A Reader’s Story: Debt, Teamwork, and Determination

by Kevin on June 2, 2008

One of my readers sent in a pretty lengthy article describing his experience with debt. I really enjoyed it so I thought, with his permission, I would share it with everyone. I’ve broken it up into sections to add my comments. I hope you find his story inspiring.

I am sure my story is like a lot of folks. During college, I racked up a lot of debt. By the time I graduated, my wife and I were in about $40 thousand. Like many people, I bought a few toys here and there, but even still I can’t associate every dollar of debt to a specific thing that I purchased which is the thing about debt. IT JUST SNEAKS UP ON YOU! Another thing I noticed about debt is that all the new items that I purchased began to wear out or become outdated with newer versions. However, I couldn’t replace them because I was still paying for them.
My wife and I were really stressed out about our situation. We were living beyond our means and going negative every month. We had a big mortgage and no emergency fund. So, when an emergency occurred as they inevitably will, we simply spiraled further into debt. I can still remember my wife literally crying when it came time for her to do the bills. Yes, you read that right! This is one of my regrets in life. I was lazy and let my wife assume responsibility for our finances which we both should have been doing together. Here is a life lesson, free of charge. I can’t explain how important the next couple of sentences are. If you are married, you should join your money in the same account and pay the bills TOGETHER. That way you both will always know what is coming in and what is going out. We started to do this, and it eventually turned into our budget.

He makes some excellent points. It seemed so easy to get into debt, and it kind of felt like a sneak attack. On top of that, a large portion of the debt was for stuff that wore out over time. We’ve talked about this: depreciating assets and credit don’t mix. Living beyond your means is a recipe for failure. You need a plan. You need to be cash-flow positive every month. You need an emergency fund.

Another huge tip listed here is to work together as a team if you are married. One spender and one saver can live in the same household, but compromise is key. And the saver should probably win more than the spender!

A budget was extremely important to our success. This is how my wife and I were able to see exactly where our money was going. We were able to cut costs this way and save a $1,500 emergency fund. We were so committed to a better future, we got crazy with it! We sold our home and moved from a large city back to our home town, and lived in a one bedroom apartment. We allowed ourselves $20 a week for spending money. I taught my wife how to cut my hair which saves us over $300 a year. I’m going to start laughing if I see a lot of husbands with bad hair cuts after reading this! We lived in an area with great cell phone service which means no need for a home phone. I shopped car insurance. I’m sure you’re getting the point by now. In addition, I wanted to increase my income so I took on a second job. This was really hard on me, because I was working 16 hour days! Like I said, we got CRAZY with it.

Budgeting is absolutely essential to getting back on the right track, to fight off that debt.

Hey — my wife cuts my hair, too! At $15 per cut and 17 cuts per year (roughly every three weeks), that’s $255/year at the very minimum.

Once we began to really focus on where our money was going, we began to find money to start chipping away at the debt. We planned our attack. First, we wanted to consolidate our high interest credit cards. I’m not recommending this path to everyone, but this is what we did. My wife and I had good credit so we were able to consolidate our high interest cards onto a no interest card. The new credit card was interest free for one year assuming all the terms were upheld. We were so concerned every month about making that payment in order to avoid paying the default rate and back interest. Sometimes we even made double payments on it just to make sure we didn’t miss a payment. People, that was stressful. After the credit cards were paid, we were really on fire. The momentum picked up and we started in on the next part of our debt. We had previously borrowed money from my wife’s parents but were not able to pay them back due to our “money problems”. It is never a good feeling to owe money to loved ones for an extended period of time. I want to thank them for being so patient with us, because it took so long to start paying them back. With focus, determination, and of course hard work, we paid them back faster than I ever thought possible. It surprised us both. The last portion of our debt we tackled was my wife’s car.

The 0% credit offers are risky, but if you stick to it it can definitely pay off in spades. Imagine going from 20% interest rates to 0% — you could really take a chunk out of the principle if you made consistent extra payments.

During this entire process we continuously fine tuned our budget and were always looking for ways to save money. We weren’t always moving forward either. We had a few setbacks that required us to dip into our emergency fund but we didn’t let that stop us. Mentally, when things were hard, I would sometimes question whether I was doing the right thing by being so fanatical about the budget and the debt. However with each portion of debt that was paid off, I was seeing the results which kept me going. You have to be persistent and be very dedicated with your goals, because I am not going to lie. It was very, very, very hard but so worth it in the end! Some of the things that kept us motivated included reading books on finance and debt freedom. Also, through this process my wife and I realized how great of a team we really are. Instead of fighting over why we didn’t have any money, we pulled together to find ways to save. We had more to talk about. We shared the feeling of success for a job well done at each small victory. They say the mismanagement of money can tear a marriage apart. Boy, don’t I know that. What I didn’t know was that forming an alliance and defeating the debt together could build that same marriage ten times stronger.

I think this is what Dave Ramsey is talking about when he talks about the psychology of paying off debt. Those small victories start to add up and give you momentum to pay off that next debt.

I also knew I had to plan for the day that I didn’t have any debt. That day is here and I am currently in the process of building a larger emergency fund up to $10 thousand. After that, our next step will be to save for a house.

My experience with debt has been an enlightening journey. However, I am now troubled by how many people this epidemic affects. This burden can ruin marriages and add so much unnecessary stress in one’s life. Alarming levels of debt seem to be an acceptable part of our society. When you stop and look at the destruction debt leaves in its wake, I dare say that it is not acceptable. My hope is that this topic will continue to gain attention and spotlight until there is a new social norm. Just as once upon a time it was perfectly acceptable in society for people to smoke on airplanes and in offices, today smoking has been all but eliminated in many buildings and establishments. With the focused attention on this epidemic, I hope that we will begin to teach ourselves and our children about money. Learning about the opportunity cost of taking on consumer debt, because we really are trading our well being for things. And finally, I hope that my journey can spark someone to act today to begin this journey for themselves.

So there you have it!

What do you think? Is your story similar or drastically different? Did you learn anything from this reader?

I hope this article shows just one person out there that might be thousands of dollars in debt that you can get yourself out. It takes time, hard work, and determination… but you can do it. This reader did.

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