Heidi asks …

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  • August 11, 2008

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Heidi asks …

My husband and I currently have a good deal of debt that we’re trying to dig ourselves out from under.  Do you think that someone who has had a serious history of debt can ever completely change things around for the better?  It seems like it is a never-ending ride, get out of the debt trap and land right back in it.  How can one protect oneself from this?  Would you consider it a disqualifier for your experiment?

Heidi, nothing financial can disqualify you – or anybody else – from this ‘experiment’ … after all, it wouldn’t be much of an experiment if I only chose people that I thought were on the cusp of ‘making it’, would it?

I did ‘disqualify’ one person very early on, on the basis that they were an undischarged bankrupt … I didn’t want them to take arms-length advice from me in lieu of seeking proper, detailed personal advice.

I would suggest the same thing to you … read up on debt snowballs and debt avalanches; seek professional advice to help you assess whether you can use these (or other) tools to ‘dig your way’ out of your debt.

If so, that’s what you should start to do … if it’s only going to take 2 to 4 years, great! We’ve got 3 to 5 more to play with!!

In the meantime, here is my basic advice:

1. If your Life’s Purpose does not shout to you loud and clear l you that you have much better things to do with your money than acquire ‘stuff’ (and, the debt that goes along with it) then you’ll need to stop here.

2. But, if you do get a ‘new vision’ of your future, and it starts with having monye in the bank – serious money – then start saving a fixed % of your household income; apply as much as possible to existing household debt … don’t forget the debt avalanch / snowball. Add 50% of all future pay increases and ‘found money’ to this regimen.

3. When you get your head above water (or the interest rates on the remaining debts are lower than investment loans will cost you) start to swing into buiding up a little lump of cash to throw into your first serious Making Money 201 activity (hopefully, you already found a way to do some little, low/no cost ones while you were still working on 2.)

Bingo! You are on your way …

See, it’s not where you start, but how you start and where you finish, that counts. So you tell me …

… you still in? 🙂

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Comment Number:
1
Written by:
Heidi
Posted on:
August 11, 2008 at 4:54 am

AJC, I’m still in (from the sidelines!) Thanks for answering the question. I probably should have also mentioned most of it is medical! While there are no interest rates, those hospitals want to be paid quick, or they’re taking you to court! 🙁

Comment Number:
2
Written by:
josh
Posted on:
August 11, 2008 at 11:20 am

i dont think this suggestion is moral, BUT i hear if you send the hospital some money, as in any money ($5) a month they cant attack you legally because your showing that your trying

Comment Number:
3
Written by:
AJC
Posted on:
August 11, 2008 at 11:28 am

@ Heidi – gotta pay d’em medical bills … some people have to take loans out to help them pay such unexpected expenses. Others have HELOC’s or ‘spare’ investments that they have built up for that purpose. If you don’t then Josh’s unsavory idea may work 😉 or you might try a bunch of 0% ‘honeymoon period’ c/cards but you MUST have a system in place that ‘guarantees’ that this will all be behind you by Month X.

Comment Number:
4
Written by:
Heidi
Posted on:
August 11, 2008 at 12:51 pm

@Josh – I was sending them $100/month! They don’t like that on a 3k bill 🙂

Comment Number:
5
Written by:
Heidi
Posted on:
August 11, 2008 at 12:53 pm

@AJC – Actually, the last one will be paid off by January. Now to stay out of the hospitals!

Comment Number:
6
Written by:
Di Eats the Elephant
Posted on:
August 11, 2008 at 1:22 pm

Heidi – I don’t disagree with Josh’s advice – I paid off my lawyer that way and no one threatened to sue me. Perhaps the person you are speaking to at the bank simply has to meet some standard (for their own personnel record) and you can speak to their supervisor and explain you are trying to pay it off and are making payments? I know some agencies can be very unforgiving, and they all think that it’s simple enough for the one who owe to charge it against a credit card, but I have decided not to do that with any medical bills. You could also do a sliding scale on these kinds of bills. Pay off more up front, then reduce how much you pay them monthly as you pay off more “costly” bills (i.e., with interest rates), still ensuring them with a check each month that you have not forgotten them. In essence, the hospital/medical association agreed to “credit” you for the work that was done, in the manner that it was agreed to, and there is nothing wrong with making payments unless you agreed to pay all “at once” when the bill was sent to you. Then it is just a case of what you are doing now – renegotiating the terms of that agreement. No need for anyone to get “hot and bothered” at the other site (which is a business) and they may only need reassurances that you are not a deadbeat (with which hospitals do have to contend, by law, and usually through the Emergency Room). Glad to hear those debts are coming off in January.

Comment Number:
7
Written by:
Shannan
Posted on:
August 13, 2008 at 12:54 pm

Heidi – despite your serious history of debt, you, along with the rest of us, are mentally in the place where we should be a part of this experiment. We need to change, need to do better, need to be better. I see this as a great opportunity, knocking at the door, to make things different and better. Good luck!

Comment Number:
8
Written by:
AJC
Posted on:
August 13, 2008 at 1:15 pm

@ Shannan – Nicely put & very supportive … a HUGE part of the success of this ‘experiment’ will depend upon the Community that we manage to build: those who want to share/learn with the 7MITs.

Comment Number:
9
Written by:
Heidi
Posted on:
August 13, 2008 at 11:21 pm

@Shannan, agreed! I’ve been in this place for a bit over a year now and ready to completely dig out!