Our Story So Far Part 1: Change is in the Air
This weekend, there was a warning from a new reader/commenter on my weekly grocery shopping post that with our recent economic downturn, if I didn’t change my lifestyle, I was in for a rude awakening. When my spouse read the comment, he turned to me and said “What they might not understand is that it is the numerous changes we have ALREADY made that is allowing us to deal with this downturn without worrying that our house or car is going to be taken from us.” And he is right. We are in a much better place to deal with the change in our financial circumstances today than we were 6 months ago, and although we have concerns, they are not over paying our bills and meeting our basic monthly expenses. It made me think about all the changes we have made since we started our serious debt reduction path, and how those changes have allowed us to be able to weather this storm. I thought it might be an interesting review for any new readers or even for the devoted follower of my story, and give a little more insight into where we came from and where we are headed, as well as what *does* worry me about our changed situation. I’ll admit I’ve been accused on this blog before of being *too* strict with spending, and now not strict enough. However, we as a couple feel we’re doing what works best for us and are on a positive path now after a long road of missteps, and the two part post might shed some light into why. On to the backstory.
Several years ago, my spouse and I came to the conclusion that if we continued to use our credit cards to bail us out of bad situations, we would never get anywhere. In November of 2003, we put the credit cards away and have not touched them since. And although that was a huge step, and forced us to truly start living within our means, it was not quite enough. Our debt slowly decreased, but we weren’t making any forward progress at all. We were not spending more than we earned, but we really weren’t spending less than we earned either, and we were rather haphazardly paying down debt with not a lot of results. It was a huge step in the right direction, but it was by no means enough.
In October of 2006, my daughter, our second child, was born. Our family of now 4 had long outgrown our small 3-room apartment, and we looked into renting a larger one. We discovered that renting a larger apartment (~1000 sq ft) would be more expensive than the monthly payment/taxes on buying a house. So we decided to buy a house, something we weren’t originally going to do until we had eliminated our credit card debt. In doing this, we realized we really needed to buckle down harder and pay down our debt faster so that we weren’t living on the edge of disaster. We started sending more money to our credit card every month, when we could, but it still wasn’t quite enough. Another step in the right direction though. We started snowflaking extra money as we came into it and we made more progress than we had been making, but it still seemed like we could do more.
In about May of 2007 I discovered the world of personal finance blogging. I read every debt reduction story I came across and learned about emergency funds and about budgeting. In June I started this blog (on a wordpress hosted site at first, then moved to this domain in August) to keep myself on track and motivated about getting out of debt. And now, it wasn’t just credit card debt. Our car loan, my student loan, and my spouse’s student loan all became fair game. I wanted to be free from every debt except my mortgage. (I’d love to be rid of the mortgage too, but since it would cost even more where we live to rent anything comparable - I’m okay with the mortgage for now as basically the cost of having housing.) We established a $1000 emergency fund (which we still have), moved our kids’ college savings to their own accounts (where they remain), and started seriously budgeting to find any money we could get our hands on to reduce our debt.
This has put us in a better position than we could have imagined to be able to deal with my sudden loss of my primary income. This evening I’ll post part 2 of our story: budgeting, adapting to a more consciously frugal lifestyle, and beyond, which will talk more about what specifically we changed from the point of creating a budget (really, the biggest turning point) to today, and where we hope to go from here. This wasn’t by ANY means a great thing (the loss of income) or something we wanted to happen, but it is by no means a disaster. Just a setback, which we will get through a little at a time.
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November 5th, 2007 at 6:29 am
I think you are being very, very disciplined in the spending department. You’re doing a great job.
November 5th, 2007 at 7:18 am
Your hubby is a smart dude!
I’ve been reading your blog for a while (unlike the idiot who left that comment) and I’m continually amazed at how frugal you guys are and how dedicated you are to the cause. Admittedly you don’t have much choice if you want to improve your finances but regardless I think you are doing all you can do.
Mike
November 5th, 2007 at 7:24 am
Better start looking for a nice, roomy cardboard box (with cardboard insulation to keep the kids warm), since apparently the world is coming to an end
November 5th, 2007 at 7:30 am
It’s nice to know more about where you’re coming from. And like Holly, I think you’re doing great!
November 5th, 2007 at 8:11 am
I have a hard time with those people that try to bring somebody down … I just don’t get that. I guess all we can do is control our reactions to them, since we obviously can’t control them. You and your hubby know how great your doing, and so do the rest of us POSITIVE people out here in the Blogosphere. Keep it up kiddo, your doing great!
November 5th, 2007 at 11:36 am
Your discipline has inspired me. Since I’ve started reading this blog, I’ve stopped treating my consulting work as “fun” money and started being serious about improving my situation. I’ve made more than a $4000 dent in my debt. More importantly, and along the lines of your husband’s thinking, I’ve had several emergencies (needing all new tires on the car after a blowout, breaking a tooth and needing a crown . . . ) that I was able to handle with grace and without a breakdown. Thank you, and keep typing!!
November 5th, 2007 at 12:14 pm
I think the problem with your site is this: you don’t have a link for your back story and how you got to where you are. Newbies( like me) don’t have time to go through all your posts. You really don’t explain things. Your posts are written for your followers and calling me an idiot because I question something is moot. I don’t understand. And if I am confused, so are others but they aren’t taking the time to tell you.
You stated you lost your job. But no where (and I looked) did you state it was only $200. That’s a different story.
Well, anyway, thanks for your current explanations. You should post them on your front welcome page, upper top quarter, with the statement: ‘Start Here’ or something like that.
Other questions I had but again, I do not have the time to go through all your posts are: you say you stopped using credit cards in 2003 but did you cancel the accounts, cut up the cards, what?
I’ve been debt free for 7 years, own my own home without a mortgage, pay cash for my cars and have absolutely no debt. It is NOT an easy path and extremely difficult to accomplish.
You should not consider student loans ‘bad debt’. They are an investment in yourselves. Your only concern should be your car loans and your credit card debt. I don’t know how much $$ you and your DH earn but according to Dave Ramsey, you can lower your standard of living to say $10,000 less( again, I don’t know your stats) and use that $10k a year to pay off your debt. You could whack out your car and cards in a year if that would be the case. But then again, I don’t know because again, I don’t have the time to go through your posts.
DH and I earn about $50K per year but we live as if we earn $40K. The $10K is put away in retirement funds. Trust me, it’s a struggle. But “I’d rather live like no other now, so that I can live like no other later”.
If I have done anything incorrectly, I apologize. It’s just that your site was too confusing and I truly did not understand. I RSS’d you and will come back often now that I know what’s going on.
November 5th, 2007 at 12:24 pm
Look how far you’ve come. I think that is the theme of this post. When change happens to us (and it always does) it’s good to look to see how far we’ve come. It’s easy to get bogged down in the day to day and continue to look at a situation as bleak. But you are continually working to improve yours and obviously it was time to step back and look at how far you’ve come.
You’ve come a long way!!!!!!!!!!!!!!!!!!!!!!!!!
November 5th, 2007 at 12:59 pm
The same guy left me a message about my groceries yesterday. I didn’t feel that I needed to dignify his comment with an answer. It’s all about personal preference, that’s why it’s called PERSONAL FINANCE, not EVERYONE FINANCE.
I say keep up the great work, I think you’re going a great job!
November 5th, 2007 at 1:03 pm
Thanks everyone for all the comments!
@Boomie - I never once called you an idiot. You comment didn’t question - it dictated. I disagreed with your mandate and your presented view of the world. that’s all ;). If you’d asked a question I would have done my very best to answer it.
I am intending on linking this and tonights post on my about page. I do backlink relevant posts in each post I write, and the post explaining how much of my contracting income we actually were using in our budget was backlinked in the post for reference. Repeating the whole story in every post would be completely redundant, and would take the whole post to accomplish. I see your point of having a centrally linked backstory, and shall do that on my about page over the next week or so as I collect the pieces.
To answer your question about what we did with the credit cards - we just stopped using them. We didn’t cut them up, we didn’t cancel them, we just stopped using them. That’s all. I didn’t even take them out of my wallet. It worked for us, and was all that was needed in that arena.
And my contracting income wasn’t $200, it varied from $100 to $1600 based on the month, but most of it has in recent times been dedicated to the debt snowballing. And most of the recent months have been slow months with not a lot coming in. Foreshadowing of the shutdown probably. Heh.
And I’ll stay concerned about my student loan debt and classify it as works for me. Every situation is different and in ours, they are a drain on our already tight finances that need to be eliminated and I do consider them debt that needs to be dealt with as soon as possible. I find the mortgage light years more acceptable than the student loans.
I don’t share exact income stats for privacy reasons. Someone could comb through posts and put together a pretty close picture but as you pointed out, people are not likely to do that.
I apologize for your confusion. I do not at ALL write “for my followers” exclusively, in fact many of the commenters on this very post are recent readers (and also some long time readers, as long as a blog in existence since June can have long time readers). I do my best to answer every question asked and clarify or further explain every point of confusion, and I spend a good deal of time before posting each post putting links to posts in my archives in each one that may clarify any points I have made in that post. Sometimes I miss something, or sometimes I think I’ve explained something completely and there are still questions. I make every effort to clarify and fix that when possible.
Have fun following the future of our family. It’ll be a bumpy ride, that I guarantee.
November 6th, 2007 at 1:36 pm
Interesting story. I am struggling with a similar problem right now. I’ve done a lot of work cutting my expenses, but I doubt I’ve gone far enough. I still buy a lot of ‘wants’ and I think I justify it by saying I can pay cash for it so it’s okay, but that is of course delaying my ultimate goal of being debt free.