Tuesday, April 5, 2016

Help to Get out of Debt

In January of 1999, we came a sobering realization- without overtime money we could not pay our bills!  We rechecked the figures many times, but there was no denying the seriousness of our situation.  We were thousands of dollars in debt, without any savings, or enough regular income to cover our monthly expenses.
We started asking ourselves questions.  Mainly, how did we get into this predicament?  That was easy- we’d been raising several children and there had been many medical bills which even our good health insurance hadn’t covered.  Yes, there had been considerable expenses, but this really didn’t justify our debt.  We took a closer look at our spending habits.  Soon, it became apparent how we became so far in debt.  It really was easy.  We had been basing our financial decisions on emotion.  Our criteria was simply whether one of us “deserved” something, or with our income we “should” be able to afford it, or it was a “sale too good to pass up”.  “Get it if you really need it, but don’t buy it if you don’t really need it”, was our nebulous creed for managing finances.  We each bought what we thought we needed.  We spent money when we had it and charged when we didn’t.  We were amazed that we weren’t even deeper in debt!

After accepting our financial situation and examining the habits which led us into debt, we knew we needed some plan of how to pay off our bills. Realizing that neither of us really knew much about our finances, we began by listing what our income would be without overtime and what were our monthly bills.  From years of experience, we knew that tithing could not be juggled like any other bill.  Tithing was a sacred obligation and opportunity which had to be honored first.  Only then, could we expect the heavenly help we so needed with our finances.

Next, we made a list of our yearly bills and when we would need to pay them.  We put this information and our pay days on a one page yearly calendar, writing on it when insurance premiums were due, vehicle registrations, extra money for utilities, school fees, needed repairs, and any other expected expense.  We also wrote in approximately how much we would need to cover each expense.  We could see the pattern of our expenses all at once.  We were surprised at how many bills came due during the same few months of the year.  Since we didn’t have enough money in one month to cover so many bills, it became apparent that the only way we could avoid going into debt during those months, would be to save some money for these expenses from other pay checks during the year.  So, in the spring and summer, when we had extra money, we didn’t spend it, but instead saved the money for our fall expenses by having it deducted from our paycheck and put into our savings account.  Not going further into debt, made our fall less stressful and our Christmas happier.

Our financial discussions, and there were many, led us to something more important than just an understanding of our finances.  For the first time, we felt united.  We knew we were trying to do what the Lord wanted us to do and He would help us.  Also, we were both firmly committed to getting out of debt.  As an expression of this commitment, and after evaluating how much money we could possibly put on our bills each month, we set a definite goal of being out of debt in a year’s time.
We both knew if we wanted to reach this goal, it would take far more than just desire and a good understanding of our past habits and present situation.  We needed a financial plan that would guide us day by day.  We had heard that many people used such plans very successfully.  So, putting aside our fear of living a restricted life, we began our first budget.  Making our own budget form on our computer made it easy.  All we had to do each month was fill in the spaces.  We put in our income, then deducted from this amount our tithing, and our basic bills which included food, utilities, car expenses, and insurance.  We set a limit to the amount we would spend on grocery shopping, but were surprised when our food cost dropped by one third!  All we had done was begin doing just one large stocking up a month, with a few small stops in between for perishable items.  

After listing our bills, we put its due date and a number (1) or (2) beside it indicating out of which of our two monthly paychecks this bill had to be paid.  We put a space beside each bill so that we could check it off when it was paid.  We also printed the expected amount of that bill beside it and provided another space where we could write in the actual amount of that bill. We now knew what our monthly income was and what expenses had to be paid out of that income.  Everything that was left would be used to pay off our debt.

The few items that invariably came up each month, and which couldn’t be postponed, were recorded on our budget form.  Not only did this help us keep track of how much we were spending, but it helped us become more accountable.  In the past, we often looked at many entries in our check book and truthfully stated that we didn’t know what we had bought with that money.  Now, we had a record of not only how much we had spent, but what we had received in exchange for our money.  This accounting helped us to become more careful with our spending.,

All of our financial items such as our budget form, yearly plan, calendar of pay days, bills, how much we still owed, and checks and check register were put in one folder.  Besides convenience, this kept a constant reminder of our obligations and goals before us whenever we went to write a check, making it far less tempted splurge on some nonessential item.  We found that having to write a check for purchases, which we had to get from our folder, instead of using cash, made spending more difficult and record keeping easier.  A few checks could be taken with us when we went out, to be used for such things as grocery shopping, then recorded immediately when we returned home.  Having our goals and bills so often before us, helped us curb our financial binging.
Soon, we realized that putting ourselves on such a strict financial “diet” had some of the same problems as a regular diet- you begin to feel deprived and impulse buying results.  We knew that since we would have to stick on this diet for a long time, we needed to keep feeling “satisfied”.  We tried to keep needed balance in our lives by having regular “treats” such as going out to dinner.  By doing this, we didn’t feel like we “suffered”, and were able to make steady progress toward being out of debt.

Though we allowed ourselves a small set amount for a “fun allowance”, we cut out all other non-essential spending.  We realized that even small items can add up week by week, putting us farther behind in reaching our goal of being out of debt in a year.  Instead of  justifying our spending, now we asked ourselves if the purchase could wait until we were out of debt.  We found that most things really could wait.

Now that we had some money to put on our debts, the next problem was which debt to pay and how much to put on that debt?  We made a list of our different creditors, what we owed them, what their interest rates were, and noted if their rate would be going up in the future.  We knew that we had to quickly get our bills down within our regular income.  If the overtime ended, we would be forced to go into debt just make monthly payments.  Then, how would we ever get out of debt ?
We found that as long as we never wavered in our commitment to get out of debt, the Lord helped us. One idea was to change our high interest loans onto low interest credit accounts.  This put our required amount within our base income.  So, when we didn’t have any opportunity for overtime for a couple of months, or when the van needed unexpected repairs, we were able to pay all bills without going further into debt.

As we continued our examination of all our finances, we discovered that we were paying for double coverage on some of our insurance policies.  Also, some items were outdated for our current situation.  For instance, we had an old van we were just using for storage, but for which we were still making insurance payments.  We sold the van, and cut the redundancy out of our policies, then applied our new found money to paying off our debt. We were making progress!
Sometimes, when we felt overwhelmed by the amount of our debt, we were comforted knowing that we didn’t have to do this alone- the Lord would help us.  We also tried to keep a positive perspective.  After all, one year really isn’t all that long. We praised our progress, and encouraged ourselves by how few months we had left til we would be out of debt!  Reminding ourselves that we were just postponing buying something was another help.  It wasn’t that we didn’t have any money to spend, instead we had already spent this money. Now, we needed to pay back all the money which had been loaned us.  The biggest help was envisioning ourselves with everything paid off. We pictured how fun it would be to buy things with cash.  This vision kept us going through the year.
By the year’s end, we were debt free!  We were amazed!  It had seemed impossible just a year before.  We thought it would take us at least seven years to get out of debt, if ever.  Now, to our joy, we had no debt at all!

Immediately, we experienced the freedom the Lord has promised us, for my husband had an opportunity to change his job.  He had wanted to spend more time with his family, but felt obligated to work overtime to pay the bills.  For the first time ever, he felt free to take a job where he could spend more time home with his family.  If we had not been out of debt, we would have had to let this opportunity pass us by.

After making the initial adjustment of having money to spend again, we realized that if we returned to our old habits, we could be seriously in debt again in just a few months.  So instead of returning to the familiar and disastrous ways of the past, we unitedly adopted our proven new way of financial management.  Our view of a budget had changed from resenting it as a restriction to wanting the safety these bounds provided.  So, happily we kept our monthly budget and made a new yearly plan of expenses.  The only real difference is now we budget in some items that we would like to purchase.  We made a list of things we felt we needed to get or replace, prioritized them, and are purchasing them within our budget.  A budget which now includes a 10% savings plan so we will have cash for future emergencies.  We are feeling so much more secure, and it is such a relief not to have to worry about debt all the time!

Not wanting to tempt ourselves as we were getting out of debt, we closed each account as we paid it off, and destroyed their cards.  We also felt it would be safer from theft if we did not  have so many open accounts. Now that we are out of debt, we also destroyed all our other credit cards.  We had never noticed how many credit cards we had received from different stores.  True, we hadn’t used these cards, but there was an immense satisfaction in cutting those cards into little bitty pieces!  It reassured us that things were really going to be different from now on.  We did leave one card, with a reasonable, steady rate, for ordering tickets and other phone ordering.  Making sure to immediately write down on our budget form the amount we charge, keeps us from overspending and enables us to pay the amount we have charged that month like any other bill.   Though, with using our tax refund to quickly boost our savings, we hope we will never again need to resort to credit loans, even for emergencies.

We also continue to keep our check book balanced after each check, thus making sure that we both always know where we were financially.  Since financial discussions and planning are now a part of our lives, we experience greater peace and unity in our whole relationship. It is wonderful to no longer feel stress between us over money!

It wasn’t long til we were presented with our first major enticement to return to our old ways.  Our VCR had suddenly stopped working.  After some thought, we unitedly decided to buy another one soon, but only because we could stay within our budget.  A few other lower priority items would just have to wait their turn til next month. We had passed the test!  We weren’t even tempted to get a loan.  We really had changed!  It is great to be out of debt, and we are determined to stay that way!

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