How Do You Money? Is a series where I talk with real people about their money and how they manage it. Everyone does things a bit differently and there is much to learn from others.
Do you think you have a good understanding of how money works?
I am not what anyone would call “money savvy”.
Have you gotten yourself into trouble because of that?
Five years ago I was in extreme financial dire straights.
I had 27,000 in credit card debt at the age of 29. I was unable to keep up with
the mounting bills which led to more mounting bills. I paid my credit card
bills with my paycheck and paid for food, gas, and necessities with credit
cards. It was a vicious cycle to say the least.
How did you get out of that mess?
It was at my lowest point that
I decided I had no choice but to declare bankruptcy. Honestly, it was scary as
hell, embarrassing, and I felt like a total failure. I vowed to never fall into
financial ruin again.
It was the same year that I
met my future husband. He was pretty much my opposite as far as financial
responsibility and he’s turned out to be an amazing teacher for me.
Where do you stand now, financially?
Now several years
post-bankruptcy, we are married and have a three year old daughter. I have
since graduated nursing school and my husband has a solid job as a software
engineer. My husband still has a substantial amount of student loans ($50,000
give or take) and I have $8,000 in student loan debt. In addition we have
$5,000 in credit card debt as well as two car payments at around $500/month, a
daycare bill of $780/month and all your standard monthly bills (gas, cable,
water, electric etc).
We live in a house that we
purchased before we knew we were having a baby (closed on the house a week
prior to finding out actually) and we have goals of moving to a better school
district and owning a bigger house for a growing family within
three years.
That’s a big load to bear. Lots of obligations! How do
you manage it all and not get into a mess again?
My husband has been
researching the “debt snowball” and we have begun to implement it each month. The biggest step towards
getting our debt down has been budgeting the hell out of every damn cent that
comes in!
I totally agree! So how do you work it?
Every two weeks, my husband and I each get some pocket
money. Each of us gets $200/two weeks. This covers eating lunches out at work,
clothes, shoes, drinks with friends, movies, entertainment etc. As you might
expect, this can go fast but I also find having cash on hand makes me think
twice about whether I really need something whereas just swiping a card can
seem just a bit too easy. Next we have an $800/month grocery store/necessity
budget. We estimated this to be high so we have a little wiggle room. Now the
debt snowball comes into play. We are focusing our attention on the highest
interest rate debt first. With the extreme budgeting, this month we were able
to put $1000 on one credit card, almost completely clearing the balance. We
will be out of credit card debt by June (this month had some extra expenditures due to it being my husband and my birthday month). After June, we will move on to my husbands highest interest student loan. Paying $1000 per month we think
we will be completely free from student loan debt by the middle of 2018. In
addition to the debt snowball, we are trying to put at least $500/month into
our savings account to put a down payment on the house we need and to use in
case of an emergency so we don’t need to use those credit cards again.
It sounds like you have it all figured out. What do you
think you’ve learned about debt since you’ve gone through all of this?
Being strict with spending is really hard, but being
indebted with no plan to get out of it is a hell of a lot more stressful and
hard. Although it’s a learning process and it’s not easy, I find it gratifying
that I’m contributing to the betterment of my family. No matter how “stuck” you
may feel, there are ways to get out of it and to rebuild your financial life.
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