I’ve Paid For This Twice Already…

Archive for the ‘Why Debt Stinks’ Category

Things are good for us right now, there is no denying that.  We’ve paid off an enormous amount of debt in the past year, I’ve been able to turn some of my hobbies and talents into viable sources of income, and our family is in a much less precarious position than it was when I started this blog a year ago June.

But as we come to a final decision of disability insurance, and I look at the very real possibility of an electrical upgrade sooner rather than later, and also start making calls for someone to come look at the porch post we discovered had a gutter leaking onto it and has begun to rot, I again, in my head, bemoan the fact that we still have debt hanging over our head that makes every monetary decision we make just a little more complicated.  It isn’t that we haven’t learned from our past mistakes - we definitely have.  I actually understand now the importance of saving money just because versus the idea of always having a plan for the money.   I know that we need to hope for the best but prepare for the worst.  But the reality of our remaining debt (including our mortgage, which I don’t even touch on here) makes our financial position just a little more precarious than we’d like, and also slows down our preparation for what might be.  It just takes a lot longer to fix the situation than it took to learn the lesson.

Things have definitely improved for us.  I don’t get a sick feeling immediately in the pit of my stomach when I discover something we’ll need to fix or spend money on.  Well, sometimes I still do, but it isn’t my inevitable immediate reaction.  But the reality is, it could happen all over again. My spouse could lose his job, we have little resources right now to combat that long term, we might have to turn to credit cards, and we could be back in the same place we were 4 years ago.  At some point, we’ll be more prepared, but we have to finish fixing the mess we made first.

This process takes time. There isn’t an easy solution.  And hence, debt stinks. 

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Another side effect of being in considerable debt is that you may have a lack of available funds to make the frugal choice vs the cheap choice. I talk a lot about being frugal vs being cheap, and how I work out the difference for myself. A core tenet of frugality, to me, is making the most cost effective choice for the long term, even if it isn’t the least expensive option in the short term. Being cheap is simply choosing the least expensive option no matter what. It isn’t always clear what the best long term option is, but making the effort to try and discern it and using your resources wisely to try and make that frugal choice is important.

This was brought into focus for me with our recent furnace purchase. We were originally told that we could fix what was wrong with the furnace for less than what a new furnace would cost. But the problem with that choice was that the age of our furnace dictated that we would simply being doing that as a stop-gap measure, and that the furnace itself could die at any time, effectively wasting the money we put into fixing it (which would have been between $600 and $1000). Clearly, replacing the entire unit was a better way.

But that is where debt comes in to bite you. Fortunately for us, the timing of the furnace event meant that we could come up with the money to replace the furnace in cash and not have to worry about adding to our debt at this time or getting behind on our other debt payments. But that certainly was not necessarily the case. If we didn’t have the money to replace the furnace, we may have been forced to choose to repair the existing until instead and hope that it lasted long enough for us to be able to afford to replace it.  Because so much of our income is directed towards paying off things purchased or done in the past, it limits our choices for the future, and sometimes can but that smart choice out of reach.

Debt.  The double-edged sword.  Can’t just make it disappear, and can’t stop it from affecting the future while it reminds you of the past.

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Reflecting on the events of the past week, I’ve been thinking about the fact that every time it seems we get into a good rhythm of paying off debt, and are poised to make significant debt repayment progress, something seems to get in the way. That is not at all to say that we don’t make progress despite that, but the fact remains that we seem to get sidetracked right on the verge of significant progress. When we were on the brink of paying off our credit card debt, my car’s engine completely died and had to be replaced, which actually put us into even more debt for a very short time and delayed the credit card payoff by over a month. And now, when we were poised to hit our debt with a extra paycheck/stimulus check double whammy, the furnace decided it’d rather have that money.

Which leads me to my latest observation on why debt stinks. Life doesn’t just stop or go on hold and wait for you to get out of debt before throwing any curveballs your way. When you’re in debt, and working diligently on getting out, your “extra” money is earmarked towards that debt, so when something happens that will set you back financially, you either may not be prepared for it, or it may set back those debt elimination plans significantly.

The other side of that, is when these big things happen, I find myself thinking about how much closer we’d be to being out of debt if only we had that money we spent on unexpected expenses available for debt reduction. All told, including the upcoming furnace replacement, since the start of this blog we will have spent probably close to if not over $10,000 on unexpected repairs and other expenses of that nature. That total equals almost half of our remaining debt. Without those setbacks, our debt might be approaching four figures right now. However, our increased financial awareness and responsibility has left us able to handle these setbacks without completely going under, which is more than I could have imagined a year ago. But still, if we didn’t have significant debt we’d be in a better place to prepare for life’s inevitable surprises.

Life doesn’t just stop. It goes on, things happen, and you have to roll with it. And when you’re in debt, you have to decide between how much you want to devote to getting out of debt versus how prepared you want to be for unexpected expenses. And whatever you choose as that balance point, somewhere you’re taking a risk. We’ve consistently chosen to risk more by saving less versus holding back the debt repayment. So far, we’ve been able to manage that, but for how much longer? It might be time to reconsider that strategy before timing doesn’t work out on our side.

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I’m starting a new randomly-appearing series of posts about reasons I hate debt, debt drives me crazy, or basically, why debt stinks. This doesn’t apply to every kind of debt, or every person’s own situation. These are reasons why the debt in my life, in a word, stinks. You might see your own situation in a few of them, or at least, be entertained.

I remember when receiving money I wasn’t expecting used to excite me. It always seemed like there were limitless possibilities for what I could do with the windfall, no matter how large or small. It didn’t matter if I ultimately was “responsible” with the money and saved it, or I spent it on something frivolous, the point was, I felt I had a world of choices open to me.

Now, when a windfall comes into our lives, it already has an assignment. Beat down the debt. The debt needs to go. All dollars diverted to this purpose. Which is not to say that the idea of extra money isn’t exciting, or that I don’t appreciate it. And watching the debt total go steadily down has its own level of excitement and reward. But it isn’t the same. The wonder is gone. The world of possibilities have closed themselves to a single point. This came into sharp focus for me when, last December, my spouse was given a small portion of money that my father-in-law inherited from my spouse’s uncle. $1000 is a lot of money for us to receive at one time, no strings attached. For a moment a number of things rushed into my head, but the realization that we needed to put it towards our credit card debt really immediately squashed all those other ideas. The progress that we made on the credit card with that windfall was satisfying and I am happy with our decision, but it takes a little bit of the unadulterated pleasure out of the whole “found money” thing.

I know that there will be people who respond to this with “take a portion of the windfall and live possibilities with it” and that is a good suggestion, but it ultimately gives me more satisfaction to use it all to pay down debt.  And I can’t trick my brain into thinking I might do something else with it first.  I try, but it ignores me. 

Someday, not too far in the future I hope, unexpected money will open itself to a world of possibilities again.  And even though, in the end, I might still end up making the boring “responsible” choices with most of them, I know the magic will be there like it used to be.  We all need a little bit of hopeful magic once in a while.  And saving choices, although they may seem boring on the surface, are still much more exciting than handing it over to Citibank or Sallie Mae.

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