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 includes mortgage payments.” I told him it didn’t. “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!

Debt #2 Eliminated! First Semi-Annual Report

DH = Dear Husband

On the right track – and it’s weird!

November has been a month of monetary abundance. (See post “Debt and Guilt . . .”)  A few weeks ago, we dared to hope that with our insurance reimbursement, DH’s expenses claim, and my three-paycheque month, we might be able to finish off Debt #2 by November 30.  As it turns out, we didn’t even need to wait for my third pay.  This past week, DH and I drove to the bank and eliminated Debt #2!
“Do you feel secure not having Debt #2 anymore?” DH asked me as we exited the bank.  We both felt a giddy light-headedness and a slight loss of equilibrium, but I thought he was joking.  “It’s been with us for at least five years, and now it’s gone.”   While driving from the bank to the wholesale grocery store we’d gone to a thousand times before, we sat in stunned silence.  DH got confused about where he was and almost made a wrong turn.  Getting out of debt is disorienting!  Who would have thought it?
The end of November marks the first six months on our journey out of debt, and it’s time to look back at our progress.  We’ve focused on Debts #1 and #2, but our mortgage has also decreased. 
Start of June:  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
End of Novemeber:  Total Debt = $231, 400
#1 – $0
#2 – $0
#3 Business Debt – $80, 830
#4 Mortgage – $150, 570
               We’ve paid a grand total of $26,000 off of our debt in six months!  If we had never listened to or read Dave Ramsey’s Total Money Makeover – if we had continued with the course we were on in the spring of 2012 – things would be significantly different.  Remember, we weren’t terrible with money at that time.  We were paying $1,000 per month off of our new car; $600 per month extra on our mortgage; and $700 per month off of the business debt.  On a regular basis, we were paying $2,300 off of our debt – that’s on top of the regular mortgage payment – each month.  That’s not bad.
               But not every month was regular.  We weren’t working together, mainly because I had a strong aversion to financial details; we weren’t communicating about money matters except to bicker.  As a result, we were never current.  Tax bills and Visa bills and regular monthly payments and sudden needs/wants were coming in chaotically, leaving us (mainly DH) with no sense of our actual financial status at any given time.  So we would occasionally skip our debt repayment, or even back track on it.  Last spring, for instance, DH borrowed $3000 from our line of credit for Debt #1 so that we could pay our property tax bill.  Although $2,300 in debt repayment, on top of the regular mortgage payment, was our goal every month, we did not always attain that goal.
               My guess is that if we hadn’t started this focused journey out of debt, we would have paid off about $17,000 (including mortgage) in the last six months.  That means we’ve paid $9,000 more than we otherwise would have.  We’ve increased our debt repayment by about 50%.  Last spring, we failed to maintain regular payments, on top of the mortgage, of $2,300 per month.  For the past six months, we have averaged over $3,500 per month.
               If you asked me how, I’d have some quick answers:  I taught summer school for the first time in fourteen years; I didn’t go with DH to his annual convention as I had the previous two summers; DH and I spent much less on our anniversary than we had the previous two years; we no longer pay for house-cleaning; we missed our camping trip due to DH’s illness; we sold some items on Kijiji.  But I’d have less tangible answers too:  I have faced down my aversion to the details of money matters and have become  a partner with DH in the management of our household finances; DH and I are recognizing our own agents of inner-sabotage – things like guilt and worry and self-identification with middle-class debt (more on that later); when there has been more money than we expected, we’ve resisted the temptation to indulge and have put more against debt; we’re learning to identify the fine line between needs and wants.
               At the beginning of June, I compared our journey out of debt to a 10 km road race (see post “Here We Go!”).  “If you’ve ever taken part in a road race,” I wrote, “you know how effortless it feels at the beginning.  Surrounded by fellow runners, cheered on by well-wishers, adrenaline pumping, barely conscious of your legs beneath you . . .  It’s as if you are carried by the crowds through that first kilometer or so.”  Well, we’ve completed the first kilometer.  One tenth of our debt is gone.  We’re doing so much better than I would have thought possible.  And now that the adrenaline is subsiding, now that the psyched determination of the start is quieter, now that we feel the effort we’re expending, it’s going to be our challenge to keep pace.  The second kilometer of a road race is still pretty sweet.  I say bring it on.

When Debt Falls Off the Radar of Significance

DH = Dear Husband
Every week before I post, with a couple of exceptions, I read my entry to DH to get his feedback.  For the first time, this week he gave it the thumbs down.  “I know what happened, and even I was confused,” he said.  “People won’t understand, and they’ll get bored.”  Believe it or not, I’ve come to appreciate his brutal honesty.  But I maintain the right to disagree.  And I do.  A crisis arose this week, the details of which I cannot disclose.  According to Dave Ramsey, the average household takes seven years to get out of debt.  Chances are, at least one crisis is going to take place in that period of time for any given household – a crisis that overtakes everything and pushes concerns about money and debt off the radar.  I believe it’s honest and of value for me to write about it.  But if I’m wrong, if you share DH’s opinion, please excuse me this once:
               There are times when money matters lose any significance.  Imagine, for instance, that your spouse goes to the clinic complaining of fatigue and that the doctor discovers a lump.  Or that you’re looking for a book in the room of your teenager, whose recent moodiness you thought was natural, and you find a stash of ecstasy pills under the bed.  Or that your sister calls you in fear of her husband – a man you’ve long considered a brother – because he’s been abusing her for years and things are escalating.  It’s none of the above, but you get the idea of the magnitude.
               Adrenaline takes over and you morph into a state of hyper focus and purpose.  Your plan of action is exactly what it should be, and you execute it with superhuman competence.  Only when the initial crisis is in hand are you overtaken by the cloud of shock.  Considerations of cheap parking or clever snack-packing to avoid purchases of food are not even remotely possible.  Every ounce of energy has to be channelled towards the monumental task of putting one foot in front of the other.  And it’s OK when you trip in your efforts to do so.  When you drive right into the median (no harm done) or when you can’t find the money you’ve just taken out of the bank machine because you’ve put it in the most unlikely compartment of your wallet.
               But this is a blog about financial management and debt repayment, and now that I’m able to step back a bit, I can see manifestations of the change in habits that we’ve adopted over the last few months.   I’ve been a long way from pristine.  My stoic resistance to buying treats gave way to a flood of Band-Aid spending.  Chicken wings, panini, donairs.  Egg rolls for everyone.  More Tim Hortons than I can count.  I knew even as I purchased that I was investing in the superficial for short-term feel-good value.  And I knew that it was OK to do so.  I can tell you that at an earlier chapter of my life, I would have invested more heavily in more lavish distractions.  A shopping spree perhaps.  Or an impulsive week-end trip.  We’ll only spend so much money on Band-Aids now – and that’s on automatic pilot, not conscious willpower.  Improved habits keep working even when you’re not thinking.  Even when you couldn’t care less about them.  They’re habits.
The cloud is thinning out.  I have returned to work and have found myself able to function – even to engage in joking banter with staff and students.  I can drive without incident.  At home, we’re making birthday plans and Christmas plans.  Once again we bear in mind such things as the discount hours when turning on the washing machine.  
I can honestly say that my outlook is one of hope.  As Leonard Cohen wrote so insightfully in “Athem”, “There is a crack, a crack in everything /  That’s how the light gets in.”  I don’t think I know anyone who hasn’t at some point or other in their lives suffered a shattering blow.  If we handle these times poorly – if we draw tightly into ourselves in defensive fear or anger– we keep the light out and become bitter.  But if we handle them well, with hearts that are vulnerable but open, the light reaches us powerfully, and we become better – more compassionate; more patient; more understanding; more loving and wise.  We become richer in the way that matters most.

Debt Reduction and Guilt: Facing the Sabotage from Within

 
DH = Dear Husband
Our attack on Debt #2 has begun in earnest.  This week, we received our reimbursement cheque from the insurance company.  (See post “Debt and Uncertainty . . .”)  That’s $2,589.15.  And then there’s the amount of money we set aside in October.  It was impressive, partly because we sold two musical instruments and an office desk that had been collecting dust in our house for years.  So another $2,872.  This month, we are setting aside $2,600 for our November debt repayment.
12,800
-2,589
-2,872
-2,600
$4,739
               But that’s not the end of it.  I get paid every two weeks, so twice a year I have a three-paycheque month.  This year, November is one of them.  Furthermore, DH, who works out of our home, is preparing his annual expenses claim this month.  It is possible that we will have Debt #2 completely paid off by November 30.  It is almost certain that we will have it paid off by the New Year.  Unbelievable!

Money Guilt

               When I first listened to the CD version of The Total Money Makeover, I was struck by Dave Ramsey’s assertion that personality traits become more pronounced as debt is discarded and wealth is gained.  In particular, I remember him saying that if you often feel guilty, you’re going to feel even more guilt as your wealth accumulates.  I thought to myself at the time, I’m going to have to watch out for that one.  Well here it is!  I feel a distinct discomfort about our good fortune this month. Even DH said one morning this week, completely out of the blue, “I don’t know if I’m going to be comfortable not having any debt.”  What’s with that? 
               In talking about this bizarre discomfort, DH and I both admitted to having thoughts that served to give a twisted reassurance: 
        Things are good now, but it will all balance out; we’ll probably have a really bad couple of months ahead.  Might as well make the most of it now.
        This is an impressive month, but we still have years of debt repayment ahead of us.
        We’re on track to pay off our debt in five years, but we’ll be so close to retirement by then that we won’t have a chance to build up our equity.
        My union is starting to take action.  There’s a possibility that we’ll lose some income for a while.
I have tried to figure out the root of my reluctance to embrace financial success.  In the end,
I would have to say that my comfort with financial struggle originates from faulty interpretations of the Bible.  Even faulty interpretations that I shed years ago, at least on an intellectual level, are apparently still at work in me:
              
Faulty interpretation #1:  All rich people are bad.  Look at the rich young ruler.  (Mark 10:17-27)  He refused to sell all his worldly possessions as Jesus asked him to do.  That’s when Jesus said, “It is easier for a camel to go through the eye of a needle than for a rich man to enter the kingdom of God.”
Revisiting interpretation #1:  Clearly, Jesus didn’t believe that all rich people were bad.  In his parable of the prodigal son (Luke 15:11-31), the father is wealthy enough to have servants, jewelry, fine clothes, and a fattened calf.   And he is a good guy.  In the parable of the good Samaritan (Luke 10:30-35), the hero is wealthy enough to transport a severely injured man to safety and to pay for his medical care and lodging.  Joanna, one of the women who supported Jesus financially (Luke 8:3), was clearly wealthy.  The centurion who implored Jesus to heal his servant acknowledged his own wealth and power.  And of him, Jesus said, “I have not found anyone in Israel with such great faith.” (Matthew 8: 5-10)  As for the rich young ruler, if we continue reading Jesus’ commentary, we see that it is in this very context – that of the difficulty of a rich man entering the kingdom of God – that Jesus says, “With man this is impossible, but not with God; all things are possible with God.” (Mark 10:27)
Faulty interpretation #2:  The Bible says that money is the root of all evil. (1 Timothy 6:10)
Revisiting interpretation #2:  Look up 1 Timothy 6:10.  “For the love of money is a root of all kinds of evil.  Some people, eager for money, have wandered from the faith and pierced themselves with many griefs.”  Money is not the root of evil; love of money is what brings the piercing of grief.  As for the management of money, there is a great deal of advice in the Bible on that topic, so clearly, it’s important.  Don’t borrow money because you’ll end up being enslaved to the lender; your character is of more worth than your money; don’t give your heart to money; before you take on an investment, make sure that you can pay for it; don’t be lazy or you’ll end up poor; work hard so that you won’t be in need; give to the poor; be generous . . .  Biblical monetary advice urges calculated wisdom combined with a guarding of the heart.  It warns against the foolishness that can lead to financial ruin just as it warns against the worship of money.  In his parable of the lost coin (Luke 15:8-9) Jesus tells of a woman who, after losing money, decides to “light a lamp, sweep the house, and search carefully until she finds it,” and then calls her friends and neighbours and says, “Rejoice with me.”  He doesn’t say, “She realized that it was only money, so it wasn’t worthy of her notice.”  It was worthy of her notice – and her time and her effort and her celebration. Nowhere in the Bible does it say that money is evil. 
               I’m going to stare down the guilt that is making me less that absolutely thrilled with our fantastic progress this month.  It’s a joy-killer – a life-muzzler.  It stems from a theology that is oppressive and inaccurate.  The woman in the parable lit a lamp, just as we have shone a light on our financial mess; she swept the house, just as we have tidied up our accounts; she searched carefully, just as we have searched for ways to manage better.   And when she succeeded, she rejoiced! 

Debt and Uncertainty: The Challenge of Being in Limbo

DH = Dear Husband
“I phoned yesterday,” I told the person at my work insurance company on Friday, “and was told that it would take three to five business days for you to wrap up my file.   But I thought I’d phone today just in case you already have it all resolved – and I can have a really nice week-end.”  Or a really bad week-end.  But at least I’d know.  The woman on the other end of the phone had to go away for a few moments.
To review our insurance drama, which has kept our debt repayment on hold for over two months, I have to take you back to the end of July.  For his business franchise, DH went to an American city for an annual convention, and in a stroke of bad luck, had a gallbladder attack twelve hours prior to his flight home.  At a nearby hospital, he had to pay a $2,500 deposit for a few hours of emergency treatment before going to the airport.  We later found out that bills for the hospital visit totaled $6,500.   After a flurry of e-mails, faxes, and phone calls to get our insurance claim going, we had to wait . . . and wait . . . and wait.  DH had had a gallbladder attack in May, so the possibility of a pre-existing condition  – which would eliminate our chance of any coverage – was being investigated.  There was little I could do besides periodically check in to see how things were progressing.

Grace in Limbo

The psychology of uncertainty is tough.  I have never been comfortable in a state of limbo. Whether in employment, in relationships, in questions regarding health or finances, I function best when I know where things stand.   I am sometimes struck by the grace with which certain people absorb the limbo in their lives.  They carry on day-to-day with relative serenity even if they’re waiting to find out whether or not their job contract will be extended; even if they’re not sure of the feelings of their love interest; even if the doctors haven’t yet determined a diagnosis; even while waiting for an insurance claim to be processed.  If it’s a grace that can be acquired, I’d like to grow some more of it because limbo is a recurring theme in every life.
DH is better at dealing with uncertainty than I am, so it was my challenge to face this state of limbo as best I could and not to let worry over it sabotage other areas of my life.  Dale Carnegie says that when you’re inclined to worry about something, consider what the worst case scenario might be, accept it, and move forward.  In our situation, the worst case scenario was that we would not be reimbursed for the $2,500 deposit and that we would have to pay an additional $4,000.  This would be frustrating by any standard.  We were feeling triumphant at the end of July, on the verge of paying off the $8,600 which was Debt #1, and to be stuck with the possibility of $6,500 in bills right then was extremely aggravating.  It played into the belief I apparently harbour deep in my subconscious that no matter how much you try to save or how much you try to pay off, circumstances will undo it. 

Up

There’s a brief playing out of this belief at the wonderful beginning of the movie Up, when Carl and Ellie try to save money for their dream of adventure in travel.  Over and over again, they put their spare change into the savings bottle.  Over and over again, they take a hammer to the bottle and smash it to pay for car repairs, medical bills, damage to the house . . .   And Ellie ends up dying before their dreams can be fulfilled.  I just watched that segment on Youtube to get the details right.  It still makes me weepy.

 Perspective

It took the words of a wise colleague to snap me out of my frustration.  (See end of post “On Hold”.)  She reminded me that DH’s health was the thing that mattered most.  She said, “Any problem that can be solved with money is not a problem.”  It seems like a false statement to someone struggling with debt, but debt is not really a money problem to begin with.  It’s a money management problem.  I decided then that no matter which scenario came to pass, I would keep managing well.  At a previous chapter in my life, I might have responded to the uncertainty of our situation by throwing up my hands in defeat, sticking my head back in the sand, and ordering take-out; but at this time, I determined to continue in my vigilance.  We have put money aside with the understanding that it would either go towards the additional $4,000 in medical bills or towards debt.  I would have to say that worry has not sabotaged other areas of my life.  Perhaps I am growing some of that limbo-absorbing grace.
The woman at the insurance company eventually came back to the phone yesterday.  “We sent your cheque out in the mail this morning.”  We’re getting reimbursed.  No more limbo.  Sweet, sweet news!  Debt #2, which sits at $12,800 will soon be attacked on all sides – by the insurance cheque as well as by what we’ve put aside for October, which has been awaiting marching orders, and by our November amount, which has yet to be calculated.  I’ll know the numbers by next week.  For now, I’m happy just to soak it all in and to know where I stand.  No hammer required.  The change in the bottle adding up!

Treats While Getting Out Of Debt

Temptation on a drive from work

I was driving home from work last Friday when a familiar craving hit me.  I wanted Chinese food.  I’d been there before, and I recognized the pre-existing conditions.  Days were getting shorter; temperatures had dipped; work had an element of extra stress.  The best egg rolls in the world are prepared at a restaurant only a little out of the way of my homeward route.  Two egg rolls with plum sauce would do it.  Maybe some sweet and sour chicken balls too.  But how much would that cost?  Probably over $10.  Wouldn’t that be a purchase I’d regret?  I’m prone to death by a thousand cuts, and wouldn’t this be one such cut?  The crunch of the eggroll beckoned until the last possible moment, but I made a left turn onto the highway and steered clear of the restaurant.
Triumph?  Not exactly.  I still had the craving.  And it was Friday.  Was life to be devoid of any charm just because I was getting out of debt?  Wasn’t it OK to have a treat at the end of the work week?  I remembered recently talking to someone who’d said that her friend, an extremely good money manager, treated herself to a 99-cent download of a song at the end of each week – and then I got an idea.  At the bargain grocery store nearby, I knew that there were frozen Chinese dumplings for just over $2.  I made another left turn.  This was triumph.  I had my treat, and I got to feel financially wise at the same time.

Treat envy

I’m always amazed at work to see the number of staff and even students who come into school in the morning with a Tim Hortons or a Starbucks paper coffee cup in their hands, often with a little paper bag on the side.  Is that a muffin?  I find myself wondering with slight longing.  Or a bagel?  I bring my breakfast and lunch to work, and I belong to a coffee club in which members take turns providing cans of coffee and cartons of milk and cream.  I used to spend about $2 per day on treats like muffins and coffee, and every once in a while I’d buy breakfast on my way into work, or I’d pop out for lunch.  Not anymore.  I do feel an “atta-girl!” pride in having adopted and maintained these financially prudent habits, but I become wistful at times.  Even while sipping perfectly good java from the coffee club, I can’t help but sigh at the sight of a happy colleague with a Tim Hortons cup in hand.
I could try to analyze this longing and overcome it, but I’ve found a way to navigate it.  There is a woman at work who doesn’t have a car, and almost every day, I drive her home or close to home.  She originally asked if she could pay me to help with gas, but I said “No”.  She was insistent about contributing in some way, so I took her at her word and made a suggestion.  I said, “How about a treat at Tim Hortons once in a while?”  And that’s what we’ve done.  This week, I had a coffee and a donut.  Last week, it was a cheese croissant and an ice-cap.  This is the most brilliant arrangement ever! 

The question of sweating the small stuff

I know that it’s possible to look at such musings as ridiculously nit-picky.  “Buy your egg rolls already!” you might say.  And there is a philosophical paradigm that makes my pondering of treats a misguided effort.  “Don’t sweat the small stuff,” goes the saying, “. . . and it’s all small stuff.”  I’m sweating small expenditures only as a means to an end:  to develop new habits to help me get out of debt.  And I’m getting out of debt as a means to an end:  to have financial freedom so that I don’t have to sweat the small stuff.   
In Dale Carnegie’s How to Stop Worrying and Start Living, there is an account of an ancient tree in Colorado that ends up dying an unlikely death.   “During the course of its long life it was struck by lightning fourteen times, and the innumerable avalanches and storms of four centuries thundered past it.  It survived them all.  In the end, however, an army of beetles attacked the tree and leveled it to the ground.  The insects ate their way through the bark and gradually destroyed the inner strength of the tree by their tiny but incessant attacks.  A forest giant which age had not withered, nor lightning blasted, nor storms subdued, fell at last before beetles so small that a man could crush them between his forefinger and his thumb” (Carnegie).  I always thought that Carnegie’s point here was that it is wise to deal with the small things – the beetles – because they can kill you.  But most people seem to interpret it as a message against allowing small things to worry us.  Hmmm .  .  .
I think that every person who is trying to pay off debt has to deal with the issue of treats in a way that works for him or her.  I do know certain individuals who absolutely never buy treats.  They’re the ones who say things like, “Why would I pay for something that I can make myself?”  But I for one am not wired that way, and if I thought that I had to shut down that side of life completely in order to succeed at debt reduction, I’d probably give up on my journey out of debt.  Fortunately, I’m finding that there is plenty of room for manoeuver in this area, and I’m spending a fraction of what I used to spend on it.   I’m choosing to keep the treat factor alive; I’m just modifying it so that I don’t experience death by a thousand cuts – or debt by a thousand lattes.  I’m dealing with the beetles so that they don’t do me in.

Debt and Numbers: Making the Stats Personal

 DH = Dear Husband

Canadians’ debt: ‘in danger zone’

               “Canada’s debt soars into danger zone”.  So read the headline for Barrie McKenna’s article in the Globe and Mail this past Monday (October 15, 2012).  Canada’s average household debt-to-income ratio has reached 163%.  Apparently, 160% is regarded as the threshold to avoid – the point that signaled economic catastrophe in the U.S. and Europe – and Canadians have surpassed it.  Only a few months ago, I was completely immune to statistics like this.  There was a certain numbness surrounding my brain that prevented the significance of numbers from penetrating to my consciousness.  But this week, I was eager to know:  How do we fit into those stats?
               DH and I started to punch in numbers, and we found that we were incredibly on the mark, hitting the average almost exactly.  There’s something comforting about being average – even if that average is in the “danger zone”.  Through my school’s online library, I have easy access to Statistics Canada’s Social Trends Magazine, and in researching the debt-to-income ratio, I came across an article written by Matt Hurst, April 21, 2011 (Catalogue no. 11-008).  In “Debt and family type in Canada” he touches upon a recent history of family debt-to-income ratio.  In 1990, it was at 93%.  In 1994, debt first surpassed income.  By 2009, it had hit 148%.  (Hurst)  This week, we’ve reached 163%.

Frogs and hot water        

“The story goes that if you drop a frog into boiling water, he will sense the pain and immediately jump out.  However, if you put a frog in room-temperature water . . . and . . . gradually turn the water up to boiling, the frog will not sense the change.  The frog is lured to his death by gradual change” (Ramsey, 13).  This illustration, from Dave Ramsey’s Total Money Makeover, provides a lens through which to view the rise in Canada’s average debt-to-income ratio by 70 percentage points over 22 years.  The water is getting hot, but we’re in denial.  It’s been so gradual, and it still feels comfortable.
My comfort at being average was lessened by a sobering fact.  At 53 and 49 years of age, DH and I are too old to be average.  “Younger Canadians (aged 19 to 34 or aged 35 to 49) were more likely to have debt than Canadians aged 50 to 64. This corresponds with the lifecycle. Younger households take on debt to purchase homes and related goods early in the life cycle and then spend the following years paying off the debt. Trends in average debt levels generally mirror these results:  debt levels were lower for 50- to 64-year olds . . .” (Hurst, 43)  Any remaining vestiges of comfort in being average disappeared when I realized something else in my research.  DH and I had the math wrong.  We had been dividing our debt by our gross income.  To get your debt-to-income ratio, you have to take your total debt (credit cards, line of credit, car debt, mortgage), and divide it by your after-tax income.   After punching in those numbers, I find that we’re way above the average.  We’re at 226%.   Ugh!  

A generational divide

A handful of people at my work know that I write this blog.  After my radio interview was aired at the beginning of this week, one of my colleagues in the know approached me and said, “People aren’t going to be able to relate to you.  Your debt isn’t that bad.  You have a mortgage and a business debt – those aren’t bad debts.  Some people live pay cheque to pay cheque and have creditors calling them . . .”  Her response differed sharply from my mother’s.  When Mom found out that our debt was over $250,000, she said she was stunned.  “You and [DH] will have to live like you’re poor.  You won’t be able to retire.  You’ll just have to keep working.”  What accounts for this difference in attitude?  It’s a generation thing.  My colleague is in the 34-49 age group, and she’s comfortable in her own debt, which she tells me is bigger than mine.  My mother and father, on the other hand were debt-free by the time they’d turned 40.   I find myself appreciating the wisdom of my parents.
Another colleague at work quit smoking after 32 years, and this summer, she celebrated her first anniversary of being smoke-free.  I asked her what had accounted for her success.   She had tried several times to quit smoking over the years.  What made this time different?  “I was sick of being sick,” she said.  On other occasions, she had tried to quit because her doctors had told her to.  This time, she quit because she wanted to.  Although the hazards of smoking have been indisputable for decades, she had to be personally convinced of them before she could succeed.  I think it’s the same with debt.  The alarm bells are ringing.  We’re in the danger zone.  But unless individuals are personally convinced, we won’t do much about it. 
I remember thinking, after DH had lost his hi-tech job and we were more strapped and stressed than we could stand, “What is God doing?”  I’m a Christian, and the Bible says that God loves us and that even hardships are for our benefit.  I could see no benefit to the crush we experienced.  But I do now.  It made us sick of being financially sick.  It took that kind of a trial by fire for us to feel the heat, and it inclined us to be receptive to an invitation out of debt.    The water is way too hot.  We’re jumping out.