I hope this is not too long. As with a lot of you, I didn’t learn money management from my parents. They always seemed to live in debt. Fortunately, I got a good job after college and just spent my money freely. I was living at home, so I was helping out my family, too, BUT I never saved a dime. I have to take that back. The only smart thing I did was contribute to my 401K — that is the only savings I had for 8 years. Finally, I decided to buy my own place. I had $10k in cc debt and in order to be able to borrow enough for a decent condo, my parents paid that off. It was the first time I didn’t have cc debt, but that didn’t last long. Because I made good money, I just kept a cc balance. No big deal. I’d pay the minimum and keep going.
Then I met my (now) husband. He made half as much as me, had no debt, and even managed to have a savings account. After we moved in together, we co-mingled our finances and I learned how to live on cash only. We did pretty well. We were able to move into a house and buy an investment property.
However, two events have set us back financially over the past 5 years. DH needed to get his license and we decided to start a family. We used the proceeds from the sale of my condo, so that I could stay home for 6 months with our baby. A couple of years later, DH really needed to quit his job in order to study, and we decided that we could invest in ourselves rather than other stuff and took out an adjustable equity line on our house. BIG MISTAKE. We did not adequately plan for DH’s unemployment and didn’t have any contingency plans for the time it would take to get his salary back to previous levels.
We pretty much spent 3 years living on borrowed funds and then the birds came back to roost. We never really figured out that we didn’t have enough income to pay our expenses and things looked bleak. We cut every expense we could, but we were still in the hole. It got so bad that we had to ask for money from my father-in-law, but by then our credit was shot.
We tried to refinance the equity line a year ago, but the rates were just crazy, so we took out some of our 401k and paid off most of the debt. However, we just didn’t learn and started charging again. We just recently made another move that most will think is crazy, but we’ll see how it goes. Our credit score had gone up enough to get us a decent rate on a refinance and we went for it. We didn’t take out enough to wipe everything out, but I now feel we can at least meet our month to month obligations.
This is the year we wipe out cc debt completely and go back to living on a cash basis. I hope to have a clean slate at the beginning of 2009, so that we can start working on paying down our mortgages and possibly be debt free in 15 years. 🙂