A Couple Years of Stupidity

In the following couple of years after the purchase of my Suburban it seemed like all good sense and any notion of the previous attempt to get out of debt went the way of the dodo. Although not all of it was irresponsible spending and some of the debts incurred were out of necessity, almost all of it could have been avoided had I have continued the original debt snowball and not blown it back out of proportion with the school loan and the truck but as they say hindsight is always 20/20.

One of the first major debts to hit us after the purchase of the truck was the heater in the house going out in the middle of winter. With a newborn and a toddler in the house there was not much we could do but get it fixed immediately, leading to a %10 interest signature loan in the amount of $5k for a new heater. This brought us to around $155k in our debt snowball (which we were totally ignoring at this point), within 6-8 months of  having to put the heater in, the ac pump on my truck went out, another have to fix issue. This time it was only $1600 but yet again we had no emergency fund built up to fall back on so into the bank we went again and tacked it onto the revolving signature loan they had given us. And during all of this instead of trying to get back on track  and get things aligned in our favor what did we continue to do, nothing. We kept with the convenience of eating out near to every night since with both of us working we were to tired to come in and fix dinner (or so that was our excuse).

Within 3-4  months of having the ac repaired on the truck the transmission started showing signs of slipping, since I was already running on a paycheck to paycheck basis I decided to just ignore the signs that the truck was giving me and I drove the truck until the transmission went totally out on the truck with only 1 speed working. At this point we were very lucky that my parents had an extra vehicle to lend us because the initial repair estimate on the truck this time $2800 and at this point we were all but tapped out. By this time we should not have had too many problems because both of us had moved to a really good job and had more money coming in than we had ever had before. And this was the breaking point we needed to restart our debt snowball and to get back on track. The realization that we were so far behind was like a smack in the face to us because there was no real reason for it other than our own laziness.

At this point we made the decision to make a written plan to get back on track, and we decided to look for a little help getting motivated to succeed. Through my wife's church we found that they were doing  Dave Ramsey Financial Peace University class and it was something we felt could really help us.

Next up: Getting Organized and making a plan.

Slow Start

The  seeds of want to become  frugal, money smart, and thrifty had come sometime before I had actually lost my job. It had just never sank in that we should be living that way all the time instead of just when we didn't have money to spend.  A few years ago while still at my old job a friend had recommended that I read  Dave Ramsey's book The Total Money Makeover: A Proven Plan for Financial Fitness ... So I sat down and over the coming week or so after I read through the book learning the method Dave laid out before you to become financially independent. For a short time after a different mental state come over me and I pushed my family in a direction to stop trying to catch the Jones. I slowed spending and eating out, I cut out going to lunch every day from work and started carrying leftovers or microwave meals and I put us on course to pay off all of our bills just like those in the book had stated could be done.

The want, the need to be Debt Free lasted for quite some time I even picked up another book by Dave called Financial Peace Revisited  which just furthered my resolve that we needed to be debt free.... We did pretty well, in the first year after reading these books, we managed to go from blowing every incoming penny to actually having a starter emergency fund (outlined by Dave as $1000 put up for emergencies only) and having a small nest egg starting to grow in our savings account which to this point was only there because our bank required we have a savings account to have checking. We followed the "Debt Snowball" given to us in the book until we had paid down to just our last 3 or 4 bills (counting our house), with debt freedom in sight we were on the home run stretch...... And then....

My stupidity set in before home base, I decided I wanted to go to school to learn about computers. Technically, not a stupid idea just not a well founded idea when you have to take out a high interest loan to do so. And on top of that I let advertisements for a "career education" center, cloud my brain. I saw the 6-9 months to do what you love ad and I fell for it just like any other sucker that doesn't think things through first. I'll fully get into why this was a bad choice later but this is where my resolve broke and we really started spending again.  Going back to school I added a school loan of $18,000 back into the snowball that really has done nothing for me and has yet to pay for itself. 

On top of going back to school I found out that my wife was pregnant with our 2nd child at this point and again good judgment went out the window. I took my fully paid off 4 cylinder gas friendly truck and sold it, to go purchase a new "family size" gas hungry Chevrolet Suburban because that was my dream vehicle and I finally had reason to need the extra space. Another large bill back into the debt snowball that was now growing larger than it had originally began with all of the small bills in it that we had worked to pay off. With a new child on the way should have been the time that we cracked down, got in line and pushed to finish our goal of freedom from debt, instead it is where we fell apart and started making unwise decisions again.  Our debt snowball had been down to just my wife's car, her school loan, and our house a total of about $125k owed. But after my bad decision it was back to over $150k for us to work on again.  And I tell you this not  looking for you to feel sorry for me but to show you that even the best laid plans start to fall apart if you do not have dedication to the goal at hand.

Next post: A couple years of stupidity.

Learning,

There comes a time in all of our lives in which we have to learn new things, to change our ways, to improve upon ourselves. Whether it is because of a choice, a decision, or something totally out of our control it happens. It may or may not be something that drastically changes who we are or even something that changes our way of life. 

For me and my family the time for change has come. As of 7/15/2010 we went from being a 2 income $80,000 a year household to a 1 income barely meeting the bills household. It was not by design or even by choice that our life took this direction but by stupidity on my part. Getting fired from what I consider to be one of the best jobs/careers I have held in years all because of a stupid statement between friends(a story all in itself). But it has been an eye opener and possibly one of the better things to happen to us, because it made us aware that we were trying to keep up with the Joneses, we were trying to keep up the appearance that we could do as we pleased.

Had we have been smart over the  3 1/2 years I was at my job and we were bringing in more than ever before we would have saved, we would have taken the opportunity afforded to us and would have built an emergency fund and a fall back plan of 3-6 months of expenses for use during times like we are facing now. BUT we did not, we just did as a majority of all Americans have done and still continue to do: We spent like there is no tomorrow. Instead of smart grocery shopping and eating at home, we ate out 4,5, sometimes 6 or even 7 times a week or more. We looked at our budget and saw there was money there that we could put in the bank, instead we decided we "needed" a new flat panel LCD television. When I wrecked my truck, I got a nice big check, did I take that money and buy a new vehicle within reason? spending only what the insurance paid on my old vehicle.. No. I went out and purchased a bright, shiny $24,000 truck with nice big monthly payments... Now what am I doing, STRUGGLING with all the nice bills we racked up during our time of excess, not success, excess because we really did not need all these things.

Why am I telling you, complete strangers, this? I hope that my story and the learning process that I am going through and have gone through over the last few months will give you pause. Will give you a reason to reassess whether you need that shiny new expensive thing, or whether you would be better off to add another 5% to your savings. And if you are out of work and in my shoes maybe I can show you some new tricks to help you out, help you save a few bucks here and there.

Over the next few posts, I am going to lay out the steps we have taken to try and get in line, to get in order and manage to survive while I have spent the last 5 months searching for a new job in one of the worst job markets I have seen in many years. I have recommended reading for you, whether christian or not it is reading that should help you to turn your situation in your favor. For tonight that is all I have to say.