The Good Life on a Budget

• Posted by JvW on July 18th, 2009 filed in Uncategorized

This post was originally written in June 2008 but never published. Since then, we have completed paying off our credit card debt, but we’re still working on the emergency fund. It’s a good reminder to me that debt payoff is not all we have to consider.

We have all heard Dave Ramsey’s advice to keep an emergency fund of $1000 while paying off debt. But what happens if $1000 isn’t enough? A Grand can help keep you afloat through minor emergencies - a small car repair, a minor injury - but for the big emergencies, it’s woefully insufficient.

Earlier this year we found ourselves in the midst of an income deficiency. Simply put, through a variety of circumstances, we were not making enough money to pay our bills. We were working to remedy that, but in the meantime, we still had to pay the mortgage. So we decided to borrow some money.

Obviously this isn’t a good situation to be in. We looked around at our options and decided to take advantage of a 0% interest offer from one of the credit cards. Of course, there were some strings attached. There was a balance transfer fee of 3%. The kicker, though, was that the credit card making the offer already had a balance. So when we got back on our feet and started paying it back, the 0% would be paid back first, while the rest accrued interest. Still, it was the best option.

I calculated the amount of time we expected to experience our income deficiency and the amount of the deficiency each month. A little math, and presto! we borrowed $5000. From a credit card.

It was an extremely painful phone call to make when I transferred the money into our bank account. It felt like such a step backwards, when we had previously been moving forward so quickly. All of a sudden, our goals were out of reach and our lives were put on rewind. We also were using credit cards again for necessities like gas and groceries.

Worst of all, we acted penny wise and dollar foolish. I would cut coupons for groceries, then we would go skiing for a weekend. We didn’t really want to admit our income deficiency, so we kind of ignored it. It was all too easy to slide back into debt, which is pretty scary. Just when I think I’ve come a long way…

All in all, we managed to go from $12,438.99 in debt at the beginning of February to $28,093.32 at the beginning of May (this figure includes the taxes and the vacation, which was charged for security and paid off before interest hit). It’s ridiculous to think that in 4 months we more than doubled our credit card debt.

Fortunately, my predictions were accurate and our income deficiencies were short lived. We are now continuing to pay off debt and fighting to get back to where we were (and beyond). Last week we broke under $20,000 again, but it doesn’t feel the same the second time around. I am dying to know what it feels like to have zero credit card debt. Zip. Zilch. Nada.