Recession Proof Living

I often blog about the importance of paying off consumer debt, such as car loans and credit cards. It’s great advice, but the hard part is getting it done in real life, in a messy world where family members don’t always cooperate, cars break down unexpectedly, and you arrive at the grocery store without your coupons or your grocery money envelope.

To help fill in the some of these little-known gaps, I’m starting a series of posts about how my family actually did it. So without further ado, here is the first installment.

Part 1: How we started

The year was 2004. At the beginning of our journey out of debt, my family consisted of me, my husband Chet, and our three-year-old son “Bub.” We had approximately $25,000 in credit card and car debt, and we weren’t happy about it. At the time, Chet and I were both working outside the home, and we were living paycheck to paycheck. We were extremely lucky not to face any serious emergencies at that time, because we had less than $500 in savings.

We weren’t poor. We had good jobs and a 2000 square foot house, but we had a negative net worth anyway. In other words, we were broke.

Credit card minimum payments and car payments ate up about $600 per month of our take home pay. By the time we paid our house payment, utilities, food, and insurance, we had little if anything left over (or so we thought. . .more about that later). Nothing to save for emergencies. Nothing to invest for retirement. No college fund for Bub.

Our paycheck-to-paycheck lifestyle also created an extreme amount of stress. We fought about stupid things like how much to spend on clothing (because we had no money set aside for that, DUH!), whether we could afford to eat out or not, and how much to spend on gifts for family members. An unexpected car repair or a flat tire felt like a bomb exploding and blowing our fragile situation to smithereens. Paying the copay for Bub’s ear tube surgery was a major ordeal that took months to pay off. Our lives might have looked happy on the outside, but the stress we felt was huge.

I began reading The Total Money Makeover by Dave Ramsey and found that many of the ideas made sense. Debt is not a tool, I learned; it’s an unfortunate circumstance that should be avoided. Some of the advice seemed rather shocking at the time. I don’t need to have a car payment? Life insurance is not a good investment? Credit Cards are not a great way to earn airline miles? Fascinating stuff.

Then our church started offering Financial Peace University, a course and support group developed by Dave Ramsey’s organization. Since we approved of Dave’s basic principles already, we figured it was worth trying out. We might learn some interesting tidbits and make new friends. . .and maybe even reduce our debt a bit.

When we arrived at our first class, we thought we were pretty serious about getting financially fit. Turns out, we had no idea what “serious” really meant.

Stay tuned!