I spend a lot of time talking about money and debt but I have never disclosed exactly how much debt I have, in part because it feels like a private matter. Yet as I start to get serious about wanting to clean my financial house up, I am struck by the fact that most folks who choose to do financial housekeeping generally at some point are willing to share with others the level of debt they have.
If you are a long time reader, you know that I have grappled with the idea of filing bankruptcy. It’s a lovely idea but after looking at my debt distribution, bankruptcy may not be the best idea since the bulk of my debt is not dischargable in a bankruptcy…and as far as I am concerned the idea of completely trashing my credit without complete relief does not seem like a great idea.
So drum roll…the grand total of debt that the Spousal Unit and I have is $211,310.57! Yes, that is two hundred thousand dollars and no that does not include our mortgage. Actually $113,310.57 of that is my student loans, that is for both my undergraduate and graduate degrees. The other large portion is the $66,000 that is owed in back taxes. The early years of the Spousal Unit being self employed we were not as good with the taxes as we could have been and lets just say the penalty and interest rates the IRS charges actually makes Vinny the loan shark look like a bargain and that is a understatement. You start off owing Uncle Sam $5000 and it can grow to $10,000 real fast so you have a few bad years and what was a small sum becomes really unmanageable.
The remaining $32,000 is $12,000 remaining on the hubby’s student loans and a mere $20,000 in credit card and medical debt.
So that is where I am, suffice it to say I don’t have a spare $200,000 sitting around to pay these bills off and since our income started dropping two years ago, the picture is a tad bleak at times. Right now we are planning to take Dave Ramsey’s Financial Peace class, though having read his book, I am not sure we will be able to implement all his ideas exactly to move us along but I do think its a step in the right direction.
However thanks to the fact I am lowly non-profit servant, it looks like the US Dept of Education has some options aside from being in constant deferment where I might actually be able to get my loans paid off sooner rather than later…10 years versus the current 30 year plan I am on when I am not in deferment.
As for the IRS, they too have been willing to work with us since we have worked hard to not run up more debt and since they know all about us financially they realize we have no hidden funds. The IRS actually offers settlement programs and we are exploring those options since interest rates that accrue daily don’t get them any closer to getting the money from me.
As for the remaining debts, well that $20,000 is the only amount that could be legally discharged in bankruptcy but as we get serious with our not spending plans we are hoping this is where Dave Ramsey’s advice might help us as far as starting a debt snowball.
So there it is…I have laid my financial soul bare for all the world to see. I admit knowing there are friends and associates that read my blog I am a little nervous about this but truth is I need help. I need folks to know that I struggle with money in part because for years I could not face the fact I had a shopping habit. On some level I see my situation as similar to someone dealing with a substance abuse issue though my drug of choice is consumption. In the early years of our marriage we could have easily been saving 20-30K a year and had we been doing that we could have better weathered the financial storms that really started stirring when we moved to Maine 7 years ago and became a hurricane 2 years ago. Instead I assumed we would make more and more money and in the first 5 years of marriage amassed a lovely collection of designer clothes and other useless trinkets. At one point I was like Sarah Jessica Parker’s character from Sex and the City…broke as hell but looked great. I mortgaged our financial future to have weekly hair appointments at upscale hair salons back in Chicago.
I have come a long way, and I am proud of it but I know I have a lot more work to do, to realize I don’t have to spend money. That the temporary fix I get from that $4 coffee is just that temporary, instead saving that money to pay off creditors is a much better idea.
Now with the holidays coming up, clearly the potential to get in a jam is there but we are looking at ways to have a frugal holiday, most likely by using layaway at area stores to buy for the kiddos. The upside of not having much extended family is that we only buy for our kids and send cards to everyone else. We are also planning on visiting family and friends soon. I realize many would consider this a splurge but its important to me that my daughter know our family and since folks are willing to put us up, we can find ways to travel on the cheap.
So now that I bared my financial soul, while I have no plans to become a financial/frugality blog, I will be writing more about my struggle to manage my money. I have written a budget for Oct that looks great, things would get paid, we would be working towards our financial goals and it’s not complete deprivation…I can still have an occasional mocha at the evil empire. The thing is I have to stick with it and that’s where I am going to need some help. Its sorta the baby steps to a no-spend lifestyle.
So if you have any ideas or thoughts or want to share your own struggles with money and how you overcame it, I would love to hear from you.