How did we get here??

About 7 years ago, I remember thinking to myself after hearing person after person going into bankruptcy how can anyone rack up 20,000 or more in credit card debt.  How hard is it that if you don’t have the money you don’t go buy anything??  Well little did I know what was to come for my family and how easy it could be if you are not careful.

Fast-forward to December 2008, my wife, kids and I were both excited for Christmas and even more so looking forward to the birth of our 3rd child.  But then all of a sudden Meghan was put on bed-rest for the last 6-8 weeks of her pregnancy.  I figured money would be tight, but with her PTO and short term disability that we would make it through.  Little did I know what was to comeJ  At the end of the year, I was admitted into the hospital for 5 days and then 2 weeks later it was time for Jordyn to be born.  That bill was not a pretty sight when we received that, but I figured I’ll just pay for it with the credit card and pay it off as soon as possible.  When Meghan gets back to work we’ll have it paid off in no time was my mindset.  I knew we would have to pay interest on it but I figured it would be better than a late bill with the hospital.

Shortly after that Meghan did go back to work, but things just weren’t quite right.  It took quite a while for us to figure out that Meghan was suffering from Postpartum Depression.  It was so severe that she had to be admitted into the hospital for about a week, but also wasn’t allowed back to work until she was back to normal.  She did eventually go back to work but that was another 6-8 weeks later.  But just like before when we got that bill, “Put it on the credit card, we’ll pay it back quickly.”

Our biggest problem though was I didn’t know how much Meghan could handle with any major stressors.  It’s hard enough raising three kids, especially one very colicky baby, trying to go back to work, and her body basically saying “No you’re not ready yet.”  So how do you talk about finances, and balancing a budget when she is going through all that?  I basically decided it’s not worth it.  It’s more important that Meghan is with us and healthy, then it is to worry about that right now.

Instead I found other ways to help keep our credit card bills down.  Well, kind of.  I thought I’ve got this other credit card, and I can transfer all of this money onto that one at 0%.  Surely by then we’ll be back on track and pay them off quickly.  Well instead of paying them off, it just delayed the inevitable.  And eventually you get to the $40,000 amount that’s on your credit cards.

The main reason I signed us up for the Financial Fix Up was to force Meghan and I to talk about our finances.  We sat down with our financial counselor and got all of our different numbers on paper.  None of them surprised me, as I am in charge of our finances.  But they surprised Meghan A LOT.

So all we did that night was talk about our finances, what we can do to get them back under control, get them fixed and start saving up for our future plans.  The first thing that we did was to analyze our spending.  Many of the numbers were right where I expected them.  But one in particular was way off.  We spent over $400 a month eating out.  That was immediately fixed.  We have gone out to eat twice since our meeting and that was out of necessity.  Fixing this has been a chore because it’s always the easy choice.  “I’m too tired to cook, let’s go out to eat.  It’s right there on the way home and it’ll be quick.  The kids will actually eat it.”  All of them make it easy but that was one of the biggest reasons our finances haven’t recovered since Meghan went back to work full time.  Then we got the kids involved too with this.  We explained to them that we need to start saving money and they said well we don’t need to have toys with our Happy Meal.  We figured out that the toy alone is over a dollar of the meal.  Then our girls rarely eat the whole meal so we have them sharing one.  We went out to eat Wednesday at McDonald’s and it cost $13 for all 5 of us.

Another bill that was way too much is what I like to call our Wal-Mart bill.  We used to spend over $800 a month and actually closer to $1100 at Wal-Mart.  Just like most people we buy just about everything there, groceries, household, etc.  And the worst part that both of us were guilty of was if we needed one thing it was an automatic trip to the store.  And of course that one thing would then turn into 10 things.  We have both now committed to making 1 trip a week at most to get the things we need.  And over the past month we have spent about $140 at Wal-Mart.

Long story short we are learning about the things we need to change to get back to where we originally were which is completely out of debt.  And my immediate goal for the next year is to cut our credit card debt in half.  That is a very aggressive goal but the way this last month has gone, I think we can do it.

3 thoughts on “How did we get here??

  1. Many of your un-reimbursed hospital bills are tax deductible. You get the biggest savings via your flexible spending account (FSA) as you get first dollar tax savings – your expenses are deductible on Schedule A once they exceed 7.5% of your adjusted gross income. You can make a change to your FSA when you experience a life event. In this case the birth of your child qualifies you to make a change in election.

  2. You are absolutely correct. That was the one and only time we had enough medical bills that we actually got to the 7.5%. That makes a big difference when it comes to tax time.

    Another thing that you can do if it is offered through your workplace is to sign up for Health and Daycare Reimbursements. You have the money taken out before taxes and you are reimbursed for it after you pay the bill.

    For example if you take out the maximum for Daycare of $5000, then you are saving 10% or whatever tax bracket you are in when it comes to tax time. It works the same way for Medical related expenses.

  3. Way to go Steve and Meghan. It takes a lot of courage to get all of your debt on paper–and to share it with the world. You are making some great decisions.

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