If you missed Part One of "Get Out of Debt" Click Here.
Wow, I never would have anticipated the stir my last post on this topic would have caused. Thank you for all the nice comments and those of you who shared your story with me. It became very obvious to me since last Wednesday that this topic (as I described earlier in a posting elsewhere) is like the proverbial elephant in the room. And here is the irony in that, because we don't talk about it is a large part of how we often get into financial trouble and then we don't want to talk about it because it is embarrasing. Am I right? Ever heard the term "vicious circle" before?
Okay, so last week I left off telling you that since June of last year we have embrassed the teachings of Dave Ramsey and since then have made a drastic turn around in our financial situation.
I can't stress enough to you all how we honestly thought we were well on our way to being able to retire in comfort someday. It was quiet insidious how our financial debacle snuck up on us.
I urge even those of you who feel your finances are fine to follow along in these next few steps to assess where you are. Hopefully, unlike us, you are right on track.
The next step was the most painful for me and most hurtful to my husband. I had to own up to every single penny I owed. Every penny! Now mind you, much of it he knew about like a student loan and a credit card, but he didn't really know the full picture. Why? Because I didn't want to tell him. I didn't want to be lectured to or treated like a child, so I suffered through my financial problems silently by myself.
I was making just enough money to pay minimums on everything. But minimums don't get rid of debt, they just build it a home to live in forever.
Once all of my personal debt was drug out, accounted for and added up, my debt, the person who is for the most part a stay-at-home-mom with relatively no income, had aquired almost 67% of our overall debt (not including our mortgage.)
Disclosing it was hard, but seeing the sock-in-the-gut my husband felt was the hardest part of all.
Weeks later while he was still mending from the blow, he shared with me it felt like I told him I had an affair. In his mind (and I completely get it) I was going behind his back and cheating on him not with another man but with money, threatening our families very future. Here was a man who since the day we were married worked hard and long hours to provide for his family, and the one person he trusted the most was being extremely irresponsible with it. I was failing as a wife and as a steward of our money.
At this point all I can say is that as a couple we went through something we had never experienced in ninteen years of marriage.
Good news is in time we healed it up and now, today, our marriage is even stronger than ever.
So what was next.
Well, once I had aired my dirty-debt laundry it was time for us to figure out down to the very last penny what we owed as a couple.
Out of respect for my husband I am not going to give you exact numbers so instead we will talk in percentages, but let's just say your jaw would drop.
Here is how the bottom line of our debt broke down:
Credt Card Debt (mine) - 38%
Personal Loan (ours) - 9%
Car (ours) - 24%
Student Loan (mine) - 29%
Grand Total (not including our mortgage) - we were in debt by 78% of our annual income
So to put that in perspective, take 78% of what your total family income is and see how much it is.
That's a lot isn't it?
Even though I knew how much I owed, I never in my wildest dreams would have imagined that as a couple we owed that much money. And this isn't including our mortage which for the time being we will keep out of the equation.
We were broke.
Yes, we lived in a nice home, drove a nice car, had money in our pockets and bank accounts, had money invested. But we were broke. Because if you took what we had minus what we owed we should have been living on the streets. This is the nasty part of the debt cycle that we as a nation subscribe to. We think that if we are paying our bills, making our monthly mortgage payments and our car payments that we are "successful." No, we are not. If you owe more than you have you are broke. And we were really, really broke.
Don't believe me? Do this exercise right now. First find one of your larger bills, like a credit card or car payment. Go ahead, I'll wait.
Now, on your last statement look at what you paid and how much of the debt it actually paid off. For example, if your car payment is $400 and it only takes $250 off you total balance, you are throwing away $250 every month. How much are you throwing away on just that one debt? Could you write a check to pay it off now?
Bet you could really use that $250, couldn't you? Just imagine going to an ATM and taking out $250 in cash every month and then driving down the street with your windows open and letting the cash fly away. Now imagine doing that with the money you put toward your credit card, or worse yet your mortgage.
Listen to our real life example.
We pay $1725 every month for our mortgage payment. Guess how much it takes off the principal?
Can you feel my stomach clinching everytime we make that payment.
Every month I open my car window and let $1566 fly away into oblivion.
Yes we have our home on a low interest rate but it is only 3 years old so right now we are paying mostly interest. Can you see why we want our mortgage gone?
So here is your assignment this week. I want you to do three things:
1. Gather up all your debt (all of it). Put it on paper and then own it. Accept it for what it is, no more pretending it is not that bad.
2. Next if you have a spouse I want you to share it with him or her. This is really hard I know. Believe me I know! But you can do it. Things will never get better if you don't. I thought I could handle it on my own and the truth was I couldn't. I needed my husbands financial and emotional support. While I haven't lied to you about how rough it was, I promise you our marriage today is stronger. We have become an amazing team in becoming debt free. My husband has forgiven me and he has accepted some of the reponsibility. He too admited that he suspected I had more debt but did the "don't ask, don't tell" thing. He put blinders on and for that he too owned some fault.
3. Lastly, make a list of every thing you owe as a couple/family. Everything! List it from the smallest debt to the largest, which is usally a mortgage.
I hope you all found this helpful and I look forward to hearing how your assignment went. You can do this, I know you can. Part-Three, next Wednesday.
Click Here to go to "Get Out of Debt - Part 3".
You deserve a debt frree life! Jamie