“women and debt”

RC = Retired Colleague
DH = Dear Husband

Impossible financial situations

I was recently driving to work, listening to the radio, when a segment about a food bank was aired.  Featured was a twenty-eight year old single mom with a student loan to repay.  She worked for a low wage as a receptionist, and the numbers just weren’t adding up.  I found myself thinking, It is so hard for some people – for some women.
When I Google “women and debt” the links tell a story of their own:  “The Student Loan Debt Crisis is A Woman’s Issue:  Here’s Why . . .” ; “The generation of young women drowning in debt . . .”; “Women drowning in debt?  You can’t blame it all on expensive shoes”; “Helping Women in Debt Program” ; “Debt Divas/Women in Debt . . .”  Intrigued by “Debt Divas”, I clicked on the link.  A quick glance through the forum options brought my attention to “My Diary as a Bankrupt Single Mom . . . So Far” (http://www.debtdivas.co.uk/).  Abusive ex-husband; manipulative power games leading to bankruptcy; children to care for and protect; onset of depression and anxiety . . .  The obstacles faced by some women are staggering.
When it comes to discussions about debt, I usually find I can put forth a strong argument if one is called for, but I was rendered speechless when I first talked with RC about her debt.  RC (“Retired Colleague”) has had a hugely successful teaching career.  I always knew her as a hard worker who, on top of her day job teaching high school, worked at Saturday schools, summer schools, night schools, and with a local university.  I thought, Wow!  The energy some people have!  It wasn’t about energy though.  It was about need.  RC, a single mother, was the sole supporter of her two children.  In her mid-fifties, she became exhausted and developed chronic pain, so she retired earlier than she had planned.  Still, I was surprised to find out that retirement posed a financial challenge for her, and that she would have to continue working part-time.  I was surprised to learn that she was deeply in debt.   
Not only has RC been a single mom and sole supporter; she has a child with high needs.  When he was in his teens, RC’s eldest son experienced a mental illness which, when wrongly treated, flared into something debilitating.  Through the first years of his early adulthood, he was in all ways dependent upon her.  He couldn’t go to school; he couldn’t hold a job; he phoned her frequently through the day.  Her life centred almost completely around him.  There was some progress as he got older.  He started working minimum-wage jobs.  He started looking into school.  But it was a bumpy road, marked by several job changes, a few false starts in post-secondary courses of study, as well as plenty of demoralizing scenes at home. Eventually, tensions built to the point where he had to move out.   But how was he to pay for his apartment?  How was he to pay for his car?  His low, unsteady earning power wasn’t going to do it.  RC paid the bills. 
“How much do you spend on your son each month?” I asked her several months ago.
She took a deep breath and hesitated, but she knew the answer well because she is very much on top of her finances.  Let’s just say it was a whole lot – way more than the mortgage payments that DH and I make each month.  “But what can I do?  I’ve looked at it over and over again.  There’s nothing I can cut.”  She lived in fear that if she didn’t cover his expenses, her son’s struggles with mental illness would get the better of him and lead him to self-harm.  I couldn’t say anything.  I could only see the insurmountable obstacle she faced.
Among the people I know, four are women who live this reality.  Each has a mentally ill adult son.  All four have gone through divorce.  And I believe that all four of the young men involved are alive today because of the sacrifices of their mothers.  These are sacrifices that most of us are never called upon to make, and they are sacrifices that often involve debt.  I certainly don’t feel inclined to champion the cause of debt-freedom with RC, but she’s a regular reader of my blog, and she is keen to get out of debt.  She is open to discussion, so we discuss.

 Open attitude, intense focus, encouraging progress

And there’s something marvelous that can happen when people focus on a goal despite their circumstances.  When we face the obstacle and acknowledge, This is too big for me to overcome – not whining, but as a pure matter of fact – and keep our hope fixed anyway.  The obstacle starts to melt.  At least it has for RC.  I saw her not too long ago, and things have changed.  She has discussed her situation with her son, and he understands.  He doesn’t want to drain her.  He’s starting to take on more of his own financial needs. Trimming here; adjusting there.  I asked her if she’s still devoting that huge monthly sum towards his expenses, and she said, “No.”  It’s down by half now.  Is it still too much for a retired single woman, trying to become debt-free, to spend on her adult son?  Yes.  But it’s a whole lot better than it was before.
RC’s goal is to become debt-free in three years.   I believe she’s going to succeed.  She’s facing daunting challenges, but as she opens up and shares and listens and engages and questions, her situation is morphing into something better.  And what about “Bankrupt Single Mom”, or the single mom at the food bank?  What about all the women who deal with limited income, failed and sometimes hostile relationships, needs of the children they love, and impossible debt?  All I can do is point to RC.  Open up.  Share.  Listen.  Engage.  Question.  Seek out allies and support.  Keep fixated on the goal.  Most barriers can’t withstand the heat of such patient, focused, persistence.  Like the obstacles faced by RC, they melt.  
    

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I would love to hear what you have to say. Feel free to share your thoughts, offer advice, disagree, or ask questions. (Disrespectful comments will be deleted.)

 

 

Affirming Heroics in Debt-Reduction

DH = Dear Husband
IC = Italian Colleague

My “mangiacake” deficiencies

            I work closely with an Italian colleague (I’ll call her IC) who likes to tease me for being a mangiacake.  A mangiacake is someone who is white and not Italian.  Our principal sin is that we only know how to bake cakes.  Inherent in this deficiency are a string of other failings such as the inability to cook proper pasta meals and the practice of hosting pot-lucks.  I wear the mangiacake label with pride as a friendly rebuttal.  For instance, I brought Christmas baking into work and made sure to inform IC of the pot-luck gatherings that I hosted over the holidays. 

 IC on housework

Last year, she was appalled at the fact that we hired cleaners every two weeks to the tune of $100.  “How can you let strangers into your house?”  “You have three daughters.  Why not get them to help you clean?”  (Note:  No mention of getting my husband to help.)  “Think of the money you’d save!”  The cleaners quit just about the time DH and I began our journey out of debt, and we decided not to hire anyone else.  IC was pleased with this decision, and eagerly impressed upon me the virtues of bleach as I prepared our family for the task ahead.  When I returned to work one Monday, after spending hours cleaning house over the week-end, I proudly told IC of my accomplishment.  Eyebrows raised in sarcasm, neck moving with attitude from side to side, she said, “So, you cleaned your own house.  Good for you.”  You’d think at least she’d give me a high-five!
            When I talk to people about what I have done to reduce our debt, if anything impresses them, it’s the fact that I taught summer school last July or that I didn’t travel to the U.S. with DH for his annual convention.  But I know that for me personally, these have not been the most heroic of my efforts.  It’s the house cleaning that makes me a debt-reducing superhero.  I hate cleaning.  Most people don’t like cleaning, but what I’m talking about goes way beyond the general dislike.  It’s a uniquely fierce loathing.  I’m able to discern it in others when they have it, and I feel an automatic bond with them.  But most people don’t understand.  They have a “suck it up, Princess” attitude to any whining, so I pick my audience carefully when the need to vent arises.

 Heroism is in the eye of the beholder

            The other aspect of our debt reduction that is particularly heroic is the discipline we are exercising in setting aside that $100 that we are not spending on house cleaners every two weeks.  For the first several months of our journey out of debt, this money went to remedy the abysmal state of my discretionary fund (see former post “Discretionary Money:  His and Hers”).  In the last few months, we have been putting it aside for a sectional sofa and flat-screen TV.  It used to be that if we wanted to make a big purchase, I would say, “Let’s get it,” with the perfectly comfortable understanding that it would go on our credit card.  DH would put off the purchase, worry about it, and then buy it.  With the credit card.  Our measured, intentional saving is new to us.  And even in terms of debt repayment, it signals the fact we’ve reached a new level.  With our goal of debt reduction, I was at first inclined to use every spare cent against debt.  But I realized that we’d burn out and give up if we never devoted any income to wants.  Do we need a new sofa?  No.  Do we need a flat-screen TV?  No.  So on the one hand, we’re allowing ourselves to want them, and on the other hand, we’ve set up a system which requires us to wait and which denies us the use of our VISA to make the purchase.  Such fine tuning, for us, is nothing short of heroic. 

 A well-earned high-5!

            I’m sure that most people who are trying to get out of debt have their stumbling blocks that others don’t appreciate.  Some hate to pack a lunch.  Others can’t stand the idea of tracking where their money is spent.  For some, giving up that daily coffee and muffin is a heart-breaking loss.  Others feel terribly constrained when denying themselves spontaneous purchases on credit.  Everyone who is reducing debt has to make cuts that we don’t want to make and to devote energy to budgetary details that we’d rather ignore.  And I bet that for most of us, a particular cut-back or a particular aspect of budgeting is extremely difficult.  But who is there to cheer you on when you do it anyway?  I am.  I understand that seemingly small efforts can be huge.  I hereby give you a high-five and dub you Debt-Reducing Superhero!
          

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I would love to hear what you have to say. Feel free to share your thoughts, offer advice, disagree, or ask questions. (Disrespectful comments will be deleted.)

Debt And Middle-Class Identity

DH = Dear Husband

 “People in my class borrow . . . “           

              This past November, when it became clear that we’d soon pay off Debt #2, I wrote about the odd fact that our success made me feel uneasy.  My discomfort was rooted in an unhealthy money-guilt, and I’m sure I haven’t seen the last of it.  (See post “Debt Reduction and Guilt . . .”)  Like me, DH felt off-kilter with our good fortune.  “I don’t know if I’m going to be comfortable not having any debt,” he said at the time.  When I asked him why, he struggled to pinpoint the reason, but he came out with, “People in my class don’t have money to buy things.  They borrow money to buy things.”  It was the first time I had ever heard DH refer to “my class.”
            And he was right.  “Pay up or get out:  The middle-class life has been built on debt . . .  Now that bill is due.”  Jason Kirby’s article for Maclean’s magazine from March 19, 2009 supports DH’s self-identification with middle-class debt.  For most of the last century, debt was a dirty word in Canada . . . [Starting] in the 1990s our attitude to debt changed . . . [and] our nation of savers became a nation of borrowers.  Debt emerged as the great enabler, the ticket to the trappings of a better life, to flat screen TVs and shiny new SUVs” (Kirby).  In Katherine Porter’s book Broke:  How Debt Bankrupts the Middle Class (2012), she introduces Kevin Leicht’s analysis of the same growth in household borrowing in the U.S.  “. . . [The] debt burdens of today’s families would have been unthinkable in the prior generation.  Leicht describes how debt is used as a tool to simulate social class.  He conceptualizes debt as a buoy to keep middle-class lifestyles afloat . . .” (Porter, 15).

The Debt-Matrix

            The picture of the middle-class that emerges is not very pretty.  We’re indebted because we want more than we can afford.  We use debt as an “enabler” to “simulate social class” – to fake being richer than we are.  We in today’s middle-class are not as wise as our predecessors, for whom “debt was a dirty word”, and who would look upon our debts as “unthinkable”.  But we can’t beat ourselves up for this collective lapse in judgement.  We’ve been subjected to powerful assaults by sophisticated ads that keep us dissatisfied; by “generous” banks eager to capitalize on that dissatisfaction through loans; and by the math riddles of “experts” who convince us that debt is a winning proposition.  And why save and wait when you can have it now?  The agents of debt in our society create in our perception a Matrix-like reality from which it is very difficult to unplug.
            A colleague who knows I write this blog said to me a few days ago, “Your blog is very helpful to people in the middle-class.”  I think that she meant it in its positive sense, but I also think she meant that it doesn’t apply so much to those who are less privileged.  She is probably right.  However, according to Broke:  How Debt Bankrupts the Middle Class, debt is overwhelmingly a middle-class affliction, as “more than 90 per cent of bankrupt people are members of the middle class” (Porter, 10).  Debt, it claims, “is ubiquitous in the middle class” (Porter, 15).  

Middle-class mission

            I believe that the call to all middle-class debtors is to get real – to embrace the laws of addition and subtraction; to resist the urge to present ourselves as better off than we are; to make an intentional break from society’s Debt-Matrix; to develop the patience for delayed gratification.  DH’s expression of what it is to be middle-class in our times is accurate.  We don’t have money, so we borrow it.  But middle-class characteristics are not set in stone, and we can change for the better just as we have changed for the worse.  DH and I are facing down our discomfort with debt reduction, and we’re helping to break and reshape the mould for our class. 
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First Slice Out Of Debt #3

DH = Dear Husband

Debt #3 – an “exciting” debt to pay off            

I remember thinking, months before we would start to take on Debt #3, the business debt, that it would be exciting to pay it down.  You know you’re in a pretty special head space when you think of debt repayment as exciting, but that’s how it is.  We decided in advance that when the time came for us to start in on this debt, DH would pay himself as little as possible from his business revenues so that as much as possible could be directed against the debt.  That way, we’d be using money taxed at a business rate – about half the taxation rate for personal income – and we would therefore be able to put more against it.  Furthermore, we would have variable payments each month, following the variable monthly revenues of DH’s business.  Exciting, right?
            I liked to think that we’d start off by giving Debt #3 a decisive blow.  In my wildest projections, I dared to imagine taking off $10,000 to begin with.  Although I predicted that we’d start paying it off in February – not December – I knew there would be a Christmas windfall to use.  I also knew that DH wouldn’t have to keep large amounts aside for business purchases because he’s at that sweet spot where he’s got all of his basic, major equipment.  Significant purchases will still be required from time to time, but not on a regular basis as they were in his first three years of operation. 

Debt #3 – a “fluid beast”

            DH’s business debt has been a fluid beast.  It started out at about $60,000 and he began right away putting $700 per month against it.  With major expenses, however, the beast grew, maxing out at about $90,000.  DH’s monthly payments would sometimes bring it down a bit, but then the need for another piece of equipment would shoot it right back up again.  By the time we started our journey out of debt in June 2012, Debt #3 sat at $80,800.  We decided then, as we took on Dave Ramsey’s approach to debt reduction, that we would not touch it until we had first paid off our smaller Debt #1 and Debt #2, but DH would not allow it to grow either.  Any business purchases he has made since June 2012 have been made with money generated, saved, and available from his revenues.
            So at the beginning of December 2012, Debt #3 still sat at $80,800. We had done nothing to reduce or add to the principal, and the monthly interest of $200 had been a regular business expense.  Taken in total over three years and four months of operation, it’s an expense that has added up to somewhere around $8,000.  Ouch! 

Too busy

           But at the beginning of December, we were on a high from our earlier-than-expected elimination of Debt #2.  We weren’t analyzing the numbers for Debt #3.  And how could we?  The Christmas rush was already well under way.  I have written before about our gratitude for DH’s gainful employment – about how much better it is for him to be too busy at times rather than to be underemployed and floundering.  We’ve experienced both, so we know.  But this December brought us to the brink in terms of how busy things became.  It’s a home-based business, and throughout most of the month, DH only pulled himself away from his office to go to bed at about 2:00 am – sometimes later.  It became normal for him to get more business on a given day than he usually takes on in a week.  “How am I going to do all of this?” became an almost daily question. 
            This kind of work volume takes its toll.  “All work and no play” doesn’t capture it.    “All work and no play, no family time, no church, no workouts, no social interaction, and no sleep,” is more like it.  For my part, I was running the household and parenting – as well as working – pretty much on my own.   And while we couldn’t help but be encouraged by the boom, I believe DH was completely accurate when he said, “If I had to work like this over the long term, I wouldn’t live very long.”  It was unhealthy physically, relationally, and mentally.  And although at its peak it lasted for only a month, it’s not a month we want to repeat.  Christmas was lovely – but we hovered over a breaking point in the lead up to it.

First slice out of Debt #3

            On one of the last days of 2012, mellowed by good sleep, rich and recent memories of friends and family over Christmas, and looking forward to a day on the slopes, DH and I put down our first payment against the business debt.  Never dismiss your wildest projections – because sometimes they turn out to be true.  Debt #3 now sits at $70,800.  The first slice we took off of it was $10,000.

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I would love to hear what you have to say. Feel free to share your thoughts, offer advice, disagree, or ask questions. (Disrespectful comments will be deleted.)

New Year’s Resolution: Personal Debt Reduction

 DH = Dear Husband
            There is something about the week between Christmas and New Year’s that leads many of us reflect upon our lives and resolve to make changes.  No matter how old I get, no matter how many New Year’s resolutions I’ve broken in the past, I find myself at this time of year on the precipice of a new beginning wanting to make things better.
            If one of the changes you’d like to make in your life is to reduce your personal debt, I encourage you to go for it.  When DH and I resolved to begin our journey out of debt, it was not at New Year’s but in May 2012.  Our start date was June 1, and if you can be motivated by other people’s experiences, then be motivated by ours.  So far, we have exceeded our goals.  In our first six months of debt reduction, we lowered our total debt (including mortgage) by over 10%.  At the end of November, we dug up numbers to compare our debt reduction in the six months prior to June 2012 with the six months after.  Income was identical.  Expenses were the same.  But our debt reduction increased by 640%.
            “How?” you might ask.  I certainly have.  The best answer I can come up with is that when you go at something with focused intention, when you reject complacency, when you fight against obstacles from the outside and sabotage from within, powerful change happens.
            Does everyone who resolves to lose debt succeed?  I’m sure the answer is “No”.  Gym memberships increase sharply each January as a result of people’s New Year’s resolutions for physical fitness.  By the end of February each year, most of these resolutions have fallen flat and the gym is less busy.  Resolutions do not have a great track record.  But we all know a few people who have done it.  They lost 70 pounds and kept it off.  They quit smoking.  They paid off the mortgage. 

Maslow’s Hierarchy of Needs ǁ Prudence’s Hierarchy of Personal Debt Reduction

I remember studying Maslow’s hierarchy of needs both in secondary school and in university.  As a high school teacher, I’ve even taught it to the next generation.  Maslow’s theory was that in order for people to reach their full potential, they had to have their needs met.  Basic needs had to be addressed before higher order needs could effectively be satisfied.  According to Maslow, a person would live a successful, fulfilled life to the extent that all needs were taken care of, from survival needs to needs for self-expression.  Usually presented in the form of a pyramid, Maslow’s hierarchy of needs looks like the diagram above.
In reflecting upon the success we have had so far in our journey out of debt, I have come to believe that DH and I have a few things acting in our favour.  I have put together a hierarchy like Maslow’s to help explain why we are succeeding.  I’ll call it Prudence’s Hierarchy of Preconditions for Successful Debt Reduction.  (I know that’s a mouthful.)
First Precondition
Maslow:  Food, water, shelter, air. 
According to Maslow, you can’t lead a fulfilled life if your survival needs aren’t met.
Prudence:  Pointed discomfort with personal debt.
According to Prudence, you won’t succeed at reducing your personal debt unless you feel a distinct discomfort with your debt load.  For years, DH and I lived with our debts in perfect comfort.  We could make the minimum payments and then some.  We had good incomes, good prospects, and we “deserved” what we were buying.  Then DH became a casualty of the hi-tech bust and our income decreased by over 50%.  The financial distress that we endured for over six years predisposed us to become very uncomfortable with our debts.
For some people, it’s a job loss.  For others, it’s a marriage break up.  And then there are those who don’t require their own personal experience of financial distress to feel discomfort with debt.  They’ve witnessed the hardships of their parents or friends.  Or they’re simply wise.  Are you decidedly uncomfortable with your debt load?  If so, you’re a good candidate for a New Year’s resolution to reduce your personal debt.
Second Precondition
Maslow:  Safety, steady income, insurance in the case of misfortune.
            According to Maslow, you can’t lead a fulfilled life unless you have basic security.
Prudence:  Stable, improving or innovative means of income.
            According to Prudence, you will have difficulty in reducing your personal debt if your income isn’t reliably steady or improving.  It’s not impossible though.  Some people sell their cars and even their homes to make it happen.  They simplify their lifestyles and take on part time jobs delivering pizza or cleaning office buildings.  There is room for gumption here.
            DH and I are very fortunate when it comes to this precondition.  After years of unemployment and underemployment, DH bought a franchise business (yes – more debt).  He’s in his fourth year of operation now, and it’s going very well.  His income has so far been stable, and there is every reason to believe that it will increase.  I taught summer school for the first time in fifteen years last July.  We sold some household items.  We stopped hiring cleaners.  I didn’t accompany DH on a business trip and we didn’t go away for our anniversary.  So with some stability, some innovation, and some lifestyle simplification, our income precondition is met.
            Do you have a stable or improving income?  Or if not, is there a part-time job you can take on?  Or big ticket items that you can sell?  Is there a significant way in which you can simplify your lifestyle?  If so, you’re a good candidate for a New Year’s resolution to reduce your personal debt.  
           
Third Precondition
Maslow:  Belonging, love, family.
            According to Maslow, you can’t lead a fulfilled life without the love of family.
Prudence:  Team support.
            According to Prudence, you will have a hard time reducing debt if you don’t have support from others.  If you’re married, you and your spouse must be unified in this effort.  If you have children, try to win their support – or at least acceptance (but don’t capitulate under their pressure if they don’t like the changes that come with debt reduction).  Whether you’re single or married, seek out friends who will encourage you and keep you accountable.  Find trustworthy allies with whom you can share your numbers, discuss the obstacles that confront you, and confess the ways in which you sabotage your own efforts.
            For years, DH and I experienced crazy amounts of marital strain as a direct result of financial stresses.  Last spring, when a friend of mine gave us the audio and print versions of Dave Ramsey’s book The Total Money Makeover, things changed completely.  DH and I became equally determined to get out of debt and we have been on the same page with regards to financial matters ever since.  While our children have not been entirely thrilled with our mission, they have at least come to accept it.  And we have shared our efforts with a few allies who have proven to be supportive and encouraging.  This blog is very important to me in terms of keeping me accountable and on track.
            Are you and your spouse on the same page financially?  Is this a goal you can take on together?  If you are single, do you have friends or family with whom you can share your numbers?   Will you seek out the support of people who are wise with money or who, like you, are trying to become that way?  If so, you’re a good candidate for a New Year’s resolution to reduce your personal debt.
Fourth Precondition
Maslow:  Self-worth, accomplishment.
            According to Maslow, you can’t lead a fulfilled life unless you develop the self-respect that comes from achievement in something significant to you.
Prudence:  Recognize your own power.
            According to Prudence, you will not succeed at reducing your personal debt unless you truly believe that you have the power to do so.  For years, our debt was just part of the scenery.  It was an inevitability.  Like the force of gravity and the changing of the seasons, it was something over which we had no control.  After we read Ramsey’s book though, we saw debt as something to conquer.  And after applying a simple strategy – start with your smallest debt – we developed confidence that we could do it.  In our first six months, we eliminated our two smallest debts.  We encountered significant obstacles along the way, but we won.  DH and I have very high confidence that we will be completely debt free in about five years.
            Think of your smallest debt.  I encourage you, at the very least, to resolve to pay it off.  When you do so, whether it takes a few months or over a year, I believe that you will recognize your power to tackle all of your debts.  If you have this confidence now – or if you give yourself the chance to develop it – you’re a good candidate for a New Year’s resolution to reduce your personal debt.
Fifth Precondition
Maslow:  Self-actualization.
            According to Maslow, you can’t lead a fulfilled life unless you have a complete knowledge of yourself and the freedom of self-expression.
Prudence:  Inspiring vision of life after debt.
            According to Prudence, you will have a difficult time finding it within yourself to reduce your debt if you don’t have a vision, to spur you on, of a better life without debt.  Ramsey wisely includes a vision of debt freedom at the beginning of his book, The Total Money Makeover.  As I listened, in the car on my way to work last spring, to his analogy of a tough bike ride up a steep hill (representing debt reduction), cresting the summit, and then embracing the exhilaration of the effortless ride down the slope on the other side, I was surprised at the tears streaming down my face.  DH and I don’t have a well-defined vision of life after debt, but we have the makings of one in this bike ride analogy.  We have vague hopes of travel and significant giving and generous provision for our children and material purchases.   But more than anything, we are inspired by the prize of freedom from the heavy weight of debt.  Already we can feel the relative lightness of having dropped 10% of our debt load. 
            Can you imagine life without debt?  Does an inspiring vision form?  If so, then you’re a good candidate for a New Year’s resolution to reduce your personal debt.
             I expect the gym to be full next week, but I’m sure it will settle down again by March.  Some of the newbies will stick around though.  And they will reach their goal of physical fitness.  If you feel burdened by the weight of your debts, consider a New Year’s resolution of financial fitness.  60% of Canadians retire in debt.  Canadians’ average debt to income ratio has risen to a record level of 164%.  DH and I were right in with the debt trend at this time last year, but now we’re bucking that trend, and our numbers signal real change.  Make 2013 your year to begin, and join us in a journey out of debt.
           

Comments are welcome

I would love to hear what you have to say. Feel free to share your thoughts, offer advice, disagree, or ask questions. (Disrespectful comments will be deleted.)

Newtown CT. U.S.A. – Standing With You In Grief

            Almost half of the readers of this blog are American, and this week, I would like to dedicate my post to you.  As details surface of the unspeakable horror that robbed twenty school children and six staff of their lives in Newtown Connecticut last week, shock and disbelief give way to profound grief and mourning.  Support is so powerfully and generously pouring in from your leaders and your fellow citizens.  Please know that your neighbours to the north also stand with you in grief.
            Across Canada, flags fly at half-mast.  Prayers are lifted up in churches, homes, and hearts.  Moments of silence are observed in schools and other places of work.  Tuesday morning, outside the high school where I work, teachers gathered together before classes started and listened to a reading of the name and age of each victim.  I’m sure that every one of us wondered whether we, if caught up in such a nightmare, would have it in us to act as bravely and sacrificially as our fallen colleagues to the south.  When the school day began Tuesday, all staff and students stood for a minute of silence to honour the lives lost. 
               One of the classes at Sandy Hook Elementary School was preparing to make gingerbread houses that day.  So many of the children were looking forward to Christmas.  What a staggering contrast there is between the cold-blooded massacre of children and the one whose birth we celebrate at Christmas.  He came into the world as a baby.  He distinguished himself as a child.  And when he was a man, he welcomed and valued children, and spoke with uncompromising vehemence against anyone who would corrupt and harm them.  He lifted up children as a role model for us all.  “Allow little children to come unto me, and forbid them not: for of such is the kingdom of God.” (Luke 18:16) 
The closer you are to the centre of horror, the more raw the devastation of its impact.  As much as everyone of my acquaintance has been shaken by this atrocity, I know that Americans must feel it more acutely.  Please accept my condolences on behalf of Canadians for your nation’s grief.  The sweet faces of the children you have lost are etched on our minds.  Their names are known to us, as are the names of the devoted staff who took bullets in an effort to protect their precious charges.  You are not grieving alone.  You have our support and good will.  May God give you comfort and strength, and may God bless America.

Christmas While Getting Out Of Debt

DD1 = Dear First Daughter
DH = Dear Husband

I love Christmas.  And while I generally recognize the wisdom of the philosophy “less is more” through most of the year, at Christmas time, I let more be more.  Our Christmas lights are up outside; we’ve chosen our tree and have wrapped the first garlands around it; I baked shortbread cookies and Nanaimo bars last week-end; I sent Christmas cards out in the mail two days ago.  DD1 will be arriving in less than a week!  It’s been a full year since we’ve had her home.  And plans are starting to evolve:  plans to go out with family, with friends from high school days, friends from work, friends from church.

We’ll be hosting Christmas dinner at our house.  There will be four generations of family, twenty-seven people in all sitting down to a meal here.  Everyone will bring a dish, and there will be turkey, stuffing, potatoes, gravy, cranberry sauce, bread, roasted vegetables, salad, and a whole range of desserts.  After dinner there will be ping-pong, pool, a game of charades, and singing around the piano.  This is what Christmas is like for us.  And I know that make us very, very lucky.
I remember a few years ago watching Cast Away with my class the day or two before Christmas break.  There’s a Christmas dinner scene in the movie, just before Tom Hanks’ character leaves on his ill-fated flight.  One of my students whispered to me, “Miss, is that what your Christmas is like?”  I didn’t understand what she was getting at.  Lots of food; lots of family; candles, Christmas lights, decorations – it looked very familiar to me.  So I answered, “Yes.”  She said, “I’ve never had a Christmas like that.”  She told me that her dad didn’t do anything special at Christmas time, and her mom wasn’t in the picture, so she and her friend would go to a movie theatre for the day, as they had the previous December 25th.   My heart went out to her.  I could feel her longing for what she was seeing in the movie.  When you hear of the difference it makes to give an anonymous gift or to buy items for a food bank or in some other way to make a donation for people who struggle and for whom this is a very difficult time of year, it’s not sentiment.  It’s very real.

Does our journey out of debt matter at Christmas?

So is it really necessary to allow considerations of debt repayment to enter the scene at this point?  For the sake of family and friends and celebration and giving, can’t we just put that whole thing on hold?  Just for one month?  No.  DH and I agreed that Christmas would be on a budget this year.  Two week-ends ago he was annoyed with me because I’d started shopping without our having established a plan of action.  I soon thereafter became annoyed with him because he would not put aside his mountains of business (very welcome business!) to sit down with me and actually define that plan. With fierce intention, we carved out a period of time and started in on the numbers.  Are we feeling Christmas yet?
I remember wondering in November, a month that included an extra paycheque for me and a business expenses claim for DH, what had happened to the very same windfall at the end of last year.  I realize now that Christmas happened.  DH and I spent somewhere around $2,500 on presents alone.  Eeek!  On top of that, there were five restaurant meals with friends and family.  There were ski days.  Movie days.  Shopping days.  And then there are always the expenses of wrapping paper, cards, host & hostess gifts, baking . . .  I hope I don’t ever become jaded, but the money flow at Christmas time can be obscene.  In fact it was for us last year.  And perhaps the year before.

 “Balanced abundance”

This year will be different.  Our plan is balanced, and allows for a finite abundance.  Presents will come in at about $1,000.  There are plans for two restaurant meals.  Ski days?  Movie days?  I hope so! But here’s the rule of thumb:  We will not go into debt to finance Christmas this year.  And that will be a first. 
“Remember what Christmas is for,” we are occasionally reminded at this time of year.  “It’s about Jesus’ birth.”  That doesn’t altogether clarify things for me with regards to monetary restraint though.  I understand Jesus to be someone who enjoyed gathering with friends to break bread and to celebrate.  He was all for giving to the needy.  And his birth was worthy of the lavish gifts bestowed by the wise men. I don’t want to be a debt-ridden dupe of the commercialized sentiment of Christmas, but I don’t want to stingy my way out of the celebration either.  The learning curve involved in our definition of a plan for Christmas has been sharp, but we’re moving ahead with it now.  More is still more; it’s just not in debt.

Comments are welcome!
I would love to hear what you have to say. Feel free to share your thoughts, offer advice, disagree, or ask questions. (Disrespectful comments will be deleted.)


Debt #3: The Business Debt

DH = Dear Husband
               Debt #1 was $8,600.  Debt #2 was $12,800.  Debt #3 is in a different league:  $80,800.  In fact, it’s right on the line past which Ramsey, in his book The Total Money Makeover, says, “hold the payoff on that size debt until later.” (Ramsey p. 131)  In his plan for becoming debt-free, which we are following, there is a point at which savings begin; first, an emergency fund, big enough to see you through three to six months without an income; secondly, a steady savings of fifteen percent of gross income to build up wealth/prepare for retirement.  During this second stage of saving, large debts like the mortgage, which for us is Debt #4, are paid off.  But more on that later.
               For Debt #3, there is a bit of a numbers game involved in determining whether we should start taking it on now or later.  Ramsey advises to wait if your business debt is larger than half your home mortgage.   Our business debt has been hovering around half of our home mortgage for quite a while.  At this time last year, it was slightly less than half.  Now, it’s slightly more – but only because we haven’t been paying it off as we’ve focused on debts #1 and #2 while our mortgage has continued to decrease.
               Furthermore, we have to consider our ages (49 and 53) and how close we are to retirement (as early as 6 years).  If we are to retire debt-free, it’s more important now for us to emphasize debt repayment than savings.  I do have a very good pension plan, so our prospects for retirement are not dire – so long as we’re debt-free.   All things considered, we’re going to start tackling Debt #3 now.

The Story Behind Debt #3

DH decided that he would no longer pursue a career in the hi-tech sector after he’d lost heart from a roller coaster ride of employment in three consecutive companies, each of which failed within a  five year period in the early 2000s.  (See post “Debt #2:  The Story . . .”)  Between the time he made that decision and the time he purchased the franchise that he has been operating for over three years now, he spent six years in a state of underemployment, trying to forge a new direction.  Within those wilderness years, he honed in on an area of interest that used his skills, but found that he couldn’t make a regular business or a substantial income from it. 
We took frequent long walks together through those years, and I remember the walk during which he first mentioned a franchise chain for the very business he was struggling to create.  It offered guidance and training; a formula for marketing and pricing; a prioritization of equipment to purchase; and most importantly, a network of people doing the same thing.  That was during my long-standing allergy to matters of household finances, and for me, it was a no-brainer:  “Go for it!”  For DH it was less certain.  We were already in scary debt, and the purchase of the franchise would add to it significantly.  But he was cornered, and he did recognize an answer to his business needs in this franchise.
Could we have managed better?  I think that in order to look at “what we should have done”, I have to go way back.  We should have paid off the mortgage on our first home before moving to a bigger one.  We should have saved up an emergency fund when we were both gainfully employed – I in my part-time teaching position and DH in his lucrative hi-tech position.   If we had done that, then we would have been in a paid-off home when the hi-tech bust came.  We would have had a fund to supplement DH’s low income through the wilderness years, and perhaps a significant deposit to put towards the franchise purchase.

Two sides to the “big house” issue

But here’s the kicker:  It’s actually a great thing that we had a big house.  DH runs his franchise out of our home, and there is no way he could have done so out of our first house.  He would have had to rent office space which is extremely expensive.   So in the end, I can’t say “what we should have done.”  I suppose it’s good enough to know what we need to do now. 
DH’s business is going well, and it’s like manna from heaven.  Over three years later, we continue to feel the exquisite blessing of hope that was birthed in that long walk when we first discussed the franchise.  We don’t take his gainful employment for granted as we did when we were younger.  And it’s OK that the paraphernalia of his business spills out of his office and into the living room, dining room, and basement.  It’s OK that our family life has had to absorb a regular heralding of customers by the doorbell or the business phone.  It’s OK that at certain times of the year, like now, he has to work more hours than we ever would have thought possible.  It’s so much better than the aimless wandering we did for longer than we could stand.

What we’ve got going for us . . . and what we’re up against

In terms of paying off the mammoth business debt, a few things stand in our favour:  First of all, the snowball effect is starting to happen.  We were paying roughly $80 per month just on interest for debts #1 and #2.  Now, that money will be added to whatever we can pay off Debt #3 each month.   And as Debt #3 lowers, the $200 monthly interest that we are now paying will also decrease and allow more and more to be paid against the principal.  Secondly, taxes on business income are 50% lower than taxes on personal income, so there will be more after-tax money to put against this debt.  Thirdly, there will be significant windfall opportunities as DH has a better-than-average month or takes on an unexpected and well-paid bit of business.  My hope is that we will have Debt #3 paid off in eighteen months, but I’m fully aware that it could take a lot longer.
A couple of things stand against us.  First of all, our fourteen-year-old van can’t hold out forever, and we know that at any time, we might have to put debt repayment on hold so that we can buy a used vehicle.  (We’re committed to doing so with cash.)  Secondly, our fifteen-year-old roof is due to be replaced.  So again, we might have to put debt reduction on hold to finance a new roof.  
But we’ve got the experience of the first six months of our journey out of debt behind us.   We’ve been toughened by the challenges we’ve faced so far, and we’ve been encouraged by our progress.  Our repayment of Debt #3 will unfold one way or another.  Let’s see how. 

Debt, DD3, and Justin Bieber

DH = Dear Husband
DD3 = Dear Third Daughter
               “How is [DD3]?” I asked DH over the phone before driving home from work last Friday. 
               “She came home from school, went right up to her room, turned off the lights, and got into bed.”
               Ugh!  Awful feeling for parents to know that they have been the cause of their child’s misery. 
               Apparently, in May or June of this year, DD3 asked us if we would buy her tickets for November’s Justin Bieber concert.  “And what did we say?”  I asked DD3, trying to recall it.  We had told her, when Bieber came to town two years ago, that she’d be able to go next time.  She answered, “You said that you couldn’t because of your debt.”  It sure sounds like something we’d say.  Especially in May or June when we were new to our journey out of debt and our knee-jerk response to any consideration was, “NO.”  There was a reason why DH and I couldn’t remember her request:  She’d never complained about our answer.  More ugh!

Passing the Torch of Good Money Sense to the Next Generation

DD3 has been remarkably tolerant of our mission to become debt-free.  She makes it clear that she’s heard enough money talk already, thank you very much, but she accepts the resulting boundaries with good grace.  DD3 gets a monthly clothing allowance from us, and in our efforts to teach healthy money habits, we’ve imposed some policy on her management of this allowance.  20% goes into a savings account; 10% goes to a charity of her choice; the remaining 70% is hers to spend on clothes or gifts or movies or treats.  So far, she wipes it out well before the end of each month, but she then awaits the new month with patience.  Eventually, we hope she’ll learn to pace her spending of that 70% better, but she’s on the right track, and she’s developed the practice of giving, saving, and spending.
               “What am I going to use the money in the bank for?” she asked when we first started this system.  I hesitated because I didn’t have a good answer.  Would she blow it all on a car some day?  Was she to use it to supplement the funds we’ll have saved for college or university?  Or were her savings to be for an even longer-term purpose?  For a house?  For retirement?  Retirement!  She’s not even in high school yet.  Isn’t that ridiculous?  I still don’t know.  All I know is that saving is a good habit to develop for all of the above.  Since I provided no answer, she suggested, “Will I use it to pay off my debts?”  I felt a surge of maternal warmth and mortification.  She had learned to accept debt as an inevitability.  And DH and I were clearly talking about it too much.  “Sweet-heart, we’re hoping to help set you up so that you never have debts to pay off,” I explained.  That thought sat with her for a moment before she said quite serenely, “I feel so secure.”

The Night of the Concert

               But what good is security when you’re a Belieber and you can’t go to the concert?  What comfort is a growing savings account when all of your friends are going and are talking about nothing else?  Her anguish started about a week before the concert, and it only grew with every passing day.  DH and I realized that we’d made a mistake.  We’d been too quick to say “NO.”  But what could we do?
               I walked into the house after work last Friday with a last-ditch-effort crazy kind of plan.  I talked with DH about it right away, fully expecting him to be against it.  “Go for it,” he said.  And I did.  I walked up to DD3’s room, turned on her light, and sat on the side of her bed.  She looked at me with the face of despair.
               “[DD3], I’m ready to do something crazy.  But there’s a chance it won’t work, so you’ve got to be prepared for disappointment.”  I gave her a brief explanation of scalping – very brief since I’d had no prior experience with it besides ignoring scalpers and wondering with some contempt why anyone would ever buy from them.  The concert was only two and a half hours away, so we had to make our decision quickly.  DD3 was game.  Within twenty minutes, we were ready to go.  Within another ten minutes, we were at the bank where I took out twice the cash DH and I had agreed upon as a maximum – just in case.  In a state of suspended animation, we drove into one of the heavily staffed parking lots.  “Mom, you have to pay for parking!”  DD3 exclaimed in concern.  Had I passed my guilt on to her?  “It’s OK,” I assured her, “I knew I’d have to pay for parking.  It’s alright.”
               Soon, we were part of a stream of adolescent and pre-adolescent girls and moms – a few dads, brothers, and good-sport boyfriends scattered in the mix.  I would have to make my move soon.  How did one go about finding a scalper?  What was I to say when I did?  Before I could formulate my script, he was stepping out to speak directly to me.  “Would you like to buy some tickets?”  He held them out in a tantalizing fan.  “Yes.” I answered.  Cheap seats or better seats?  “Cheap,” I said.  He pulled out two, right beside each other, right by the aisle, $100 each.  That was actually better than I’d hoped for.  I’m not adept at driving a hard bargain.  “I’ve never done this before,” I confessed to him.  He assured me it was alright.
               We had them!  The tickets were in our hands!  DD3’s sadness was vanquished by an incredulous happiness.  I was the best mom in the world, and this was the best night of her life!  Our $50 seats (I had a vague notion that I’d be paying double) were way up in the nose-bleed section at the end of the horseshoe.  We were at the aisle as promised.  And absolutely nobody was sitting to my right.  Thousands upon thousands filled the seats to our left and below us, and as the anticipation grew, so did DD3’s joy.  The advantage of sitting at the end of the horseshoe is that you can see back stage.  We exchanged waves with the people who performed in the opening acts before they stepped into the limelight.
                
               “Look!  He’s there!”  I pointed to the Biebs himself, getting into the zone all in his winged glory backstage before he flew out to begin his show.  The first high-pitched scream to pierce my ear was DD3’s, but soon the whole mass of female adolescence joined her as Justin made his entrance.  My future son-in-law kept his fans enthralled from start to finish.  

               Was I prudent?  I think I was.  It would have been wiser to have purchased the tickets ahead of time, but it’s prudent to acknowledge mistakes.  It’s wrong to give a knee-jerk “NO” to every opportunity – even when getting out of debt.  So I have no regrets.  DH and I made up for our mistake, and there was “one less lonely girl” last Friday night.

First 6 Months of Debt Reduction Revisited: WOW!

DH = Dear Husband
DD2 = Dear Second Daughter
               This morning, we had a rare hour of peace.  Not leisure – I was making apple crepes for Sunday breakfast and DH had work percolating in his office – but we could talk.  I reviewed the numbers I had written down yesterday.  How on earth had we averaged $3,500 per month in payments off of our debt?  Did I have the math wrong?  I checked.  It wasn’t wrong.  I expressed my disbelief to DH, and he said, “That’s impossible.”  But again, I punched in the numbers.
               Yesterday morning I wrote my post, as I often do, in the midst of interruptions that are a part of family life.  DD2 needed to be taken to her drivers’ ed. class; the dog needed to be fed and walked; customers were coming over to see DH . . .  The significance of the numbers I was writing didn’t have a chance to sink in.  Only this morning was I fully struck by how incredible they are.
               As DH and I tried to make sense of it, I asked him if we could access our debt numbers for the six months prior to the start of our journey out of debt.  With a little digging, we found them:
End of November 2011:  Total Debt = $261, 461
#1 New Car Debt – $12,826
#2 Old Car & Course Debt – $12,833
#3 Business Debt – $76,742
#4 Mortgage – $159,060
Start of June 2012:  Total Debt = $257, 400
#1 New Car Debt – $8,600
#2 Old Car & Course Debt – $12,800
#3 Business Debt – $80,800
#4 Mortgage – $155,000
In the six months prior to the start of our journey out of debt, we paid only $4,061 off of our total debt!
               Weren’t we making extra mortgage payments?  Weren’t we paying down the business debt?  Clearly not!  The chaos of our finances and our lack of communication undid every good impulse we had.  Now bear with me as once again, I review our progress over the last six months:
End of Novemeber:  Total Debt = $231, 400
#1 – $0
#2 – $0
#3 Business Debt – $80, 830
#4 Mortgage – $150, 570
In the six months since the start of our journey out of debt, we have paid $26,000 off of our total debt.  That’s an increase over the previous six-month period of $21, 939 – or of 640%!!!
               Yesterday, I estimated that if we hadn’t listened to and read Dave Ramsey’s Total Money Makeover, if we hadn’t started a focused journey out of debt, we would have paid off about $17,000 over the last six months rather than $26,000.  When I shared my estimate with DH, he said, “I don’t think we would have paid off that much.”  I have to agree with him now! 
               A particularly frank colleague at work who knows about my blog asked me, “So you have all this money to pay off your debt.  What were you doing with it before?”  I explained to her at the time that DH had only recently been earning a good income after years of unemployment and underemployment.  I said that only in the last while did we have the income that enabled our debt reduction.  I thought that I was giving an accurate explanation, but I clearly wasn’t.  Our income and expenses from December 2011 until the end of May 2012 were almost identical to our income and expenses over the last six months.  I taught summer school in July, but that’s the only additional income that we’ve had.
               I asked DH this morning, “Did you make an expenses claim last November?”  He did.  “Didn’t I have a three-paycheque month last December?”  I did.  What did we do with those extras?  “Did it all float into the ether?”  It did.
               We certainly haven’t been able to pay $3,500 off of our debt each month over the last six months, but each month we have been intentional about debt repayment.  Each month it has been a focus.  As a result, when the windfalls came – especially the windfall of November – we were inclined to put it all against debt, and combined with what was already very good, it boosted up our average payment to the $3,500 per month that I still can’t quite believe.
               “It’s a thing that happens,” DH said this morning.  “When you go at something with passion and purpose, it becomes greater than the sum of its parts.”  I can’t wrap my head around it.  I don’t get how it all adds up.  But it does.  What a great point at which to start the second six months of our journey!  What a great point at which to face the mammoth Debt #3!  We’ll keep up our focused intensity each month, through the highs and the lows, with the hope that the sum of our efforts will blow us away!