Recently in an e-mail, I was asked how do I do it? What a loaded question! It was asked about my spending habits and how can I live so cheaply. How can anyone answer a question like that in one e-mail? The whole history of how I learned to live the way I do didn’t happen overnight.
If it wasn’t the idea of looking at bankruptcy, my life probably would have never changed. I would have kept spending money like there was no tomorrow. In 2010, I was $65,000 (£49,000) in debt, with no means to pay it off. I had no savings and a rather small 401-K. A mortgage that we were upside down on, three cars that were junk, and a home that was falling apart. At the age of 52 I was ashamed by how irresponsible I was and how my habits with money were chillingly immature.
Due to this financial nightmare my marriage ended early in 2010. I left our home which had a three bedrooms, two baths, two car garage, and an acre of land and moved into a 450 square foot apartment. Even that small apartment wouldn’t have been possible if my landlord didn’t hold my check for the first months rent.
The only furniture I had was an old couch that was left behind by the previous tenants in my new home. Those first two weeks I lived off of PB&J’s, cheese sandwiches, and hot dogs. I didn’t have a TV, so after work, my time was filled with many hours of reflection. I realized that my circumstances would only change when I made some goals.
Until this crisis I never had any goals. Go to work, go home, and repeat. It was a depressing way to live. And during this time of reflection I came to see that not only had my adulthood been this way but my whole life. Growing up, instead of going to work, I’d go to friends, or the bar, or anywhere else, just so I didn’t have to look at what was going on inside of me. It was through these reflections that I began to understand my alcoholism.
My early goals all revolved around money. The first one was to not bounce any more checks. I lived by bouncing checks. At $35 for every written bad check it drained my finances really quick. Again, with these reflections, I began to see that the $10 of gas I put in the car to get back and forth to work was actually $45. That’s if the bank cashed the check. If they sent it back to the store where I got the gas, another $25 was added to that. So that $10 could cost as much as $70. Yet, I never blinked an eye at doing this. The idea of making a budget or watching my pennies never entered my mind.
To achieve this goal, I started rounding up the checks written and rounding down my deposits. So, if I wrote a check or used a debit card and the amount was $10.01, in my ledger I recorded it as $11. And when I made a deposit for $100.99, in my ledger it was recorded as $100.
I quit balancing my checkbook when the statements arrived and got into the habit of quitting using checks or debit cards when my balance showed $10. Within three months, my checking account had close to $200 more in it than the balance showed. This simple step also started me on my second goal, which was to start a savings account.
Slowly, I began seeing that I had a little extra money in my pocket on payday instead of being broke. Now it was time to start paying back my debts. The largest debt was my mortgage. The ex-wife also left the house and it sat empty for a couple of months. So I wrote the bank and said I was walking away from it and releasing all claims to it. This save me some money in legal fees and time with court proceedings.
I roughly owed $45,000 (£34,000), the bank ended up selling it for $36,000 (£27,000), so I owed $9,000 to the bank, which they processed as an income and I owed taxes on. So with that cleared, I began working on the rest of the debt. Which was from credit cards and medical expenses.
By now my credit was shot, so I really didn’t care about credit scores or loans. All I wanted was to get out of debt. There was roughly 12 different creditors that I owed money to and I began paying off one at a time. I started with the smallest and paid on it and only it until it was paid in full.
This might take me a couple of months to do yet I kept my focus on just that one bill. It didn’t matter how many threatening phone calls or letters I got in the mail. It was just one bill at a time. When that bill was paid, I went on to the next and so on.
Paying this much debt off this way can be defeating, as in there never seems to be an end to it. So, I created an award system to go along with my hard work. Once a week, I’d treat myself to a coffee and a sweet roll. This used to be a daily affair, but now I felt like a happy child being rewarded for a job well done. That $5 expense brought me more happiness than it did when I had that luxury every work day.
After every bill was paid, I’d treat myself to a home delivered meal – usually pizza! Then when a large bill was paid, I’d treat myself to a night on the town and finish it off by staying in a hotel. All simple things, but when you had nothing they are extravagant gifts.
That’s the thing with debt. We can feel we are entitled to things that are actually luxuries and not needed to make our life more enjoyable. A simple example is the computer program – dropbox. You can use it for keeping photos, documents, and whatever else your heart desires. It can add up in cost and for what a person uses it for can be quite expensive. So I use the free version. Just to move photos from a tablet to a tower or wherever. More times then not, I’ll get messages saying my dropbox is full. If I really want to keep what is stored in there I’ll get a flash drive for a couple of dollars and put it on that.
I’ve come to realize that the things that I felt I needed to have were nothing more than luxuries. Now that I live near a major city in England, I don’t need a car, there is more than enough ways to travel without needing a car. Money saved on gas, insurance, maintenance, and taxes.
I didn’t need cable TV. I used rabbit ears or watch TV on the Internet. Money saved $35 and up a month. I didn’t need a fancy phone contract. Now I use pay as you go.
There are only two ways to get out of debt. Increase income or decrease expenses. I tried increasing income and all I ended up doing was to also increase my expenses. The only way for my to get out of debt and manage my money was by decreasing expenses. I got to a point in my life that I was tired of working for money. I wanted money to work for me.
Along the way, goals change. Mine went from getting out of debt to moving to England. Now that I’ve lived in England for four years I have new goals. One major, life changing goal, that for now I’ll keep quiet about. When it happens I’ll share it from the roof tops because it will prove to me that managing money in a constructive way can bring rewards that not to long ago only seemed like pipe dreams.
In 2010, I was $65,000 in debt, with a credit score of 355. By 2020, I celebrate my fourth year of being debt free. Today, my credit score is above 700, I have a six month emergency fund plus a very healthy savings portfolio.
It started with a commitment to get out of and stay out of debt. It is achieved by increasing income or decreasing expenses. At first, it takes discipline to stay the course, to be mature enough to realize you didn’t get into debt overnight nor will you get out of debt overnight. With this discipline, I realized that I wasn’t entitled to anything. It also gave me the insight to recognize a 72 hour cooling off period. Which means, that any major purchase that I might make doesn’t happen right away. I wait 72 hours. After that time, if I still want to make the purchase then I can see that it is a necessity. If I don’t want it then I can see it was nothing more than what would have been an impulsive purchase.
Managing money doesn’t need to be something to dread, nor is it something to be ignored. Money is something that shouldn’t be feared, nor something to be worshipped. It’s not a god, nor the root of all evil.
The sooner a person realizes that money doesn’t bring peace of mind or happiness the more enlightened they will be. 12 Step Programs speak about a Higher Power. It is the spiritual center of our existence. When we have no money, that centerness should still be there. When we have money, that centerness should still be there. The more you worry about money, the less centered you become.
There is nothing more ugly than an uncentered human being obsessed with money…