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Maxed Out: On the Verge of Bankruptcy, Again


This episode of Maxed Out is about Karen, a single mom of a 9-year-old girl named Bailey, and she's in danger of having to declare bankruptcy for the second time. She says she'll feel like a loser if it happens again, and everything she cares about — her daughter, financial stability, and her home — is at risk. Karen has no savings for herself or for Bailey's future. Even though she's always short on rent and lives on cash advances, Karen can't help herself from her favorite four-letter word: sale. Find out if financial guru Allison Griffiths can stop Karen from spending her way in to a second bankruptcy when you read more.

Karen's paperwork is the messiest Allison has ever seen, which is why Karen was clueless of her average $945 shortfall every month. A big part of her problem is that she spends $1,552 in cash each month and doesn't know where her money is going, and she's wasting about $470 a month on bank fees alone. Karen consistently gives her ex about $100 on a monthly basis, even though she can barely pay her rent.

Allison puts Karen on a strict budget that leaves no room for shopping and allows for $25 in cash each week. She doubles her debt payments from $200 to $400 each month and will be able to pay it down in four years. Allison tells Karen to stop giving money to her ex and put it into an educational savings account for Bailey instead, and she suggests giving Bailey a $15 allowance each week. Bailey has to track the way she spends her allowance so that she doesn't make the same mistakes her mom did.

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