Friday, October 25, 2013

What does it take?

The recent post/discussion on Mysti and her blog/financial life really resonates with me. I think because I see myself (for many years) in her posts, in so many ways. We struggled to get a grip on finances and life for so long. It was stressful and draining.  We spent so many years trying to pay down debt and as soon as we'd make a little headway, something would happen to put us right back where we were or in reality - gradually getting higher and higher in debt. Over and over again. Most of it (except for the health problems) was our own doing. When you are stressed and just trying to keep yourself afloat you don't make very good decisions, which in turn lead to more stress and more bad decisions. Suddenly faced with a big bill you weren't expecting? Not prepared and no time or money to make arrangements, what do you do? Well, put in on a credit card, of course...or get another loan..and now you have another payment to add to your already over extended budget, which ends up being mostly interest and very little principal getting paid down. It's a viscous cycle.

I admire those people I have read about in blogs or financial success stories - those that were able to "wake up" and make the real sacrifices necessary to really get out of debt. That takes a lot of will power and for those that are married, it took a big commitment from BOTH parties to work together. The ones that succeeded in getting rid of high debt in a few years seem to have things in common. Most of them were willing to downsize their homes and lives! Not many of us are willing to do that. In my case, I would have done it in a heartbeat, if DH had been willing, but he wasn't on the same page as me. But, by the time we had to file bankruptcy that really wouldn't have helped us much in the end. The most we could have downsized our mortgage payment (or a rent payment) for a decent place to house a family of 4 in this same school neighborhood, would have saved us about $4-500 a month. With DH loosing his business (that is why we had to file) the $200,000+ of debt. we barely would have been able to make a dent. Just his equipment payments totaled over $5000 a month - there is no way the finance company would have accepted $500/mo payments from us.  But for some, downsizing might be the tough way they need to reduce their personal credit cards and debt.

Cars are such a necessary evil for most. For the most part DH and I are on the same page when it comes to cars - we both feel it very important to have a reliable car for commuting to work. Though the first year we had one car and we carpooled every day. In the early years he was caught up in having brand new cars or pick ups with high monthly payments. About the time I was staying home with child #2 we bought a Suburban brand new for like $30k (this was back in 1996. We paid it off in 4 years  and it had low miles (because I wasn't working and just used it for errands) and was in excellent condition (DH is a stickler about keeping cars nice). When I went back to work when child #2 started kindergarten (for 2 reasons - we weren't making it on DH's business income and he had also just started getting sick) I got a job 6 miles from home. DH was basically not working much and had to hire a person to replace what he had been doing before he got sick and then couldn't take a salary for himself anymore. We were basically living off my small salary. We finally made a good decision in our financial lives......we would sell the Suburban and I could drive our old 1986 car (our very first car purchase) back and forth to work. It was old and had a lot of miles on it, but I was only going 6 miles each way. We got about $15,000 for our 6 year old Suburban and paid down credit cards (business debts) with it. That was probably one of the smartest things we ever did. It kept us afloat with his struggling business and health for awhile longer and we reduced our debt by a nice chunk all at once.  Another thing DH did at that time downsize his company some and called all his credit card companies and did some tough negotiating with them. He told them he had $15,000 to pay between them and what would they be willing to take. It's not something I could have done and he got half of his debt written off. Then we made the big $15,000 payment. We were almost out of most of the debt and getting by on my small $35k a year salary.  Dh was down to one employee for a couple of years.  Then that guy quit and DH decided to just suck it up and try working again. He didn't work every day because of his health, but he did most days and felt he was doing ok. Then big mistake made - he decided to finance some new equipment. Big payment (over $5k/mo) but he was getting by and doing ok and all of a sudden the economy crashed and his little niche in the construction industry disappeared. No work at all coming in. by the first of 2009.......followed by a change in his condition - chronic daily severe pain, followed by a personal bankruptcy filed in 2010.

The old car was getting me back and forth to work for almost 2 years, but it wasn't the most reliable. One time my clutch broke right in front of a gas station. I was able to coast into the parking lot and called my FIL (DH was working) and he came and luckily across the street was a repair shop, so he pushed me over there with his bumper! Then a few months later something else broke, I can't remember what. I really did need something more reliable, especially as alot of time I had my kids in the car with me when running errands. DH's parents (knowing our credit was shot) offered us a loan to get a new car. Now why we still, at the time, thought we needed a brand new car is beyond me. DH had just never been the type to trust buying used. (the one time we did in the early 90's turned out to be the car from repair hell!). But, at least this time DH wasn't thinking we needed a $30k car. We bought a new car that cost $16,000 and paid his parents back every dime over the next 4 years.

By 2005 I had the job where I work now and was commuting 240 miles a week. I drove that car for 7 years and put over 120,000 miles on it.  W knew it was getting close to time that either we were going to have to start putting money into it on a regular basis, but we were also going through our bankruptcy and were just kind of waiting to make a decision (nothing had broke on it yet).  Then my mom offered to loan us money (knowing our credit was shot, again) to get me a new car. We didn't take her up on it right away, but then DH started looking at newer used cars and we both agreed this would be a smart move. We figured we could get at least $5k out of my car (the interior was still like new) and then only have to borrow $5k from mom - very doable for our budget. Because we weren't in a hurry to buy a car we had time to look and find a good deal. In fact, we found a great deal. A 2011 model that had been a rental car, with less than $5k miles on it. It had been damaged a bit (but repaired, we couldn't tell) on the front bumper and so apparently the rental car company put it out to auction when it was only 4 or 5 months old. We got it for $12,600. It was like brand new - still had the plastic over the mats and smelled like brand new....new it cost $25k. So we borrowed the money from my mom and bought it and then proceeded to put my old car up for sale. I think DH was asking too much, so we weren't having any luck, but he was being stubborn and wouldn't come down in price. In the meantime DS had gotten a job where he needed a car to travel around to different locations so we decided to keep the car and let him drive it. We felt with my salary and raise at the time we could afford to make payments to my mom on the full $12k borrowed and DS could pay for the insurance now. He put another 20k miles on it, but that car still held out good and no major repair problems. We did put new tires on it and fixed a turn signal problem. We just sold it for $4500, so pretty close to what Dh had wanted 2 years earlier.

Currently, with our only debt being the loan to my mom and our home we are able to plan ahead some now and that makes all the difference in the world. We don't have a credit card to fall back on and that makes all the difference too. We both know that we don't want to get caught up in that trap again. I do now have some store card and a gas credit card, but I pay them off each month, if I use them. We know we need to have some savings in case we need a new water heater or something like that. We just can't put it on a credit card...well, I guess we could put $300 (our limit) on our Lowe's card now if we needed a new one.....

For many that are in serious debt, I think it does take some form of extreme changes to get rid of the debt. Whether it's finding a cheaper place to live or in our case, bankruptcy. I recently was reading an article (don't recall where now) of a recently divorced mom of a teenager. They lived in high priced, high status, Orange County and she was struggling to make ends meet. She still had the big fancy house from the divorce, teenager wanted a car and how was she going to afford that, insurance and college in a year or two. Most of the replies to her said "move to something/somewhere you can afford". Her constant reply was that she couldn't - she didn't want son to have to change schools. My reply was "you really can't find something cheaper to rent (or buy) in your same neighborhood? There aren't any rentals in the same school district?" I just don't think she really wanted to make the changes. It sounds like she was more about keeping up status and appearances then getting her finances in order.

Another thing that many of those successful in getting out of debt seem to do is add a part time job to earn more money to pay towards the debt. I feel bad for Mysti and her DH that they seem to need his 2nd job job just to get by every month and not able to use it strictly to tackle debt. At least those that get that extra job to tackle debt know there is an end in sight to having to work extra and take time away from spouse/family. I feel like in Mysti's dh's case, he has no choice. One of the decisions I made that also really helped turn our situation around was making the decision to leave my job and get a better paying job. I had worked at the same place for 3 years (after going back to work from being a SAHM for 5 1/2 yrs) and while I was only making $39k/yr (when I left) I was 2 miles from home. My commute was literally 4 minutes. But, while it was an easy job as far as my skills go and close to home, I also knew deep down that I was capable of a job with more responsibility and therefore, pay. In 2005 I made the decision to change jobs and work where I am now. The "cons" of taking the position was 1) the commute 3 days a week. An hour (or sometimes more if bad traffic) each waay and 240 miles a week, compared to 20 miles a week and home in a few minutes and 2) I would have longer days and more time away from my kids (who were still young) with the added commute.  But, the pro's were that my starting salary would be $50k a year. Even with the extra cost in gas and wear/tear on my car, I would still be making a lot more. It was kind of hard to leave where I was comfortable, but I did and it has made the world of difference in our financial lives. I received decent steady raises (most times yearly). In 2007 and 2008 I received a bonus each year of 20% of my salary. After now 8 years of employment my salary is now up to $72,600 and currently this year we have received a bonus of 10% of salary. Through this job I was also able to acquire my part-time side job and from that I make another $9000 a year. While I don't know how long the company will keep using me (vs. hiring an in house accountant), so far it's been 3 years and I hope I get to do it awhile longer. One of my friends at the old job still works there...very small raises over the years and several years with no raises. If I had stayed there I'd probably be making half of what I make a year right now.

While we are out of consumer debt and have stayed out of debt the past 3 years, getting a good savings account built up is still a struggle, and partly why I still blog. I try to be as frugal as possible in order to work toward growing the savings and retirement accounts. I still need to conquer saving money!


18 comments:

  1. What a nice posting. I have to day that while every one's situation is different, and unique, we can all offer support and encouraging words. Folks have to do what's "best for them" and it may not be what others would decide. I really enjoyed this posting. Thanks for sharing.

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    1. Debbie - thanks for the comment! I will check out your blog :-) I totally agree and like one commenter made on my earlier post - we are only reading about blogs - not living/seeing their day to day lives. I try not to be too judgemental as I know everyone has a different situation and way to handle things, just as I do.

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  2. Great post, as always. My take away from the comments on Mysti's blog was that if there is nothing else you are able or willing to cut to get out of debt, maybe it's time to table the expectation or goal of eliminating debt for the time being and make your peace with it. Everyone has different ideas and priorities about getting their financial house in order, and sometimes you have to just accept that it's not going to happen this year or anytime in the foreseeable future. DH and I took 6+ years to climb out of the hole and swore we would never fall back into it. And we haven't. But during those 6+ years, we were frequently depressed and angry about some of the sacrifices we had to make and dreams we had to abandon because of our poor choices. We were bored, we were stressed, and I had an anxiety attack every time my car made a strange sound. There were also a lot of good times and good days at the park with my young kids, weekly trips to the library, and free concerts and community events. We made a lot of mistakes while trying to pay off our debt, but we did our best and stuck with it, even when it seemed like we'd never be done.

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    1. True. All the good intentions and goal setting in the world won't change a thing, will they? And you mentioned "priorities. " We have to be honest with ourselves about priorities first. Denial is a miserable state, I would imagine. It is, though, very painful to watch people act as their own worst enemy of their financial stability. Best wishes to you! Enjoy your weekend!

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    2. 61scribbles - I really agree with you. At some point a person just has to accept what situation they are in, if they are not willing to change it. My half-sister is a good example of this. She is in a relationship with a terrible boyfriend and complains about it every single day.in emails to me. I have tried to offer support and advice, but finally I just said, he's not going to change and if you want to stay with him you are going to have to accept that and be content with it....kind of like I have with my DH. Sure, I have days when he just gets too much, but I've accepted it and don't complain about it on a daily basis. Same goes for finances - like you said make peace with it and do your best!

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  3. In 2008-2009 I paid off 18k in debt making 30k. I lived in a studio apartment and "Christmas was a craft". I had 4k left to pay off and I broke my ankle. In 2010 I injured my back and it ultimately required surgery. Been struggling since then as I have gone into debt another 13k.
    2013 was supposed to be the year to pay it off -- not so much. I had a plan, but made the difficult choice to have eyesight saving surgery in a FDA approved study that insurance will not cover. I am unwilling to pass up the chance to stop an inherited, degenerative eye disease when I don't know if/when the FDA will approve the procedure before I would lose my sight.. So my debt went up $2250 yesterday as I had the first eye done. In 3-6 months it will go up another $2250 but my eyesight it worth it.
    I think the hardest part for me as a single person is being accountable to myself and sticking to the plan.

    Wish Mysti haden't gone private -- I will miss reading her blog

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    1. Jean - so sorry to hear of all your health troubles. I know, the costs can surely add up. We have dealt with that with my DH. Some years we just have a few doctor appts to deal with, other years it just piles on. If you are single and supporting yourself you have to take care of your health first, so the eyesight surgery is definitely worth that! Hope it's all going well for you!

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    2. You do what you have to, especially when you're on your own and taking care of yourself. Still, imagine how many more opportunities you will have with stable and hopefully improved eyesight! I had laser surgery back in 1998 and while my vision is not perfect (I wear glasses for driving and for seeing at night), it is so much improved and has dramatically changed the quality of my life. I, too, hope you're doing well after your procedure.

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    3. Thanks for the encouragement! Procedure done on one eye Thursday (the one I am legally blind in without glasses)-- saw Dr yesterday for a checkup and he said it looked as expected and was already starting to heal -- no pain -- just need to keep the eye drops and sunglasses handy! Also was able to read a couple more letters on chart than before -- not sure if that will continue as eye heals, but it was good start.

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  4. Was all of your debt written off in bankruptcy or did you have to pay it back over time ? We had to file as well but are having to pay 1500 a month towards the debt-

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    1. Jett - we were a Ch 7 full bankruptcy. All debt was written off, other than one small personal credit card, it was all business debt because my dh wasn't incorporated, so it was all on us personally (lesson learned!)

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    2. I wish a chapter 7could have worked for us. My husbands company depended on construction also, then the doctor I had worked for for 10 years let me go a week after he found out I had been diagnosed with breast cancer ( am doing great now though!). When we filed the court let us have money to pay our mortgage, car, gas and food. The rest of our income goes back to them. No money for home repairs, medical costs insurance doesn't cover, travel for deaths in the family, car repairs,savings etc. Hard to do but so far we have done it.

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    3. Wow, I can't imagine how hard that must be. Our attorney just totally said do not do a Ch 13, since we were eligible for Ch 7. She said have it written off and be done with it and restart your lives - don't spend another 5 years not having money for other stuff that comes up - like you say home repairs, etc. How much longer do you have to pay? A doctor lets you go when you have cancer?! Wow, that is terrible. I'm glad you are doing well now!

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    1. When we initially sought a lawyer's advice about filing (a piece of equipment had gone back to the lender) DH was still working and we would have qualified for a 13 and at the time that's what we (thought) we wanted to do. Attorney told us just to wait and file once we got served papers to pay the deficiency on the equipment. That literally took a year! By then the business had totally crashed and we had recently let all the equip go back. So, attorney said for sure do a Ch 7. I can't imagine trying to pay for stuff coming up. That was one of my dh's questions to lawyer, what if that happens an she said that is the reason don't do a 13, if you don't have to. She said statistically most fail and are back at some point before the 5 years is up filing a ch7.

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  6. Wow... great post! It is hard sometimes, many times... my husband makes mid $40'K a year to support the 6 of us. I have my priorities in line though... putting a safe roof over my kids heads, paying all the bills on time, and living *below* our means. I save each week right off the top too...I know Mysti gets a lot of flack, and I can see why sometimes. I wouldn't make the same choices she does, but in the end, we all have to be able to sleep at night, praying that we're truly doing the best we can.

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  7. Carla,
    I hope that we as a family are doing the best we can, given any situation. I have to say, that for a lot of years, when the kids were young, we struggled hard with various things, budgets, overdrafts, unemployment, alcoholism (my husband, sober now since 2004), and even going to the food bank. I learned the hard way how to manage my money, budgeting, and our needs vs wants. I remember opening the fridge and having no milk for my three toddlers and the same day, the cable company came to the door to get their box back. We lost the phone too at the same time. Life was hard then, and it continues to be hard at times. I'm thankful that I had enough energy to make it through the harder times. I have a full time job, benefits, phone, cable, and my kids are all teenagers (college, junior, freshman), and no worse for the wear. Do I want to repeat those years???? No, but if I had to, I know that we would manage through it.

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  8. I read and commented on the OC mom! I wish I knew where that link is!! Filing for BK was the hardest thing to do, but like you there was no way I could climb out alone , ever!! They say if you can't snowball your way out of it in five years -file! You are doing great and should be proud that you did the right thing for your family.

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