The hardest part was coming to terms with the fact that we even had a debt problem. You see, for so many years of our lives we were managing our finances well. Expenses were under control, no credit card debt, no lines of credit whatsoever, money in savings, RSPs growing, manageable mortgage, and so on. Our finances were on auto-pilot and things worked very well.
In fact I remember 9 years ago when I wanted a new giant screen TV – I set aside the money from my income until I had enough and then I bought it with cash ($4K). Later I wanted to redecorate my master bedroom. I set a budget for myself, made a list of what I wanted, visited stores to compare products and prices, and eventually purchased all of the items I wanted, with cash ($500).
Then we decided to buy a brand new house and we managed to put together a $90,000 down payment on our new house. But owning a new house is expensive. We had this huge backyard that we needed to landscape, and landscaping in our city is super expensive. We reduced the cost of our landscaping project by 50% and again we paid cash.
I know, you’re probably thinking, why did you keep spending? Because at that point everything was paid for and we still had a very nice savings account. That, along with 2 nice pay cheques, made us feel like we could afford our lifestyle. I am not saying we were millionaires, but we were comfortable.
But the more money we had access to the worse we became at managing it well.
And I know we were not alone.
From what I’ve read about others, and from people I have spoken to, that is quite a common occurrence.
Actually I remember a friend from Australia telling me that when she and her husband made hundreds of thousands of dollars per year their money flowed in and out of their hands like water, and she never gave her finances a second thought.
But then she left him, took her kids and moved here and she barely had a dime to her name.
All of a sudden she needed to watch every dollar she spent and it was so stressful for her. For 20 years or so money was just there. She bought what she needed and what she wanted, without hesitation. But then her life changed and although she managed to find a job and a place to live here, her life definitely was not as cushy as she had become accustom to.
Our lives changed as well. We changed careers due to major health issues that were a direct result of those high stress careers. However, I can’t pinpoint the exact moment that we let our finances get out of control, but at some point during the past 6 years we started spending before saving.
And once you start spending before saving, it is difficult to stop.
First we got caught up in the buy now spend later programs. Then we started putting more on our credit cards then we could pay off each month. Then we opened lines of credit.
All huge money management mistakes, right?
Up until the beginning of 2012 we would ignore our debt and figure that it would just magically sort itself out. Other days we would cry ourselves to sleep thinking about all these dreadful things that would happen to us because we didn’t have any more money.
But then we finally decided that we couldn’t continue living like that.
Now We Are a Work in Progress
Now we are working towards reducing our debt and increasing our savings. We started this journey 17 months ago, and I’ll admit, some days are easier than others.
Some days I think: “I wish this was over and done with and that we could go back to the way things were”. But there is the lesson! We can NEVER go back to the way things were, right? And perhaps if getting out of debt was quick and easy, in a few years we would be in debt all over again because we wouldn’t have learned the lesson.
Tracking Our Spending
We now have a monthly spending plan that tracks every dollar we spend. We found ways to reduce our utility bills from $350 a month to $275 a month. We sold our house for a nice profit and put that money towards our debt. As well, we instantly began saving an additional $750 a month once we moved. Our van is paid in full and we happily share one vehicle. We share one old cell phone between the two of us and it is only for emergencies.
As well, by living in a rental home we are not tempted to spend money on the house, inside or out. And when things break down, like the washing machine last month, or the hot water tank last year, the property owner pays, not us. It is so much easier to stay on track when you do not have to spend money on things like that.
Do We Really Need It?
We do not go shopping unless we are going to buy something that we need right now. And even then, we question ourselves as to whether or not it is a necessity.
Struggling With Goals and Priorities
I’ve learned during the last 17 months that one of the key ingredients to managing your money well is to determine what your priorities and goals are. Recently Shannon Ryan wrote a post for my blog titled “Without Purpose, Money is Just Paper”, and while I understand her point, it is almost as if we find that we can’t see past our debt.
A number of times I’ve asked my husband about his goals and his priorities and he struggles with it, and I do as well. Our short term goal is to pay off our debts. But what are our long term goals and priorities?
Reducing Debt, Increasing Savings
While we are paying off our debt each month we are also putting money into our savings account. Rebuilding our savings account feels great.
When it comes to paying off our debt and rebuilding our finances we definitely are a work in progress. But the way I look at it is that if we had continued down the path that we were on prior to, who knows how bad our finances would be today.
I’m Sicorra. Connect with me on Twitter: @TacklingOurDebt and please visit me at Tackling Our Debt where I blog about ways to pay off debt, live a frugal lifestyle as well as ways to make more money.