Debt and Relationships

The New York Times published an interesting article in today's edition. "How Debt Can Destroy a Budding Relationship" examines the consequences of having a significant amount of debt and what couples should consider before getting married. In the first example a woman told her boyfriend early in the relationship that she owed $100,000. When he found that she instead owed $170,000, he walked.

She didn't lie about the number. She just didn't know what the real number was.

I mention this because it's virtually the same as my first two tips. I was charging here and there. But because I was able to make my minimum payments, I could stay blissfully unaware of the extent. But like the woman in the story, one day the real number caught up with me. In her case, her real number was an extra $70,000 -- almost twice what she thought. While my situation was nothing close to that, it was still a rude awakening.

It's scary, I know. I've been there. But you can't keep going with your head in the sand. If you haven't already, get a piece a paper, pull out your statements, and if you're like me and suck at math, grab a calculator. Meet your number -- and conquer it.

What Worked for Me

I'm happy -- and thankful -- to report that I am still debt free. It hasn't been a month yet; I'm still a newbie. I don't know what to do with myself, to tell the truth. For so long I defined myself according to my debt. All of my actions were driven by my credit card balance.

I am working hard to overcome it. In fact, I bought myself a present this evening. Nothing huge, but something to reward myself for my hard work. And it was hard work.

Which brings me to the point of this post. I thought I would share the tips that worked for me the last three-plus years. Please keep in mind that I am not a financial adviser. (If I were, I wouldn't have hired one myself recently.) What worked for me might not be doable for you. I'm single and I don't have any children, so I was able to forgo a lot of things that many people may not be able to do without.

Without further ado, I present Veronica's Top 10 Tips:

1. Realize the problem. You know the saying that ignorance is bliss? It is. As long as you don't know the exact number of your debt, you can convince yourself that it is inconsequential. You might know it's high, but not how high. Eventually, though, that number will catch up with you, and when it does, it won't be pretty. I have a clear memory of lying in bed one night and doing some quick math. I'd been charging a little here, a little there. It never seemed like a lot, and I was current on all my payments. But when I did some quick math, I estimated I owed nearly $30,000 between my car loan and credit cards.
   
2. Get acquainted with the true number. This one is closely related to #1, but it's a little more involved. You will refuse to get acquainted with the actual balance unless you realize the problem. But once you have realized it, sit yourself down with a calculator and your credit card statements. Who knows -- maybe you won't owe as much as you thought you did. For some of us, though, that number is a rude awakening. You may feel like throwing up afterward. Or you might have trouble sleeping a night or two (or three). But you can't tackle the problem if you don't know what the problem is and its extent. Which brings me to ...
3. Commit to tackling your debt. This goes beyond just telling yourself, "I want to be debt free." Well duh! Of course you want to be debt free. Who doesn't! No, the mindset you need here is, "I will be debt free." It's a shift in your thinking -- it means that you plan to work to do it. My commitment included starting this blog so that I would feel accountable for my progress. How you make the commitment is up to you, but you must do it if you're going to succeed.
4. Come up with a plan. People have different methods of tackling their debt. What worked for me was this handy debt reduction calculator, which allows you to plug in your balances and interest rates, as well as when you want to be debt free. The calculator spits out what you'll have to pay per month to achieve your goal. A word of caution: You must be realistic about your goal pay-off debt. Sure, I would've liked to have paid off my $21,000 credit card debt in a year, but do you know how much I would've had to pay per month? (Actually, I don't either, but I know it would've been a lot.) If you're going to do this successfully, you have to be realistic about your circumstances. If you try to pay more than you can realistically afford, you are going to burn out and quickly.
   
5. Stick to the plan. Yeah, I know that sounds like a no-brainer, but you'd be surprised how hard it is. It's the holiday season ... maybe I'll skip a payment. No. That is not allowed. Unless it is, say, a medical emergency, if you've set up a realistic plan, there is no excuse not to stick to it. In fact, challenge yourself: Instead of sometimes skipping a payment or paying less, try to pay more when you can afford to.
6. Do not forgo everything pleasurable in your life. Again, if you've been realistic about your payment plan, you will not have to eat beans and rice every night. You will be able to occasionally enjoy a dinner out with friends, buy a new item of clothing, get those cute shoes. This does not, however, mean that you can live beyond your means. Living beyond your means is what got you in this position in the first place. (And haven't you had enough of that?) But it does mean that you are a human being who is allowed some simple pleasures. If you cut out everything, you will get frustrated. And if you're an emotional shopper, getting frustrated is going to trigger your desire to spend.
7. Introduce challenges. Once you've gotten the hang of your routine, try to challenge yourself occasionally. Practice minimalism. See if you can go a week without buying beyond what is necessary. Later, try two weeks. Then maybe a month. This is not as easy as you'd think. You have to plan out your groceries. And forget about those cute shoes. But if you make it a game, it's actually kind of fun when you "win." Have a friend do it with you -- the support is beneficial and the competitiveness might just spur you on to victory.
8. Don't beat yourself up over mistakes. I beat myself up over that ridiculously overpriced haircut I got a few years ago. (Would you believe that "stylist" and her sister were recently profiled in More magazine? I laughed out loud when I saw her in there. People, the emperor is not wearing any clothes! Don't believe the hype.) But mistakes are not the end of the world and are no excuse for throwing in the towel. Learn from your mistake. Grow from it. Move on.
9. Accept that you will have to make tough decisions. This is a fancy way of saying that sometimes, many times, you will have to tell yourself no. There have been some major things over the last few years that I have had to tell myself no about. It sucked every time. But in the end, it turns out those things weren't right for me at the time anyway. Along the same lines, when I've had an influx of cash, I have paid down my debt instead of treating myself to something extravagant. For example, last December when I received my "extra" paycheck, I opted to pay an extra $1,000 on my debt. Sure, I could've deposited it into savings. Or I could've bought myself some much-needed new clothes. Instead, I put it toward the debt. But doing so put me ahead of schedule.
10. Never forget that you are not alone. You are not. You are not. You are not.