Last week, we talked about the first step of reinventing your money story being the need to get real with your monthly spending. Chances are, when you got real, you saw that money out was greater than money in and possibly some of what was going out was borrowed.
It’s so easy in the beginning to use fake money. You can justify financing a million ways, especially if you’re just beginning an adult life. It’s a perfect storm of ignorance, hope and a predatory economy
Does any of this sound familiar?
“Oh, this couch is offered to us at zero percent financing. We can get it now and enjoy it while we pay it off. Who can pass up zero percent financing?”
“Oh, this car is about $100 more a month than my last car but they’ve approved the loan at a low interest rate so I should be able to do it. I mean, I’m sure I’ll get a raise this year.”
How about my personal favorite? “We need diapers and the only way I can get them is on this visa. I’ll just pay them off in small payments for the rest of my life.”
You need more than you have income for and credit cards and stores are more than happy to “help” you make that purchase that seems so necessary.
Personally, our history was a mix of all of this. I never had money growing up, so the idea that you were supposed to buy anything with cash was foreign to me. I mean, I always understood the concept of why you shouldn’t finance, but I never understood how to make it a reality. Like I’ve said before, we did not live lavishly, but it does not take much to live above your means. We always needed what we bought. Or so I thought. I’ll get to the mental stuff later, because is important, but for today let’s focus on the ABC’s of getting out of debt.If you’ve gotten real with your spending, you’ve already figured out the monthly non-negotiables. Now, you have to start cutting.
Six years ago, this process caused me great pain. Now I get excited about the prospect. It was such a challenge to live within our means that I actually started getting satisfaction figuring out how to come in under the budget every month. It is so freeing to have only the necessary expenses, you have no idea!
The first thing I did was figure out how to decrease our monthly spending on bills. By that point, it wasn’t jus credit cards (although there were plenty of those) there were also student loans, a car loan, medical bills, utilities from our relatively haphazard interstate move and of course two house payments; rent on the new one and a mortgage on the one we couldn’t sell.
Bankruptcy and foreclosure were not an option for us. I am sure there are plenty of arguments to be made for the sensible nature of both, and if I have learned nothing in these last six years it is to never judge someone’s financial decisions. That said, for me and probably The Husband too, there was a sense of personal responsibility that compelled us to avoid just throwing up our hands in defeat, and also taking that credit hit for at least six years.
So, instead I got on the phone.
I called every single creditor from the huge Bank of America to neighborly Joe’s plumbing and asked them to work out a deal with us. We promised to pay every last dime if they could just help us make every month a little more bearable. We got interest rates lowered, late fees abolished, and timelines extended. Nearly every single creditor worked with us to make some change and I finally sought credit counseling either for those that didn’t or those I thought someone else could work a better deal with. The exception was our home loan which I’ll address later because it was such a debacle it warrants its own post.
At first, I was humiliated. I mean, imagine calling all these people and admitting you’ve screwed up you can’t even make minimum payments.
You know what happened though? Nearly every person on the other line was not only willing to work with us, but they were actually complimentary of us making the effort that I slowly started feeling less shame and more pride at the hard work we were about to do. Yes, we made mistakes, but we were trying to correct them and people really responded positively to that.
So, if you’re in a spot where you’ve got more month than money, get on the phone. Call and ask for reduction in interest rates. Call and close cards and work out a payment plan you can handle. Call and ask for help. You’ll be surprised how receptive people are to you taking control of your money.
Next Week: What is Credit Counseling? Or, how not to get duped.
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