The next couple of posts will be designed to get everyone up to speed on where we currently stand (since we're not exactly new to this particular journey). Once they're out of the way, I'll start logging our current progress, thoughts and ideas on our way to Rabbit Hill.
So, the first step in the process is to pay off our debt. Why do we have debt, and how much debt do we have? Short answer: Many reasons, and a lot.
Until I graduated from college, I never had a credit card. But that didn't mean I was financially responsible. I frequently got down to the last dollar in my checking account before I'd even realized it (because, of course, I wasn't keeping track), but I was still on my parents' dime and so my funds were always replenished. I never remember saying no to going out to eat or buying a bunch of junk at Target. Then I got a credit card. I don't really remember why or how or even what card it was, but I got one and started charging. It wasn't that I bought a lot of big, extravagant stuff (if I did, maybe I'd have something to show for these thousands of dollars of debt). Instead, it was meals out, cute trinkets, this and that, here and there. I had absolutely no knowledge of credit cards or financial responsibility, and it was always my goal to just have enough in my checking account to pay the minimum balance when it came due.
At the same time, my (now) husband had his own credit cards, and bought bigger things -- a laptop, land in Kansas (don't ask) and pretty much paid for all of our dates with plastic. (Wooing is expensive!) Then we got married and went on a honeymoon which, you guessed it, went on a credit card.
By the time we'd been married for a few months, we'd racked up a good bit of debt, even though we weren't particularly aware of it. We weren't bumping up against credit limits, but we weren't paying anything off either. Then my husband, who was working for his godfather at a very small start-up company, started getting paid a little less frequently. It got to a point where we couldn't count on his paychecks anymore. Some months there was just one check, some months we wouldn't see anything. And when you're pretty much living paycheck to paycheck, that's serious. He started to look for a new job, but he felt tied to the company and thought better days were right around the corner. So we hung on for a while. Then one day, I remember very vividly sitting in the office at the house we were renting, going through our bills. And we simply didn't have enough to make ends meet. I had no idea what to do, and I was terrified. We were able to get a loan from my husband's family to tide us over, but we added that to our debt tally -- there was no way we were going to stiff our parents on a loan.
Eventually, my husband found another job, one that was much better paying and with significant room for advancement -- but it was three hours away, so we had to move. We were renting a house at the time, and there was no way for us to break the lease. But with him not getting paid, we knew we had to make a change. So, we packed up everything in a U-Haul and moved. For several months, we paid both our rent at the old place and rent at the new place. And since we moved, I'd quit my job and hadn't found another. So even though my husband was making about as much as our previous combined salary, our expenses were much higher.
I could go on and on about all of the bad choices we made along the way, but suffice it to say that while it always seemed like money was tight, and we felt guilty using credit cards, we weren't DOING anything about our debt. And then came the worst decision we've EVER made.
We took out a low-interest loan to pay off our debt.
On the surface, perhaps that doesn't sound like a bad idea. Pay off high-interest credit cards with a low-interest, fixed payment loan and you're home free. Except we had not yet REALLY realized the error of our ways. We knew credit cards were bad, but we hadn't stopped using them. And it wasn't like we were buying big things, just dinner here and there and lunch here and there and sometimes a few new clothes or little things for the house. So once the credit cards were paid off with the loan, we kept using them the same as always. And so we filled them right back up. (I swear we are both college-educated people who are smart in so many other ways, but we were financial morons. Please don't follow in our footsteps.)
So, one day, we sat down and figured things out. I had always assumed that we probably COULDN'T live within our means, that we probably had more bills and debt than we could realistically pay on the money we were making. So I was absolutely terrified to sit down and figure it out. But we did. And, guess what? We were going to be OK. We used Dave Ramsey's software to figure out a budget, a realistic, though tight, budget that we could stick to and could pay off every single shred of debt (except for our house) in about four years' time. That included the credit card debt, two cars, student loans, the personal loan we'd taken out -- everything.
And you might be praying that this entry is almost over, and it really almost is, except as we were plowing through our debt, doggedly adhering to our budget and paying for everything with cash, my husband came home one day this past July with a letter saying that his (very small startup) company was putting all employees on "furlough," which is basically just being laid off, but with a chance you might get to come back at some point.
That threw all of our plans into a tailspin, but I'm SO glad we had reigned in our spending before that happened. As it was, we just went back to the software, typed in how much he was going to make on unemployment, and cut money where we needed to. Fortunately, he was only out of work for three or four months, but his job is still uncertain. Right now, we're paying credit card minimums and putting the rest of what we should be paying toward debt into our savings account. When things look a little more stable, we'll dump all of that to the debt at once and hopefully not be too far behind. But, if something catastrophic happens and he's out of work again, we'll have a little bit of a cushion for the future.
So, that's where we stand with paying off debt. After paying off debt comes making babies, quitting jobs and homeschooling. Stay tuned for a backgrounder on that!
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