Today ... we're going to talk about my personal financial situation. And how we got to the point that we're at right now. ... and we're going to do that by going back to where it all began.
On the outside we always seemed like we had our finances together.
We could go out to eat, buy the things we wanted, enjoy our lives with the little things that made life fun.
My siblings had struggles with money, but not me. I’m the steady one. The focused one. The money savvy one. The one with the 5-year-mortgage payoff plan.
But that was only on the outside. On the inside, I was struggling too.
Getting Really Real About Our Situation - Part 1
My husband was always a saver. I’ve always been a spender. Put the two of us together, and unfortunately it isn’t my husband’s spendthrift ways that rubbed off on me.
Before we knew it we were in debt, though luckily for us it was a small amount of debt. For two people who had never experienced it before, however, the $2,000 on our maxed-out credit cards seemed like way too much.
We knew something had to give. So, we went for the quick fix option and got a loan from the bank.
Whew, crisis averted, right? Credit cards are paid off and we’re in the clear, right?
Unfortunately, that wasn’t the case.
Within just a couple months we had not only the $2,000 loan that we now had to pay off, but our credit cards were maxed again and we were now $4,000 in debt.
It was a huge wakeup call, or at least, it should have been.
That wakeup call lasted only a few years while we methodically paid off the debt we owed. But in 2017 we were back in the same position.
Only this time, we had bigger credit cards to manage. We still had those 2 $1,000 credit cards but we also had a new card, one that came with a much bigger balance. $4,000.
And now, when we maxed out our credit cards it meant $6,000 in debt, a full $4,000 more than the first time we had been horrified by our spending.
This time, we knew we needed to make some changes. This time, we needed to make sure it wasn’t going to happen again.
Now at the time we did have a savings. In fact, we had a pretty good savings. A savings that would have just about wiped out the debt we were under at nearly $6,000.
But we had an expense.
One that would be looming over us in a very short amount of time.
You see, in 2014, just a short time after our first financial trouble and a few years before the second, we bought a car.
The New Car
We needed a new car.
My 1994 Saturn, the first car I had ever owned, was 20 years old and needed replaced.
Just about anyone would have agreed with us.
But we didn’t buy just any old car.
We bought a brand new, 2015 Highlander. At a price tag of over $40,000 it cost almost as much as our house.
The fact that our savings account was a whopping $5,000 and we were going to put every penny of it down on a new car didn’t faze us a bit.
we put the money down and we drove off with a lease that would fully mature in 4 years, giving us the option to buy it out (which was our plan from the start) or turn it back in.
It seemed like a great idea at the time.
In 4 years we would have plenty of money to buy out our car. No problem.
Getting Really Real About Our Situation - Part 2
Jumping back to 2017 again, we had managed to save up a bit more money, with the intent of putting it into a down payment when we purchased the car.
The larger the down payment we could come up with the better off we would be, right?
Well, that was true, but we hadn’t counted on the credit card debt.
It was a choice, between cashing out our savings and once again having absolutely nothing (which could have meant trouble when our lease came due), or taking out a loan (of course we could have also worked at paying down the credit cards themselves without the loan but that wasn’t something we thought we could do).
Once again, we decided to go with the loan. But we weren’t going to fall into the old trap again so easily.
We took out a personal loan for the purpose of debt consolidation.
$6,000 that went directly to pay our credit cards.
And then we took a drastic step with our credit cards, a step we hadn’t taken the first time.
We locked them in the safe.
There would be no more spending on credit cards.
We would not fall into the same trap that we had several years before where we paid off our credit cards only to wind up in twice as much debt.
This time, we were taking steps to really make it stick.
That was where our budget was born.
Building a Budget - The First Time
That first budget was difficult.
For two people who had long since stopped paying attention to the money that we spent it was hard to be so focused.
It was hard to limit our spending to only the cash at hand.
And it was definitely hard to figure out how that money was going to last us an entire month.
We each had good jobs, making a good amount of money, but keeping that money … that was the hard part.
Still, we were determined, (my husband probably more so than me since I think the reality of our financial situation hit him harder than it did me) and we decided that this was going to work, no matter what we might need to sacrifice.
In 2019 we paid off our debt and started out 2020 with $0 in debt. (We still had our mortgage, but our credit cards were paid out in full.)
And then ... things changed ... I'm not just talking about the obvious (we all know what 2020 meant for the world and most people's financial situation, of course). But we made another big life decision in 2020. ... or maybe two ...
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