If you are bogged down with debt, you will have to change your lifestyle to get out of it.
I was going through my credit cards the other day, making a list of all the cards, their statement dates, the payment due dates, and the interest rates and credit limits. I realize that we have some cards we no longer use (such as a card I had for my business) and our credit limits have crept up (even after I asked them not to raise them). The good news is, the balance on all of them is zero dollars and zero cents - and has been for many years now. But getting to this point wasn't easy, of course.
I wanted to document all this credit card information for Mr. See (or our executor) in case something happened. You'd be surprised how many married couples don't talk about money. The husband dies, and the wife doesn't even know their bank account number, how many credit cards they have, and when the bills are due (and what bills are due). I put all these due dates on Google calendar, so they show up on the computer and on the phone. And I try to document everything, so Mr. See (or our next of kin) can untangle things, should the need arise, which it eventually will. Life works that way.
Anyway, I was looking through my hard drive and came across two WORD documents with graphs illustrating the credit card pickle I got myself into when I sold Duke Street and had to pay a hefty capital gains tax bill - to the State of Georgia. We had a lot of credit card debt back then, and I was not very good at paying off the balance every month. In fact, we were struggling to pay the minimum every month. But we had two homes, nice cars, boats, a Jeep and lots of other "things" that we thought we had to have.
Over 50 grand in credit card debt - not hard to do, in America!
I also came across this second chart, showing the amount of debt and the debt limits for each card. It was pretty scary to look at, ten years later. It was even more so back then. Almost every card was at or near its limit.
I realized we were in trouble, and managed to roll over much of this debt into a 0% balance transfer (which still involved a hefty 4% fee, as I recall) to a Citibank credit card. I started trying to pay down the balances on these cards and, well, nothing happened. You see, like losing weight, losing debt doesn't work with good intentions, you actually have to make sacrifices - severe ones. It wasn't until I sold a car, the Jeep, and a few other toys, that the balance on these cards started to drop. But it still wasn't enough - I was paying hundreds of dollars in interest per month, with no end in sight.
I would try to make larger payments on the cards, but with nearly half of each payment going to interest, nothing was happening. And if you pay too much on a credit card, you end up with no cash to buy groceries, so..... you put the groceries on the credit card. It is called a "revolving" account for good reason! I realized after a year of trying to pay down these debts, that we would never get out of debt, unless we kept paying for well over a decade.
We finally sat down and talked about it (which is probably why I made these charts) and realized that we could continue to struggle like this forever (and have to work forever) and be caught with our weenies in the wringer if the economy suffered a further downturn, or we could get rid of "stuff" and pay off debts and remain debt-free for the rest of our lives. So we put the house on the market, sold the boat, sold the tractor, sold another car, sold furniture, had a garage sale - had another garage sale - sold things on eBay. You name it, we did it. We slaughtered the sacred cows.
And as you can see in the chart, the balance on all these credit cards drops to -zero- in November of 2010. Not only that, but we had no car payments, no student loan payments (paid those off) and no mortgage payments. Of course, this meant we had "only" one house, and "only" two cars. Gee, how rough is life, anyway?
Of course, for me, these were pretty easy sacrifices to make - I was flying high on a six-figure income at the time, and thought I was a superman. For others, it is a lot harder. A poor person might have "only" $5000 in credit card debt, but to them, it seems as intractable as the over $50,000 in credit card debt I had. And while he might not have a boat and a vacation home, he might have a set of rent-to-own bling rims, rent-to-own furniture, and of course, the latest smart phone and all the cable channels. He isn't poor because he has no money, he is poor because he spent it all. Same shit, different day, different level of spending.
That's the beauty of our debt society - everyone at all levels can play! You can go broke on a $100,000 a year, $175,000 a year, $250,000 a year, $350,00 a year, or like Kamala Harris, on $1.5 Million a year.
We are an equal opportunity country! Stupidity is available to everyone, at every income level! Of course, there is less of an excuse when you are a college graduate and making six figures. That just makes these "paycheck to paycheck" arguments all that more obscene.
I recounted before in an earlier posting about a fellow who was having "suicidal ideations" (a term than seems to be in vogue in the last ten years, which my spell-check doesn't recognize) over his relatively small amount of intractable debt. "I don't want to make any lifestyle changes, I guess" he says.
But in order to get out of debt, you have to make these lifestyle changes. You can't wish debt away. There is no secret "kit" you can buy or seminar you can take. There is no company that will "negotiate" away your debt - they are just con artists who will add to your debt load - and your misery.
No, you have to get rid of things and stuff and subscription services. If you really want to get rid of that debt, you have to cut cable TV entirely (No, just dropping to a lower tier of service isn't going to do bubkis). You have to shop your car and homeowner's insurance. You have to sell the hobby car, the bass boat, the motorcycle, the ATV and so on and so forth - these are things you are effectively "paying for" at murderous credit card interest rates. If you own a hobby car (or bike, or boat, or whatever) and have intractable credit card debt, then you are making "payments" on that item with your credit card. Money is agnostic - it flows from one thing to another.
Sadly, we tend to think the opposite - that inanimate objects owe money, not us. The house owes money on its mortgage, the car owes money on its car loan. But if a car is "paid for" then we own it, outright, even if we owe tens of thousands of dollars in other debts. Cars do not owe money, we do.
Is it easy to get out of debt? HELL NO. Giving up on "things" never is. But in retrospect, I am glad I did, and sorry I didn't do this a lot sooner in life (like 40 years ago). I could have lived with fewer cars, fewer toys, no cable television (which made me depressed, lethargic, and more likely to order delivery or carry-out food). I could have been more careful with money, but I wasn't. And it took not one, not two, but three of these credit card debt crises for me to finally wake up and figure out what the heck I was doing wrong.
Debt is never a desirable thing. For a business, debt can be used to create wealth - but too much debt can sink a business, as we are seeing today. For an individual, debt may be necessary to buy a house - but too much house or an overpriced house laden with funny-money debt can bankrupt the individual. Debt to get a college education can be a good thing, provided you aren't using it to buy beer and a new fart muffler for your car (I've seen it done!). And it goes without saying that a lot of college educations are utterly worthless (more and more so these days) and going into debt for a degree that does nothing for you whatsoever is not a good "investment".
But even worse than these examples is consumer debt - debt incurred to buy a snowmobile or a jet ski or something else utterly unnecessary to your life, but guaranteed to depreciate down to nothing in under a decade. Even worse are "personal loans" such as unsecured loans, consolidation loans, pawn loans, or payday loans. Borrowing a dollar to buy food today only means you pay back $1.25 next month. How is this making you wealthier? It ain't - it's taking what little you have and making it littler.
Yet so many people do it, because our whole society is laden with debt, sold on debt, and immersed in debt. We swim in a sea of debt, breath debt, eat debt, live debt. We live in a debt culture. The very value of our currency is based on debt. It is hard to escape. It is all some folks talk about - their debts, better deals for debt, their credit score, and where can they get more debt. Debt, debt, debt, debt! It is their whole lives. Which is sad.
The funny thing of course, is once you have no debt, none of this matters - at all. I have locked all our credit report accounts, and it is no big deal as we'll never have to borrow money again. Why can I say that with certainty? Well, why would I borrow money which I would have to pay back with savings - effectively turning a dollar into 89 cents? It would make no sense. Since I no longer need to borrow money, our credit scores are over 820 (oddly enough, they dinged me four points when I contested a credit card charge at a restaurant recently! Bastards!).
I realized, from these charts, that just "wanting" debt to go away wasn't going to work. I had to make severe changes in my life - changes I was loathe to make. After all, I was having fun, right? But in retrospect, it was the right move to make. The toys and vacation home were nice and all - but I was already starting to get bored with them. When nearly new, these things are fine and all, but as they wear out, well, you have to fix them, and as I am learning with just one house, often everything breaks at about the same time.
And over time, you run out of energy to maintain all of this. We see this with some of our friends who still "snowbird" with a house up North and another down South. Neither house is in very good condition. What's more, if all of this is funded by debt, it is a classic case of living beyond one's means - borrowing from Uncle Tomorrow for fun today.
But it is a funny thing. Today, I feel "wealthier" than I did back then, even if back then I had a lot of "things" like nice cars, boats, toys, properties, and other stuff. We have less "stuff" today (and I want less and less as I get older) but feel wealthier as a result. And maybe this is because we can do what we want to do, rather than be chained to a mountain of possessions and a debt-hamster-wheel needed to keep it all going.
Hoarding experiences doesn't require that we rent a storage locker! Hoarding things does. But that is a subject for another posting.