills had dug her into her rut, she would need outside help to dig herself back out. She had heard about credit counseling services that took large chunks of the payments you made against your debt, so she was careful. She found a counseling agency that was a member of the Better Business Bureau, American Association of Debt Management Organizations and whose credit counselors are certified through the National Institute for Financial Counseling Education. Doing a quick search on the web, Emily verified that these were organizations with real standards and not just empty names.

Here's what Emily got from the credit counseling service:

• Relief. Emily was relieved to learn that her $10,000 credit card debt is

  in fact about average for Americans. The credit counseling agency showed her

  that even if she didn't have the advantages she hada decent job and home

  equityshe would be able to rid herself of her debt if she just faced up to

  it.

• Surprise. The agency urged her to put money away for a rainy day fund,

  even as her credit card interest mounted. But once she started saving, she

  felt amazing. She realized she had been under enormous stress from always

  being one paycheck away from poverty.

• Understanding. The counselor understood Emily's reluctance to take out a

  loan, and helped her create a budget that would let her pay off her

  consolidated debt within a few years. Besides the car, all Emily had to give

  up were smaller expenses.

• Clarity. With her finances planned, Emily could think much more clearly

  about her financial situation. She figured out how much more money she would

  have to make to have her desired lifestyle, and aggressively pursued a new

  job. Starting fresh with her new coworkers, Emily focused on meeting people

  who were less materialisticand even met her fianc.