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.