Reader Story: I’m Done with Debt
Published on - May 2nd, 2010 (Modified on - May 17th, 2010) (by J.D. Roth) This guest post from Andrew J. is part of the “reader stories” feature here at Get Rich Slowly. Some reader stories contain general “how I did X” advice, and others are examples of how a GRS reader achieved financial success — or failure. These stories feature folks from all levels of financial maturity, and with all sorts of incomes.
I am writing this for two reasons:
- First, GRS is like a big toolbox that I just discovered, already full of all the tools I need to build a strong, long-lasting financial future for myself, and
- Second, as a letter to myself, to remind me of where I am, at this point in my life, and why it’s worth working so hard to not be here again.
Let me start by giving you my history.
In the beginning…
After high school, I lived at home with my family while I attended one of the area community colleges to complete my Associate of Arts Degree. I took a part-time job designing and maintaining a website for a local real estate company. I had no real reason to save any money at the time because my financial obligations were, well, none. At least until tax time came…
I was being paid as an independent contractor so no taxes were being taken out of my check, and when taxes came due, I owed almost $2,000. I took another job at a casino in town so I could save up the money needed to pay off the debt, and ended up liking where I was, so I stayed. Still, I didn’t save any money. If I wanted something, I’d save just enough for it, then spend it all. I had a nice truck that cost me $550 per month plus gas (it took premium and got 12 mpg!!) and didn’t think much of it.
I got a promotion at work two years after I started, got a decent pay increase, and decided it was time to make an investment. I got together with two friends (they were a couple I had known for several years), and we started looking at houses. This was in 2004 when the market was booming in California.
We got our finances approved and bought a nice four-bedroom, two-and-a-half bath house in a quiet cul-de-sac in a small town. The loan we got was an interest-only loan, and even though we knew the drawbacks of this kind of loan, we told ourselves that we were only going to hold onto it for a couple years, then get rid of it.
Exodus
Well, within a couple of weeks of closing, the couple broke up and she moved out, signing the house over to us and walking away. Now we had to find roommates so we could afford the house. Within the first year, the other owner decided he didn’t want to be there anymore either and sold me his share of the house. He took off, and I had roommates for a while until I met a girl.
Up until that point, I had credit cards but never held a balance on them. We started traveling, going out to dinner often, and next thing you know, she moved in and the roommates moved out.
Now this was about the time the economy started to tank. My debt had grown to over $20,000, and I couldn’t even afford to pay the minimum payments on my credit cards. We put the house on the market but didn’t get one offer. Then our relationship ended and she took off after cleaning out our bank account. I was left in a house with a $2,000 monthly mortgage without property taxes and insurance and decided that foreclosure was the way to go. I stopped making payments on the house and started to concentrate on the credit cards. After a few months of paying toward the credit cards, I decided to declare bankruptcy and write everything off.
In November of 2009, everything was discharged and I was now debt free. I knew this was the perfect time for me to start saving. I moved back in with my parents so I could save as much as possible but then I had to have surgery on my ankle. I had insurance, but they didn’t cover all of it. I got over that, but just when I started to save up a little bit, the temptations of my friends got the better of me. I ended up going with a group of friends to Germany and Switzerland for New Years. I had a great time and am happy I went, but it wasn’t good timing. The good news is that, unlike everybody else in my group, I paid cash for the whole thing; when I got home, I wasn’t paying off the trip for several months like some of the people I went with.
I got to the point where I could start saving again. But when I filed my taxes, I realized I never changed my W4 form through work the previous year and still had my paycheck adjusted for being able to write off the interest on the house. This year I owed over $3,000. Again, I had no money in the bank. I was able to pay off the state but had to set up a payment plan for the federal return.
Revelation
It was about this time I started reading the different articles at Get Rich Slowly. I started to realize that I make enough money to save rather quickly; I just really suck at budgeting.
So, I put together a plan on how to get out of debt, giving myself a weekly allowance, and paying off my current debt very quickly. I’ve accumulated a handful more bills from my surgery, but after putting together a plan (on paper), I can see that it is very possible to have it all taken care of in three months, while saving at the same time! More then anything, Get Rich Slowly has shown me that it is possible, and to look at the Big Picture and plan for the future. Just mapping out my budget lets me know exactly when I can pay something off so I can be honest with whoever is billing me.
I know it won’t be easy at first. I’ve gotten used to spending a lot, and just running out and buying something if I want it. I’ve accumulated some nice things over the years, and now I’ve told myself to enjoy them. I was able to pick up a friend’s old truck that runs well for only $700. I also have a motorcycle I picked up a few years back, when I didn’t have a vehicle, so I could use it as cheap transportation. It works great and is very, very cheap to maintain and operate. My degree was in photography and I plan to get up and take more pictures.
All of these things can be done for next to nothing, which will allow me to not only save quickly, but also not sacrifice living at the same time. I want to go back to school and get my bachelors degree, and I don’t want any type of student loans to do it. Debt has run my life for the past ten years almost and I’m done with it. I know at first it’s going to be hard to tell my friends that I can’t join them every trip or get together once a week for a cigar but, just like me, they’ll get used to it.
Converted
I mapped out the rest of this year, being as accurate as I could, not taking into account any extra money that might come in, and have set a goal of having $10,000 in savings by the end of the year. I contribute to a 401(k) through work, and put in twice what they match just to build it up. I also have a Roth IRA I started a long time ago, but haven’t touched in almost seven years. It’s time I started making that money work for me.
I also have a gym membership and intend to keep it. Toward the end of my relationship, I got pretty unhealthy, and am now on a path to correcting that. I have a great friend that has pushed me to my limits in an effort for me to improve myself, and I am extremely grateful for him. I’ve noticed in the past few months since going to the gym that my self confidence has grown, and I just plain feel better about myself and also in the decisions I make.
In the future, the hardest part of all of this is going to be avoiding the temptations and reminding myself that it’s all worth it. Once I establish a routine and get set in it, it’ll be much easier for me. Without Get Rich Slowly to remind me it’s possible and to help push me in the right direction, I don’t know if I would have taken the first steps to get started. And for that, I say thank you.
Reminder: This is a story from one of your fellow readers. Please be nice. After nearly a decade of blogging, I have a thick skin, but it can be scary to put your story out in public for the first time. Remember that this guest author isn’t a professional writer, and is just learning about money like you are.
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Erin@80: An excellent story and thank you for sharing it.
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It is great that he learned so much from the path he went down. One good thing to remember is you can’t escape death and taxes, so not allotting money for them was frankly, ignorant. IRS.gov has calculators and estimators. Declaring bankruptcy is a shame though. I’ve been honestly trying to pay OFF my debt and know that when I do, I’ll have done the right thing. I think he should be a little ashamed of himself for leaning on the system so hard and now be putting so much cash toward himself and his retirement. Good luck to you but I don’t think you did the right thing. You took the easy road. Just an honest opinion.
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In all reality I thought the post was very truthful and honest! Unfortunately what was troubling was all the negative posts left by fellow readers, personally they are truly unnecessary. Seems like the old fashion spanking is still most peoples way of getting points across. People have been kicking each others asses for years and look at the world now, really? Andrew has put himself out in public asking more or less for help to cure his faults and mistakes, in hopes to not recreate them again in the future.
Can it be that some readers really need to stop and understand that not everyone has had a perfect financial history, is that not why this site exists. Negativity needs to stop, positive restoration to our fellow readers needs to be enforced more often. Stop waisting my time and yours with all the name calling and bashing and give some constructive influence to Andrew instead of pointing out what he already has admitted doing. Andrew posted his faults don’t be a parrot and repeat only negative text, try to be human and help his future instead of killing him for his past.
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Erin@80- Thank you so much for sharing your story
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J.D., I’ll bet you didn’t consider the fact that once people began sharing their stories as an article, the comments would get a lot more personal.
It seems that people are remembering what a certain person said in response to their article, or that another person took a certain tone, etc. Then they are rehashing these conversations about past articles in these new posts.
I personally don’t think that’s really constructive, nor it is a compelling read for others. Can we just stick to the article at hand? I don’t think we need to go back in time to complain that Tyler used to be mean, or that Erica uses a maid, or that William loves his cat. We get it. We talked about it weeks (or even months) ago. Let’s all move on.
(But I love you all – seriously, I do – the comments here are the best – they are just getting OT).
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Here’s hoping a lot of you will research and discover Dave Ramsey’s “Financial Peace” program, which allowed us to be debt free, and in a financial position to retire at age 52 when our employer offered an early out.
Now we are traveling fulltime in our RV. . .and supplementing our lifestyle by working and volunteering in campgrounds when we feel like it.
Budgeting is not easy, but it is worth it!
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Andrew – thank you for the transparency in your post. I do sincerely hope you have learned and will make the changes necessary to succeed.
Let me admit right up front that I’m with the anti-bankruptcy crowd on this one. Perhaps for a slightly different reason than any I’ve seen posted so far.
I believe with all my heart that your word of promise is your absolute bond. If you are a person of integrity you will always honor your word. I think deep down that is probably what galls many of us about bankruptcy – seeing the promises others have made thrown away.
Two thoughts on this: First, to those who say it is ok because the credit card companies are just big conglomerates and they can tolerate the write off… While others have made the points about the revenue loss for owners (many share holders are the everyday people like you and me) and the pass along of higher interest to those honoring their commitment, I believe that perspective is inherently wrong. The issue here is NOT who is affected by bankruptcy on the lender side but the fact that that borrower did NOT keep his/her word. They have violated their own integrity, they have cheapened themselves, hence the deep guilt people often feel in bankruptcy.
Second point, for those who have gone through bankruptcy for real desperate reasons – like Erin@80 – I have deep sympathy. My brother had a disastrous event occur and he too ended up choosing the bankruptcy route. However, remember you gave your word initially to repay that debt. If you choose to select a bankruptcy option I can respect that in desperate situations IF – and ONLY IF – you then work for as long as it takes to pay back every debt you had. A person of true integrity doesn’t walk away from their commitments even if the government gives them an out. In my brother’s case he could not find any relief to even restart his life – it was truly a desperate situation. By declaring bankruptcy it gave him the time to restart and in the last seven years he has repaid EVERY debt he had even though legally he had no obligation to do so. He felt that morally he was obliged because he had given his word – that in my mind is a man of true integrity.
By the way, if you choose such a road you will find some corporations have no way to take your money because it was written off. In those circumstances he donated the money to charities but he “paid” back every dime in one way or the other.
Andrew – if you want to honor your word and keep that place in your heart sacred – pay back every dime that you owe. Be a man of integrity, you will NEVER regret it.
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Another idea for a future article (I don’t remember seeing anything about this on GRS) is things to think about financially when divorcing.
If you haven’t been through it, you may not know that the divorce decree has no real bearing on what you’re responsible for paying. Your (ex)spouse may be “responsible” for making the house payments or the car or whatever, but if they don’t do it and don’t refinance, the creditors will come after you.
We went through this with my husband’s ex. Calls from creditors threatening to throw him in jail because his ex wasn’t making her car payment and they couldn’t find it to repo it. (No we didn’t have it.) Letters every couple months that his credit had suffered because she was late on her house payment. Finding out after about a year that the accounts he’d been making his payments on were all behind anyway because she wasn’t paying her half.
We were very careful about paying all of “his” debts on time and as agreed but it didn’t really matter in the longrun because her choices continued to affect him every day.
Quit claims deeds are meaningless. Divorce decrees are meaningless.
Since 50% of marriages end in divorce, I think this information should be a daily headline in the paper, but since that’s not going to happen, a GRS article could help.
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Tyler said “Meanwhile, the actual creditors involved have long since forgotten about it and hold no ill will (being that they’re generally not actual people anyway, it’d probably be impossible for them to hold ill will).” That’s actually not true, I ran a debt collection agency for 6 years, and I can tell you that every one of those debt collectors was upset that someone could do whatever they wanted with money and then just not pay it back. Why you say? Because debt collection along with telemarketing is one of the most horrible jobs you can do, but you do it because you have to make money somehow. So if they can drag themselves into work and pay their bills on time while getting yelled at and told they are the scum of the earth. Then you can to. Try to remember there are human beings on that telephone line. Oh and yeah we know a lot about every decision you made to get into the debt you were in, you don’t look very good on paper. It’s like watching a horror movie and saying “no don’t go in there, the killer is in there!” We Americans have had a lot of fun haven’t we, the nice car, the house. Yet none of us consumed responsibly to ensure that there would be jobs in the future. The top 1% thanks you for your money. I remember a time when you would boycott products that were faulty now because of American’s consumption patterns I know that when I go to a store just about everything in there is going to fall apart because of where it was made. And on top of it people are losing their manufacturing jobs. I am a college grad, and I have a good job. But I worry about the rest of Americans the new working poor. Think before you consume. I hope that truck was American Made.
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Oh I failed to mention that I too live in California. Orange County to be exact, and everyone here lived like this. Keeping up with the Jones. Well anyone can zillow the current foreclosures in California and see that this behavior was very common. I don’t blame him, when you’re surrounded by extreme wealth you think you can have a slice of the pie too. At least he didn’t dip into the equity of his home to live off, over and over and over again until he had to try to sell his home for double or triple what he paid for it during the peak.
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@ James 109 – While I understand it’s more difficult to be surrounded by wealth and lavish consumption and still live within lesser means, I don’t think this is much of an excuse.
It is yet another reason to teach children to be independent thinkers throughout their lives and avoid or at least question tendencies of the herd.
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Mark 111- Sorry, the part where I said I don’t blame him. I was being sarcastic. Understandably difficult to read in a comment field, you can’t hear my tone, and I agree with you.
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