• Theresa Gray

Four years ago our finances were a mess! How do you compare?

Making more money doesn't always mean less debt

I time traveled this week! I didn’t even have to try to climb into a DeLorean to do it (which is good because I’m a LOT taller than Michael J. Fox). Instead, I met with a couple for financial coaching session and it was like traveling back 4 years in time and looking in a mirror. My clients were in the same financial position that my husband and I had been in years before. This was a smart couple, doing a great job raising their children, adding value to their community and working hard, but they had negative traction on their finances. They were feeling like they would have a student loan until they died. In short, they were really discouraged.

That was us too, four years ago. We never had much money in either the checking or savings account, and we had lots of debt. We would spend most of the money in the checking account each month to pay for our lifestyle (auto debit for mortgage, utilities, car payments, cable, cell phone), and would use credit cards to fund the rest of our lifestyle (dining out, shopping, entertainment, travel). Then at the end of the month when it was time to pay the credit card bill I would have a mini-heart attack realizing that the remainder in the checking account was not going to pay off the whole of the credit card charges for the month. I would pay off as much as I could, often wiping our checking account out, and rationalize how we would ‘catch up’ later. Of course, we never could seem to catch up! We would use the home equity line of credit to cover the deficit every few months, and hope for a tax refund to bail us out in April. Having debt was stressful and causing a lot of tension in our relationship (sometime I’ll have to write about “The Fight of ’06” (aka “You need to sell that stupid BMW, now”).

Does this pattern sound familiar to anyone??

Our life got much easier once our forgotten great great great Aunt Hilda died and left us a huge inheritance. All we had to do to get our 10 million dollars was spend the weekend in her spooky haunted mansion…..

Hehehe. We didn’t win the lottery. Or get an inheritance or even a raise in the paycheck. What happened is that we learned some great things that helped us to change our behavior!

Common Sense, Dollars & Cents

So how did we change our behavior? We had to stop overspending, learn to say “no” to ourselves, create a budget and then live on that budget. We made a written plan (a kind of flowchart) that we used to help us stay focused on paying off our debt. Where did we get the money to pay off the debt? We sold a few things, but we mostly created a margin between income and spending and that amount went into creating an emergency fund and paying off our huge debt. The end result is that we paid off $110k!!! (See these links for info on selling stuff and ideas to make extra money)