A Mess And An Emergency

               Whenever we used to have cleaners come to the house, DH and I would first rally the troops.  “You’ve got to clean your rooms.  The cleaners are coming.”  This command would be met with complaints of, “I hate it when the cleaners come!” and “Why do we have to clean for the cleaners?”  Picking up mess to make way for scrubbing, vacuuming, mopping, and dusting is relatively easy, of course, compared with the hard work that follows it.  But it’s annoying.

Annoying Financial Messes

               I found that our efforts to navigate the budget for June, with the goal of paying $4,000 off Debt #1, were frustrated by annoying messes.  Our first mess had to do with credit cards.  There are certain expenses that we are set up to pay with our VISA, and while we have decided (under the influence of Ramsey) not to use credit cards for impulse shopping or for anything remotely discretionary, we do use them for gas, phone, internet, and any medical or dental bills that will be reimbursed through my work’s insurance plan. 
We have always been very good about paying off our VISA when it comes due, with only the odd slip up.  But now, we’re committed to doing even better.  Now we transfer money to our VISA account the same day we use the card.   So if we buy $48.17 worth of gas for the car in the morning, we transfer $48.17 to our VISA account that evening.  When our next credit card bill comes in, it will be at zero.  A noble plan, I think. 
We knew that our VISA bill would come in at the end of June, and that it would cover purchases made from the middle of May until the middle of June.  So we budgeted $500 to cover any messy credit card debt from the previous month.  Smart thinking!  Only it didn’t cover it.  Our May VISA debt amounted to $700.  Our debt repayment had to be lowered by $200.  Not too big a deal, but a bit deflating.
A second annoyance involved our bank account.  Our bank account is one in which we have opted to maintain a balance of $1,500 to avoid paying banking fees.  On the rare occasion when we’ve dipped below $1,500 – even once during a given month –  the fees have kicked in for the whole month with a vengeance. 
It’s a system that worked in the past, but it doesn’t work now.  Ramsey’s first baby step out of debt is to save $1,000 for emergencies.  I was considering our untouchable $1,500 minimum balance as our emergency fund – but such a fund cannot be untouchable.  So when DH found an account without banking fees, I thought that it was to make the $1,500 available for such cases.  It was no small deal switching accounts.  It required us to track down everyone who does automatic deposits and withdrawals to and from our old account – insurance, employers, utilities – and to send the paper work, faxes, and e-mails necessary to get them working with our new account.  It was like tidying up a mess to make way for the cleaning.  It was annoying.                                                                                                                                                           

Starting Off With An Emergency (and bad communication)

Now to develop that house-cleaning analogy, suppose that you have diligently done away with the mess, and an emergency happens.  You’re emptying the dishwasher and two plates slip out of your hands to smash on the kitchen floor.  All activity must be suspended until the shattered glass is dealt with.  Children and pets are at a safe distance; bare feet are shod; Spouse #1 gingerly sweeps up the shards while Spouse #2 gets the heavy duty paper bag to put them in so that they don’t pierce the garbage bag.  But where are the paper bags?  It turns out Spouse #1 used them for something else and thought that Spouse #2 knew about it.  Oh, oh.  Communication lapse.
We had an emergency in June.  Our first month on a budget and we had an emergency!  Our van, a 1999 Dodge Caravan with over 200,000 kilometers, which has been paid off for years, and for which we have enormous respect, needed suspension work.  Shocks and struts (don’t ask me what those are) and wheel alignment came to over $1,300.  No problem, right?  We had that $1,500 all ready to go.  But DH had used it to pay a tax bill.  I didn’t know that.  So again, our debt repayment was hacked.  Ugh.
For the month of June, we had hoped to pay a whopping $4,000 off of Debt #1.  But in dealing with financial mess, an emergency, and a lapse in communication, we could only manage $2,500.  I’m surprised at how disappointed I am.  But I really do think that our efforts in June will set us up for a better July.  So on to next month’s budget.

Behind Every Debt There’s a Story . . . And An Alternative

 DH = Dear Husband     
              DH and I have four debts, each incurred through different circumstances.  Ramsey’s advice never to borrow isn’t contingent upon circumstances though.  So I sometimes wonder how we could have navigated each scenario differently to avoid debt.  How would things have played out in the short term?  What would have been the long term impact?
               Wallowing in regret is a dangerous pastime, but it’s a good idea to acknowledge mistakes and recognize their ripple effects.  It’s a practice that might help us to make better decisions the next time “circumstances” present themselves.   As Oprah says, “When you know better . . . You do better.” 
               In a way, Debt #1 is my favourite debt.  It’s the smallest of the four debts, and it looks like it will be killed off quickly.  It also gave us a car we really like – a 2011 Ford Focus.  And we’ll be paying it off faster than we’ve ever paid off a car.  But it’s also a really stupid debt.  We didn’t need to buy that car, and we shouldn’t have.

The Story Behind Debt #1

               In May of 2011, the lease on our 2007 Ford Focus came due.  Ramsey speaks out strongly against leasing cars – but that’s part of debt #2, and so I’ll deal with it when the time comes.  For now, I’ll only say that I’d chosen the 2007 car rashly, and I didn’t like it.  It too was a Ford Focus, but it was the young male version – black and sporty with a moon roof and a big fat spoiler at the back.  The boys at my school liked it, but I, a middle-aged female school teacher, always felt an embarrassment driving it.  Furthermore, it was a standard – annoying for the stop-and-go traffic I had to deal with driving to and from work every day.  When the four-year lease was up, it was time to go into the dealership and decide what to do.
               DH and I went in intending to buy the 2007 Focus.  There was $8000 remaining to be paid.  But our salesman, a former student of mine, was very good.  DH, who has to do sales and marketing in his business, thinks our car salesman is brilliant.  “He’s got us figured out,” he said.  The 2011 Focus was soon going to be replaced on the lot by the 2012 Focus, and so the price was right.  For $20,000, we could choose it.   Would we like a test drive?  Red, automatic, no moon roof, no spoiler . . .  It was irresistible.  And it smelled so new.  And it drove so well.  And it was such a good deal after all.  Of course, my former student added, the 2007 Focus would be a perfectly good choice too.  In our minds, by this point, it was chopped liver.
               We went with the new car and felt very happy about it.  It is a great vehicle, but when I consider the alternative, the purchase was so obviously a mistake.  We committed to paying off our 2011 Focus at a rate of $1000 per month.  If we had decided upon the 2007 Focus, we would have paid it off at that rate by January 2012, and we would have been in a position to pay off the remainder of debt #2 (incurred by a course DH took) by June.   We could have started off our Ramsey debt tackle this month by taking on what is for us, debt #3.  Ugh!  I didn’t know the numbers until just now.   What a mistake!  If we had bought the 2007 Focus, I would have continued to feel that embarrassment and inconvenience, but we could have been free of $21,000 worth of debt.  Though as DH says, there’s no telling if we would have paid off the older car so quickly,  or if we would have continued to pay down debt at the same rate after we had.                So no wallowing.  Lesson learned.  We will humbly chop away at debts #1 and #2 with the full knowledge that they were completely unnecessary.  And the next time “circumstances” arise, we’ll do better.  

Money Sense: My New Awareness


ap·o·plec·tic  / [ap-uhplek-tik]   adjective


DH = Dear Husband
USC = Urban Schools Consultant

I run a “Word of the Day Challenge” at my school.  I love it when a student says to me after taking the challenge, “Miss, I heard ‘curmudgeon’ on the radio this morning!” or “Mr. Plummer used ‘apoplectic’ in English class today, and I knew what he meant!”  So often, the same phenomenon has occurred with me.  I learn a word, and then there it is in the newspaper or in a conversation.  I witness the illness of a loved one and then find out that half of the people I know are connected to someone who has suffered it.  I examine our society’s bad habit of debt and . . .
Recently, I’ve been surprised by my newly developed consciousness of money matters.  I have listened to Dave Ramsey’s Total Money Makeover CD; I’ve read parts of two money books; and I’ve worked on a one-month budget.  This small amount of study hardly makes me an expert, but it has resulted in the birth of a new sense in me:  money sense.  I usually listen to the radio on my drives to and from work, and it used to be that my brain would blank out when the news turned to the economy.  I was vaguely aware that interest rates were low and that several European countries were having a really hard time with their debt loads, but I was eager for the topic to change to something more interesting.  Now I find I’m riveted by much of the financial news. 
I’ve also become attuned to other people’s fiscal philosophies – picking up on cues relating to their money sense.  A colleague of mine recently talked of his plans to pay off his current car debt so that he could borrow money for his next car.  Another colleague told me that if she had my low mortgage rate (we lucked in at 2.99% for the next four years), she would take out a second mortgage and invest in a condo.  There is such widespread acceptance of debt as a tool in building up equity that we don’t even see it.  A real paradigm shift has taken place in me though, and as a result I’m actually noticing this acceptance for the first time.

USC, generosity & cash

I facilitate our school’s Christian group, and this year I was very happy to have the support of a visiting urban schools consultant (USC) who worked with our graduating students one day each week.  At Christmas time, our group was planning a fundraiser.  We had chosen to support Ratanak, an organization that frees girls from the sex trade in Cambodia, and as we were brainstorming on ways to raise money, USC suggested raffles for students and staff.  “Get a spa gift certificate worth $100 for the staff and gift certificates to a store worth $150 for the students.”  He then backed up his suggestion by taking $250 out of his wallet and handing it to me.  The students and I were stunned, but we went with it – and ended up raising over $600 for Ratanak.  USC also offered to treat our group to a feast just before he left for the Christmas break, and we ordered from a wonderfully delicious Chinese restaurant.  It was the best attended meeting our Christian group ever had.  Again, USC pulled out cash to take care of the bill. 
I talked to DH about USC’s generosity, and we were both rather perplexed by his welcome but decidedly odd behaviour.  After I listened to Ramsey’s CD, I put two and two together and asked USC, “You don’t have any debt, do you?”  He confirmed my suspicion.  I told DH about it, and later, as DH was voicing his vision of life after debt, he included this comment:  “And I’ll support organizations that want to raise money for charity by pulling out $250 and saying, ‘Here, buy some door prizes.’”  DH has never met USC, but he is inspired by him.  USC, by the way, is in his late twenties.

Debt-free colleague

Emboldened by my accurate assessment of USC’s money smarts, I asked a colleague the same question:  “You don’t have any debt, do you?”  He told me he hadn’t had any debt for the last fifteen years.  This fellow teacher is about my age.  He doesn’t dress in a flashy way; he rides his bicycle to get to school; and he packs a lunch for work.  Ramsey says that the rich so often live simply.  That is certainly the case with my money smart colleague.

Another debtor following Ramsey

Last week-end, I was away at a Christian women’s retreat.  My roommate was a woman whom I had never met before, but we very quickly fell into conversation.  Within minutes, we were talking about debt.  She and her husband are debt-ridden just as we are.  And she’s using the advice of Dave Ramsey to help her through.  She said she goes to her car at lunch hour, turns on the radio, and listens to his show.  Ramsey is not as well known in Canada as he seems to be in parts of the U.S., so it was amazing to each of us that we had the same mentor.  The song we sang many times over, as a kind of theme song during the retreat, was Mercy Me’s God With Us.  One line of the chorus is:  “The debt is paid.  These chains are gone.”  I have a new appreciation for that metaphor.   
If my students keep using new words, their vocabulary will develop at an exponential rate.  If DH and I keep fine-tuning our money sense, the debt will be paid, and these chains will be gone.

Here We Go!

DH = (Dear Husband)

The High of Starting

                If you’ve ever taken part in a road race, you know how effortless it feels at the beginning.  Surrounded by fellow runners, cheered on by well-wishers, adrenaline pumping, barely conscious of the legs beneath you . . .  It’s as if you are carried by the crowds through that first kilometer or so.  I have participated in a few 10 km runas, and I love that invincible high at the start.  Three quarters of the way through, I’m resenting the fact I ever signed up.  But that first bit is sweet.

              The most extreme “invicible” high I’ve ever experienced happened right after my first daughter was born.  I had delivered by C-section, and I remember lying in my hospital bed in the wee hours of the morning shortly after her birth, the effect of the epidural drugs just starting to wane, completely taken over by the first post-birth happy hormones ever to course through my veins.  A nurse came by with a shot of pain killer, and I told her it wouldn’t be necessary.  She assured me it would and gave me the shot.  I didn’t protest, but I was truly convinced that pain was not possible at that time – even though I’d just undergone major surgery.  An hour later, I was asking for the next shot.
              Now it’s June, and DH and I are taking the proverbial first step on our journey out of debt.   Psyched by a vision of debt freedom, we feel a happy adrenaline – a hope-filled, united, optimistic energy.  At this point, I can`t even conceive of a time when we`ll hit a wall.  Dave Ramsey, towards the end of his Total Money Makeover CD, says that many people want to quit when it`s time to face the mortgage debt.  As I listened to him, I thought, “That won’t happen to us!”

Our First Monthly Budget

              And we don’t need to think of that wall right now.  At this point, we can allow ourselves to give in to the high of starting and to get as much mileage out of it as possible.  DH and I have prepared our first monthly budget.  It was more complicated than I would have guessed.  How do you know how much a month will cost until you live it?  What’s the best way to account for big expenses that aren’t due this particular month?  I’m sure we’ll get more accurate in our budgeting with practice.  For June 2012, we’ve done our best.
              As a very first step, Ramsey advises not to put money towards paying off debts until you’ve put aside a very liquid $1,000 as a small emergency fund (the big emergency fund comes later).  As it turns out, we have the mini-emergency fund already built in.  DH has been maintaining a “reserve” in our bank balance for things like unexpected car repairs.  So baby step one gets a quick check mark.              In preparing our June budget, DH and I found that we didn’t have a lot of fat to trim.  That makes sense as we had to take many cuts off our living expenses when DH lost his first career a decade ago.  The most significant change we’ve brought about with our budget is to follow Ramsey’s advice about paying off the smallest debt first – with intensity.  Debt #1, incurred by our purchase of a new car last year, sits at $8,600, and  we’ve been paying it off pretty aggressively at the rate of $1,000 per month.  We have also been putting significant amounts of money against DH’s business debt and the mortgage (Debts #3 and #4).   With the aim of intensifying our repayment of Debt #1, we’re going to stop paying off the business debt and we’re going to stop topping up our mortgage payments.  These two changes mean that we will pay $2,300 off of Debt #1 in a regular month. 

              The thing is, this isn’t a regular month.  I get paid every two weeks, and as a result, there are two months each year when I’m paid three times.  It just so happens that June is one of those months this year.  Ramsey refers to the good financial luck that seems to happen to people once they start getting their act together.  This is one such piece of luck:  a bonus to start us off.  Thanks to it, we’ll be paying $4,000 off of Debt #1 this month.  Ramsey’s “smallest debt first” strategy is based on the fact that it’s encouraging to see results.  While $4,000 would barely make a dent in our $155,000 mortgage, it’s slicing Debt #1 right down the middle and gives us that “We can do it!” mentality.
              One fat-trimming change did offer itself to us just before we listened to Ramsey’s CD.  We were paying for a house cleaning service once every two weeks, and our cleaners quit.  Some people think it’s decadent to hire cleaners, but I don’t.  With two full-time careers and children to raise, I don’t think it’s a lavish expense.  I’d rather take the rare bits of down time that I have to be with my family or friends, to work out at the gym . . . or to write.  Furthermore, I hate cleaning.  Big time.  We haven’t hired anyone else though.  The $200 per month that we’re not spending on cleaners is going against debt.  It’s a lot of work for us (mainly me) to clean this house.  It takes a full day every second week-end to get it done, and I dread it.  But because I’ve got that starter’s energy and because I’m confident that the money will go to a worthy place and won’t just evaporate, I’m able to suck it up and scrub.
              The starter’s gun has gone off, and we’ve taken our first step.  We’ve got focused energy on our side, as well as the good luck that apparently blesses the wise.  If our budgeting skill is at all accurate, Debt #1 will be down from $8,600 to $4,600 by the end of June.  Onward!

Reflect Upon Where You Started; Acknowledge Where You Are; Move Forward

DH = Dear Husband
DD3 = Dear Third Daughter 
What are the messages about money that you absorbed in your childhood and have carried into your adult life?  T. Harv Eker, in his book Secrets of the Millionaire Mind, says that each one of us has a money blueprint that wields enormous power in determining our financial health, and that most of us are unaware of it.  He encourages his readers to reflect upon the “truths” about money that they came to accept unconsciously while growing up.

Where We Started

              DH, who is reading Eker’s book, sat down with me and told me what he had discovered in his reflection.  As he allowed his mind to go back to his childhood, DH recognized that for his father, money was always a problem – something to worry about; something ominous that needed to be controlled.  DH considered his own financial behaviour in light of this blueprint, and realized that he habitually maintained a financial balance that was tenuous.  When things were good, he made spending decisions that brought us back to anxiety.  So for DH, homeostasis, when it came to money matters, was a state of worry requiring control.  That was familiar.  That’s what he subconsciously gravitated towards.
              He asked me about my money blueprint.  It’s difficult for me to sum it up as neatly as DH did, but here it is:  My parents were excellent managers of money.  They raised five children on one income; bought second-hand cars; stayed clear of the pitfalls of materialism; sent us all to university; and gave generously to their church and other causes. But the topic of money was politely side-stepped in my family.  It was discussed in vague terms if at all.  To me, it was only clear that there was a pot of money somewhere.  I saw that money came from the man.  I knew that there was money when it was needed.  I learned, in my teens and early twenties, that there was money if I made enough of a fuss. 
              As a young woman, I was a disaster financially.  All the good role-modelling of my parents was subverted by that trick I had learned of getting what I wanted by raising a fuss.  In rebellion against what I had considered austerity, I enjoyed material purchases that I couldn’t afford, yet I was repelled by the base details of managing finances or acquiring any pot of money of my own.  That’s what the future man would attend to.  Carelessly in debt, I married a man who was always worried about money and anxiously wanting to control it.  Mind you, he was in debt too.  Eeeek!  We each made good salaries though, so we’d be fine, right?  You can imagine the respective shocks to our systems when DH lost his job. For him, there really was something to worry about, and he had lost control.  For me, there was no pot of money, and I, the woman, became the principal bread winner.
              Ugh!  These are humbling reflections.  We don’t need to wallow in them though; we just need to admit to them so that we know the point from which we’re moving on.  For starters, I have to lose my repulsion from the “base” details of financial management.  I have to work with DH to overcome our debts instead of leaving it all to the man.  He is amazed by my recent engagement in our finances, and he welcomes it.  It allows him to adopt a more positive outlook on what can be, and to cut loose the bonds of worry.

Where We Are

              So what are our base details?  I’ll start with the positive side – with savings.  Ramsey, in his book The Total Money Makeover, advises to devote any savings to debt repayment, as long as there is no penalty to pay.  Fortunately, we do have savings:
a) My retirement savings – I have a pension plan.
b) DH’s retirement savings – For sixteen years, DH contributed to retirement savings, but that stopped with the end of his former career ten years ago.
c) Education Savings – When our children were very young, we began investing monthly in an education savings plan that stops once the child is within a year of graduating from high school.  We’re only paying into it for DD3 now.
d) Tax-free savings account – Just before we listened to Ramsey’s CD, we opened a tax-free savings account.  We’re contributing $100 per month to it, and we’ve only made one contribution so far. 
              Savings a, b, and c cannot be cashed in to pay down our debts without severe penalties, so we won’t touch them.  Savings d can easily be cashed in, but DH wants to keep it because he sees it as an encouraging hint of things to come.  Although it’s only a few weeks old, we can already see a few cents worth of gains in it. 
As for our debts, here is where we’re at:  We have four debts that total over $257,000:
#1 New Car Debt – $8,600
#2 Old Car & Course Debt – $12,800
#3 Business Debt – $80,800
#4 Mortgage – $155,000
Dave Ramsey gives the strategy of paying off the smallest debt first and of “snowballing” towards the largest debt.  So right now, it’s all about focusing on debt #1.  With that in mind, we have our first monthly budget to finalize.  There will be information to gather and decisions to make.  For my part, I will dig into the details along with DH, getting my hands dirty with prices and sales and options.  We’ve reflected upon where we started; we’ve acknowledged where we’re at; now we’re moving forward.

Freedom From Debt: The Vision

I was on my way to work last week, listening to the last segments of Dave Ramsey’s audio book, The Total Money Makeover, and I found myself crying.  He was describing what he calls “the pinnacle point”.  At this point, the tough battle of debt repayment has ended, the practice of diligent saving has reached a place where money saved acquires more wealth than does income earned,  and financial freedom has been realized.  He compared it to a ride he frequently took as a child on his one-speed bicycle up a very steep hill – each push on the pedal a focused effort; the impossibility of the incline requiring him to crisscross the road for a gradual ascent; progress measured by the slow c-l-i-c-k, c-l-i-c-k, c-l-i-c-k of the baseball card stuck into his spokes . . . And then finally, that last push at the summit.  From the pinnacle point, he could see the easier road ahead.  It sloped downwards.  Effort gave way to anticipation, and exhaustion became exhilaration as he took his reward.
               I was surprised by my tears.  Debt repayment, after all, is dull.  It’s all about practicality and numbers and detail and doing without and being sensible.  But here was Ramsey presenting it as something life-giving.  I allowed myself a vision on that car ride to work last week.  In my mind, I fast-forwarded to the day my husband and I would make our last mortgage payment, and we’d be completely debt-free.  It was glorious!  I’ve known for years that our debt load has been a burden, but I didn’t realize how life-sucking that burden was until I envisioned it gone. 
               I want to remain anonymous, so I’ll refer to my husband as DH (dear husband), and I’ll use other codes for other key players in this aspect of my life.  DH is as captivated by Ramsey’s vision of freedom from debt as I am.  It is rare that we are on the same page when it comes to money matters, so we’re taking hold of this inspired unity, and we’re committed to going with it.  We will begin our journey out of debt in June, and we’re preparing for it.  It’s time for details. It’s time for numbers.  I’m psyched!
               Let me begin with some numbers to give context to the starting point of our journey:
49 – That’s how old I’ll be in a little over a month.
53 – That’s how old DH is.
3 – That’s how many daughters we have.  (I will refer to them as DD1, DD2, and DD3.)
10 – That’s about how many years I have to go in my teaching career before I retire.
16 – That’s how many years DH was employed as an engineer in hi-tech.
10 – That’s how many years it’s been since DH became a casualty of the hi-tech bust.
50% – That’s the percentage of our household income that we lost after DH’s hi-tech career ended.
3 – That’s the number of years it’s been since DH bought a franchise. 
               Ramsey advises to expect the unexpected and to prepare for it.  We didn’t.  DH’s career crisis hit us very hard in every way, including, of course, financially.  It’s taken ten years to reach a new normal, and our household income is still significantly lower than it was before the hi-tech bust.  We’re in a position now that’s so different from the one I envisioned as a young woman.  I imagined that we’d coast through our 50s with the ease of prosperity, the satisfaction of well-established careers, and the dignity of being in a position to give back to our church and community.  Instead, we are financially tight, putting a lot of time and effort into making DH’s new career succeed, giving very little in terms of time and money.  And we’re in debt.  Far too much debt for people our age.
               So we’re going to start our journey.  According to my rough calculations, it will take just over five years for us to get there.  But I’m not very good at math, and I know that the unexpected will happen, so I’m not committed to the timing – just the direction of the journey:  out of debt.  I plan to post once per week and to use real numbers to mark our progress.  Jean Nidetch, the founder of Weight Watchers International, discovered that she could more successfully lose weight when she shared the experience with others.  I hope that by sharing our effort to lose debt, I’ll increase our chances of success and offer support to others on the same quest.
               The pinnacle point beckons, and we’re ready to take on the uphill challenge.