Where We Came From, Where We're Going

This is a tough one for me to post. It's always embarrassing to admit your past mistakes, especially when you knew better. If this keeps someone from making the same bonehead moves, it's worth it.

Jim and I have never been classic 'spenders'. We don't go for the nicest cars, both our current house and the one we had in New York are average fare. Nice but not ostentatious, plenty big enough for us but not a palace. We never had a lot of expensive electronic equipment or toys like boats or snowmobiles. I say all this to show you that you can make a wreck of your finances even if you're not a 'spender'.

We also were givers. We supported missionaries, our local church, and others that we personally knew were in need. So that wasn't an issue that caused the floodgates to close or anything.

We ate frugally. Didn't eat out much. Rarely did expensive activities. Most of our furniture was handed down to us. We went for years on just one car for the six of us...even walked five miles with four kids to get to the dentist(uphill both ways,LOL).

So what happened? Actually there were a few things. The first being something that never happened, as in.....a budget. If you don't figure out ahead of time where your money is going to go, it goes everywhere and leaves no trail of breadcrumbs so that you can find out what happened to it. More on that later.

We lived from paycheck to paycheck, put nothing in savings. We viewed things like car repairs as catastrophes, which is just silly, seeing that all cars eventually need repairs, new tires, brakes, etc. Instead of budgeting for that and expecting it, we'd panic every time our cars needed something saying, "How could this be happening?". I don't know....maybe we thought we were going to be like the Israelites wandering around the desert for 40 years without their shoes wearing out like everyone else's. Anyway, the transmission would go and, bang, it's on a credit card. The heat bill would be a little high and the balance wouldn't get paid in full on the credit card. Or we'd have a big dentist bill and hit the overdraft in our checking account. Nickel by nickel, supposed emergency upon emergency, the credit card debt grew...I'm too embarrassed to tell you how high. We ended up with two cards.

Jim saw that the place he worked for our whole married life would not be the place for him long term and he ended up completely switching careers. We moved out here to Michigan. We had to pay more than double what we sold our house for,for a similarly sized house out here. The salary,although good, wasn't following suit. After working for them for around six months, Jim could see the writing on the wall and foresaw that they would eventually close the Detroit office. He got a new job but had to repay several thousand dollars of moving expenses. Hmmm.....how about we put that on the credit card? (by the way, they did close the office soon after and leaving was a great move)

So what did we do about it all? Nothing yet. Jim was extremely successful at his new job and kept getting promoted. The salary kept going up. He was eventually making double what he did in New York, which is all well and good except that we felt like we could relax a little financially, so we did. Around this time, Jim and I were just floundering spiritually and that didn't help matters. (My 100th post is coming up soon....I'll tell you all about that then.)

When I got pregnant with Carrie at 41, I was exhausted and sick a lot, so we ordered lots of pizza and went out a lot. We still weren't buying extravagant things, we just had no budget and no idea where it was all going. Our income was very high, we had nothing to show for it, and we were still living paycheck to paycheck.

Around the end of 2004, we said, "enough is enough" in many areas of our lives. We recommitted ourselves to the Lord, started losing weight, and decided that we weren't going to live on the financial edge anymore. Yeah, baby!

Around that time, Jim heard Dave Ramsey on a radio show or something. We purchased the book and attacked the debt with a vengeance. Here's quick rundown of how it works. Not gimmicky. Very do-able. The first thing we had to do was write a written budget. Part of the thing that had kept us from doing this before was that we both hated paperwork. Now that we're on the budget, we essentially have none. Instead of keeping track of every dime we spend, I go to the bank at the beginning of the month, take out the cash that is allotted to things such as groceries, kid expenses, clothing, eating out or family fun, pretty much anything we pay for with cash. I divide it up and put it into the appropriate envelopes. When the money in the envelope is gone, I'm done spending. No writing anything. It's graphic and it works.

Okay. So, first we did the budget. We tweaked it a little the second month because we just weren't real sure about all the numbers the first month. We stuck to that baby like glue.

Next thing was to set up an emergency fund of $1,000. I can't stress how essential that was and always is. Many people give up on programs like this because something unexpected happens that throws them off. This helps to prevent that. Case in point: we started this thing and put our emergency fund together. One month later our transmission blew, and a month after that our roof started leaking. Believe it or not, we were so intent on getting out of our mess, that we scraped up enough money for both those things that we didn't even have to touch our emergency fund but it was nice knowing it was there.

We had our budget and our emergency fund set up so were ready to start paying down all our debt. We took the smallest debt and worked on that with the intensity of a gazelle. Once that was paid off, we took the next smallest debt and threw everything we could at it. Success bred success, and we knocked that one out. All the money we used to use to pay the monthly payments on debt #1 and debt#2 could now be used to tackle debt#3. Next thing we knew, that was gone. We tackled what we had remaining on both of our vehicle loans. In 17 months, we were free and clear. We slept better at night. We weren't living paycheck to paycheck. We were no longer slaves to MBNA or Chrysler Financial. No more Ford Credit Corp. or Citibank. DONE. Forever!

Jim was laid off in May of this year while we had three kids in college. He was without work for three months. God provided for us. Had it been four years earlier, we would have squandered His provision by having to take care of all those stupid debts as well as our present expenses. Wow. I can't even imagine putting myself in that position again.

We are now working on a fully-funded emergency fund (3-6 months of expenses), and then we will begin throwing extra on our mortgage.

So, there you have it. Our embarrassing money foolishness.

We were very honest with all of this with our older kids. It was great for them. They saw first-hand the consequences of debt and the calm that ensued once we had done the work to overcome our initial money stupidity.

That's it in a rather large nutshell. If you have any specific questions, please ask. I've bared my financial soul. Thursday is your turn.