In November of 2003, my spouse and I hit our financial low point. We’d relocated for employment for my spouse that May, leaving my employment behind, and contrary to our optimistic outlook on my employment prospects, I hadn’t been able to find a full-time position since our move. I had done a few part time temporary jobs through an agency, but the economy in the state we’d moved to was in such bad shape at the time that I couldn’t even get employment at one of the “big box” stores.
The financial low point came in November 2003 because that was when we faced up to the realization that my spouse wasn’t bringing in enough money to pay our monthly expenses. Try as we might, we were just coming up short every month and using credit card convenience checks to fill the gap. At that point, we cut back our spending to the bare minimum we needed to pay all our bills, and I networked and networked until I found another part time position through the friend of a friend for the tax season (receptionist in a CPA office) and I had some leads on employment online from home after that was over (I was pregnant and due in late June 2004).
If only we had kept our spending cut back to the minimum, I might never have been in the position to start this blog last June, because we might have made real progress and already been out of debt. But as our income increased, so did our spending. Never to the point that we were spending beyond our earnings, as it had in the past, but as I brought in money, somehow we still didn’t have any left over. We easily slipped back into the place we were at, where we weren’t living extravagantly, but we also weren’t living frugally, and our lifestyle was beyond what our incomes could provide if we wanted to truly get ahead. We did make some progress on our debts, but it was slow, and could have been a lot faster if we’d done something like devoted 80% or 90% or even 50% of the income I was bringing in solely to debt reduction. I’m not really sure that we devoted even 10% of it to debt reduction beyond what we were already paying from my spouse’s salary.
Earning more is definitely a big part of the equation if you are in a position where you are barely getting by and want to start making solid forward progress. But if it is not combined with spending less, it won’t help as much as you’d think. Our success this time so far has been due to my ability to earn more, but also our budgeting and keeping track of those earnings, so that we truly are spending less. The extra money I earn can be diverted to debt reduction instead of evaporating into miscellaneous things that never seem to be that much, until you add them all up. Which we never did – but now, we do.