debt debs

Personal Debt Wrangler – Had my money head in the sand – but no more!


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7 Financial Lessons Learned from My Parents’ Debt

I am very happy to have a guest post from one of my blogging friends, Erin from Journey to Saving.  I’ve mentioned before about how I worried about the impact that our financial bad habits have had on our kids.  Erin shares her story about this below.

financial-lessons-learnedI am no stranger to debt. While I have only personally experienced student loan debt, consumer debt came knocking on my family’s door decades ago, and nearly destroyed us.

Debs is very open in sharing her mistakes and experiences when it comes to debt and her own family, so that others can learn from her. It’s for that reason I only thought it fitting to share my own story here, with all of you, along with some of the lessons I’ve learned from my parents’ debt.

Debt is a common enemy of ours, and even though it brings dark and trying days, I’ve been able to get a few things out of it after starting on my own financial journey. After reading this post, I hope you’ll be able to as well.

The Beginning

It all started when I was 7. My dad had been laid off. I suddenly began hearing the word “No” much more often, accompanied by frustration at the predicament we found ourselves in.

My 7-year-old brain didn’t comprehend this as I can now, but I knew enough to be scared. What will this mean for us? I often wondered, especially after hearing my parents speak in hushed tones.

Bits and pieces made their way to my ears: losing home, can’t afford, might not recover, and can’t keep this up, were just a few phrases that clued me in to what was happening.

The real warning sign was that my lovely grandma was showing up at our house more often, always with food and household products in tow. It was as if we didn’t have to go grocery shopping anymore!

My childhood self was more than a little naive, thinking my grandma was stopping by just to spoil me with goodies. While that was part of the visit, something deeper was going on, as I saw her attempt to hand my mom cash several times. My mom usually refused.

Thankfully, my family recovered in about two years. My dad worked part-time until he found a full-time position, which put us in a better place. On top of that, my mom began to work full-time once I turned 13.

We went on our merry way, and I was none the wiser to the increasing pile of bills that would slowly bury us in several years.

Fool me once, shame on you. Fool me twice, shame on me.

financial-lessons-learnedIt was only at Christmastime that I was told money might be a little tight, but my parents always managed to get me what I wanted most. I never truly knew just how bad of a state we were in, until my dad lost his job again, this time, while I was in college. This time, I knew what was going on, and I wanted to run.

My parents had never gotten their financial act together. They had never saved, and they still hadn’t paid off their debt. I was angry at them. Why hadn’t they learned from their mistakes the first time around? Was I the only one that remembered those times? I didn’t know how they let history repeat itself.

What’s worse, my mom became resentful toward my dad. Without his income, we were relying solely on her income, which was only half of what my dad made. I should say that my parents were never extremely high-earners, so while we kept a mostly frugal lifestyle, losing my dad’s income was a huge blow that we never recovered from for many reasons.

My parents have always been prideful and unwilling to take “handouts.” As such, my mom shouldered the burden of making ends meet by herself, even when I offered to help. Likewise, Debs is the primary breadwinner in her family, and I know it’s not easy at all. There are plenty of mom’s out there who are shouldering this burden, and doing an amazing job of it. While it can be a thankless job, your children will grow up to appreciate and respect you for it.

To say this was a difficult time would be an understatement. I can’t even begin to tell you all how happy I was when we finally got through it. There were times I doubted we would. I took mental notes through everything, because I knew I never wanted to go through that again.

I wanted to make sure I could safeguard myself against debt. Student loan debt had been different in my mind, so I sadly didn’t avoid that, but you can bet I won’t take on any consumer debt after what I’ve seen it do. For that reason, I’d like to impart to you the financial lessons I learned from watching my parents suffer with their debt.

7 Financial Lessons Learned from My Parents’ Debt

  1. Save, budget, and track spending. Keep an emergency fund. Please. It kills me to know my parents would have been fine had they actually taken the time to save money. Because they didn’t have anything to fall back on, any unexpected expenses would go straight on the credit cards. It was a vicious cycle they were unable to break out of. My parents also thought they had a good hold on things, but I guarantee that a budget or spending sheet would have opened their eyes.
  2. Communicate. According to my parents, there was a bit of miscommunication going on. My dad believed that they were paying the cards off in full every month, when in reality, they were paying the minimums. This was because my mom balanced the checkbook and paid all the bills. I know Debs has mentioned a few times that she didn’t realize how bad things were because her husband was doing the same. Even though I handle all of our finances, I always keep my boyfriend in the loop. Your other half needs to be included.
  3. Perseverance pays off. I want to inject a little happiness into this post! I’m glad to say that my parents fought the battle and won, in their own way. They are still in debt, but they were able to retire and move to a place that is much more affordable. They purchased their house outright and no longer worry about a mortgage. With the sale of their old house, they were able to put a large chunk toward their consumer debt, and they now have a good buffer in their bank account should they need it.
  4. There’s more to life than possessions. Having a little less than my peers made me realize early on that there’s simply more to life than having the newest gadgets, prettiest clothes, trendiest accessories, etc. My parents never purchased name-brand anything, and they always shopped frugally. They’re both deal-finders. I got a hand-me-down car (from my grandma to my mom, then to me) and only replaced it once it was unreliable to drive. Even though it was a funky teal color, I didn’t have to pay for it, and that made it valuable.
  5. Experiences matter. I’m an only child, and many of my memories growing up involve my parents. None of these memories revolve around things, though. Yes, I can remember the gifts they’ve given me over the years, but what matters most to me now is spending time with them. No one lives forever. So the next time you feel pressured into buying something for your children, remember that prioritizing experiences is the way to go. They will thank you for it some day. Remember to enjoy the little things life has to offer.
  6. Keeping up with the Joneses? Nah. I never got the sense that my parents were trying to keep up with anyone, even though there were plenty of people around us that were clearly questioning our priorities. They were never phased by it. Sure, it’s a little sad to see people from college “living the life,” (or so they want us to believe?), but I’m happy where I am. I have a great boyfriend, two adorable cats, and supportive friends and family.
  7. Don’t give up hope. This has to be the most important lesson I’ve learned. My parents went through a lot in a short span of time, twice. Yet, they’re still together. They pulled through. And I turned out fine. Looking at my student loan balance can make me feel hopeless at times, but I know I’ll reach a $0 balance someday. Being in debt has taught me things I never would have discovered about myself, and for that, I am thankful.

 

financial-lessons-learnedI want to close this out by saying that things could have been much, much worse. Compared to some people, my family had it easy. I am very grateful that my grandma was there to help us through everything, because I’m not sure we would have survived without her generosity.

Don’t let debt take away from you any more than it already has. I know it can be soul-sucking, and that the journey is a long one, but you’ll make it through if you choose to fight. And I know you want to, otherwise you wouldn’t be here!

What are some of the lessons that debt has taught you? Did you grow up around debt? How has it affected you?

erinmauthorpicErin M. is a full-time personal finance freelance blogger and virtual assistant. She’s passionate about helping other millennials get started on their financial journey. She blogs about frugality, being happy with less, and tackling student loan debt on Journey to Saving.

 

PART OF

brokeGIRLrich


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Credit or Cash? Pick Your Poison

credit-or-cashI’ve been thinking about how I spend and pay for my purchases recently.  Ignoring out past financial history, today, I don’t have a problem with credit cards.  We pay ours off monthly and can always be sure this will happen because:

  1. We budget and track our spending
  2. We set up the payment for the due date as soon as the bill is sent electronically
  3. We monitor our cash flow, so I ensure I will have the funds in our account when the payment is made.  I will not go into overdraft, nor will I go below my $2K threshold I must maintain to avoid $9.95 of bank fees.
  4. If, for some reason, our spending is more than usual due to an unplanned emergency spend (examples: broken appliance (we always fix first if possible), car repair), I will transfer money from our Emergency fund/Property Tax account which is sitting at $9K currently with plans to grow to $15K.

I like to use our credit cards due to the cash back we carry on both cards.  One is Visa and one is AMEX (for Costco, though this is now changing and we will have to pick a new Costco card by the end of the year – either Mastercard or Personal Capital).  Currently I have cash rewards accrued on our Visa that will be paid in November as follows:

4.00% cash back – gas & groceries $170.26
2.00% cash back – recurring bills & pharmacy $60.79
1.00% cash back – everything else $161.34
Total cash back reward earned to date $392.39

This is based on stuff I need! I’m getting more than $400 because I lived my life!  Granted, the card carries an annual fee of $99 + $30 for a second card, but we are still ahead more than $265 right now and probably $300 by November.

Some PF reads lately have acknowledged that credit cards have been a problem for them in the past, they’ve tried them again, and still they remain a problem so they have sworn off them.   Travis @ Enemy of Debt says Credit Cards Are Officially NOT For Me and I totally respect that.  If you’re struggling with what to do in this regard, I really recommend you read his views. There’s no right or wrong answer, but there’s a right or wrong answer for you.  [Tweet “There’s no right or wrong answer, but there’s a right or wrong answer for you. #creditcards “]

Brian @ Debt Discipline has just paid off his 109K of debt and blames their families credit card usage for putting them in that position.  Well it actually is due to overspending, but in truth, I agree with Brian.  If credit was not so easy to obtain, families wouldn’t find themselves leveraging the convenience for ‘stuff’ they deem as important or necessary.  They want to get some savings behind them for a few months before they decide if they will try to use credit cards again.  In his words “A credit card is a tool for a consumer, just like a hammer is for a carpenter, when used wisely can be very effective, when used unwisely can cause major damage.”

I was reading on Myles Money the warnings about credit cards to teenagers and students in his post Credit Virgins.  It’s definitely a slippery slope and fair warning needs to be given to those that haven’t been taught to pay them off monthly.  This is something I learned from my parents, never to carry a balance.  I was actually surprised to learn that some people thought it was the only way to build up a credit rating, to keep a balance on your credit card.  There’s a lot of misinformation out there.

So while I know the dos and don’ts of responsible credit use, it’s really spending that I have always had the problem with.  So I’ve been thinking about if using cash would  help me to spend less rather than using credit?  For me, I don’t think it makes any difference.

I realize that credit or cash (or debit)  has no bearing on how much I spend.   Having cash in my hand or wallet and handing it over, does not make me think twice about buying something anymore than handing my credit card over.  It’s like cash is just paper and it has no more relevance to me than that piece of plastic. They are both important, but one is not more important than the other.  I would reluctantly hand either over if I didn’t think what I was buying was (a) necessary (b) reasonably priced (c) in line with our spending goals.    So this reinforces my strategy to use credit wisely.  Then, I can use the once a year* cash back to pay for more of what is necessary, reasonably priced and in line with our spending goals.

What side of the coin are you on – credit or cash/debit?  If you use credit card rewards, what is your preference for type or rewards?  Does paying with cash or debit help you to spend less than with credit?

*Note:  Some cash back cards pay out more frequently.

Part of Friday Jet Fuel #13 and

brokeGIRLrich


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Worth it Wednesday ~ Dear Debt Letter

debt debs ransom-note-dear-debt

Debt sent me a ransom note … I’m so ignoring him

Worth-it-Wednesday is here a little early because Melanie at deardebt.com enticed me to write my debt breakup letter.  It is such a great idea but as I started to write, I found Debt was sitting on my shoulder watching every word I typed.  In usual fashion he decided to chime in.  Go on over and check out what I and he had to say.  He’s a gnarly little fellow.  So here is me, writing my taking back my life letter, and this is how it went … Dear Debt …

In other news….Nutcracker by artur84 from FreeDigitalPhotos.net

DD#3_targetsMy #3 daughter gave me the best Mum’s day present on Sunday when she told me her student debt from her Masters degree was all paid off!   About a year ago we sat down and did a Gail Vaz-Oxlade analysis on her expenses to see if it fit into Gail’s guidelines for Housing – Transportation – Life – Debt – Savings of 35% – 15% – 25% – 15% – 10%.    Now, she did have more than could be paid off in a year but she received a very sizable income tax refund so was able to completely extinguish it this weekend.  I was so happy!! 

I didn’t know how serious she was taking it from when we last talked about it and I don’t like to nag.  Well, more honestly, I was probably afraid of being disappointed, so in usual fashion I buried my head in the sand.  (Hey, it’s her debt, not mine!  … even though I did feel partly responsible for not setting a better example on how to handle money.)  She used to be a bit spendy and she likes to travel.  Plus, her once famous quote “I’ll always be in debt” used to make me cringe, so I figured she was going to be a hard nut to crack.

Look the nut is cracked open into a heart shape ... ahhhh!

Look the nut is cracked open into a heart shape … ahhhh!

But I guess Mum’s persuasion and some new found frugalness on her part was just what was needed to crack that nut open.  She thanked me because she said I helped her to see it was possible to eliminate her debt.   :)   I guess I can really move on from my guilt trip now.  Heeee …

Image Credits from FreeDigitalPhotos.net:
Nutcracker by artur84
Walnuts In Love by Aleksa D

 


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The Evil and Grace of Low Rate Cash Advance Credit Cards

We have gathered up quite a bit of available credit (like rolling tumbleweeds) in our debt journey (enough to hang our self with a rope, but lemme try to keep this post positive).

cash-advance-credit-card

Creative Commons License Attribution-NonCommercial 2.0 Generic (CC BY-NC 2.0)
Ðeni (break) Denise Rowlands on flickr

Consequently we used to get a lot of telemarketing calls trying to get us to use these credit cards by transferring higher interest debt onto a card with a low balance transfer rate.

Apparently, while I had my head in the sand, the Irishman started to play along. Hence our debt story where we had amassed $250K of consumer debt up to D-day. (I kid you not, go read about it here).

So fast forward to March 2012, more affectionately known as D-day, I put my big girlie panties on and start wrangling this debt monster.  Strategy becomes my game.  Hey, I got nuthin’ else. Continue reading