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.