Financial Friday: Our Imbroglio

Imbroglio:
– a misunderstanding, disagreement, etc. of a complicated or bitter nature, as between persons or nations.
– an intricate and perplexing state of affairs; a complicated or difficult situation.
– a confused heap. (source: dictionary.com)

Imbroglio’s second definition – and really the third – is the perfect way to describe our family’s financial situation at the time of the Great Epiphany in the fall of 2013. My husband J and I were trucking along in life, thinking we were doing not great but staying afloat. After all, we were both employed and owned our own home, had a child, drove nice vehicles. We had friends over, we’d host the occasional party, etc. From the outside looking in, it may have seemed like we had it all together. Like a lot of social media posts, looks can be deceiving.

This post is about when J and I finally confronted our finances and realized just how much of an imbroglio we were in that was of our own creation. I know for some, talking about finances is a big no-no that you don’t talk about with people. It’s too personal, too private. I think talking about finances is vital, so we can share and educate people, warn them of mistakes we made and perhaps help them improve their own situations. Why not learn from our mistakes?

We had so many bills and it never seemed like there was enough money to pay them all on time. For a while, we were going to the nearby metroplex to shop and browse during the weekends. In our small town, the options for entertainment are few, especially if you don’t drink alcohol and have small children. So, we’d drive the hour to the metroplex and just see what there was to see and do. Shopping was a great pastime with so many stores and then the wide variety of restaurants. Of course, who could resist getting store cards for that wonderful percentage off your first purchase? I certainly couldn’t! So by the time of the Great Epiphany, I had a handful of store cards as well as the power of Visa and Discover in our wallets demanding payment each month along with the required bills of vehicle payments, mortgage, and utilities.

I honestly hated checking the mail; I would get so sick to my stomach about it that I would purposely avoid it for an extra day or two because I knew there would be yet another bill in there and we may or may not be able to pay for it. Growing up, I use to run to check our post office box. I loved finding those slender envelopes and occasionally a magazine or a greeting card in there, waiting like paper Christmas presents to be opened. As an adult, eh, those waiting envelopes were like proverbial bombs waiting to go off in my stomach. Some months, we were doing the money shuffling of proverbially robbing Peter to pay Paul.

And then it happened. It was the day before Thanksgiving, 2013. We traditionally went to see my side of the family for that holiday, which meant gas to drive there and a hotel for the overnight stay as well as some extra money for a festival we liked to hit up while we were there. So… Thanksgiving wasn’t exactly an inexpensive trip. W was 18 months old and I was excited to have him interact with the family. Last time, he was a mere three months old and not very interactive. At a year and a half, he was really engaging with people. It was awesome to see. As we were packing up and getting ready to leave for a long weekend, the water heater died. It wasn’t a new heater and since we were the lucky home owners, that meant there was no landlord to call to deal with it. There was no resuscitation of that heater; it was going to require a full replacement.

I called around to price water heaters and for the size we needed, we were looking at $300-400. My husband thought he and a friend could do the actual replacement, thus saving us the cost of a plumber. However, we didn’t have the money to buy a heater in the savings account – we didn’t have one – or the checking account. Our upcoming Thanksgiving trip? We’d planned to have Visa fund that excursion. I honestly didn’t think we had enough open credit on a single credit card to purchase the heater and might have to split it between two cards. This also would cut into our trip funds. So our choices were: see my family for Thanksgiving or get a water heater. I love my hot showers every morning just as much as I love the rare chances I get to see my extensive family. As much as I hated doing it though, I canceled our hotel reservation which in turn freed up enough credit to buy the heater on one credit card. That hurt in a lot of ways but we had to prioritize and the house repair won.

That holiday weekend was the Great Epiphany for us, a watershed moment that screamed “Get your financial shit together!” in big, bold terms we could no longer ignore. We were one big expense away from our house of cards imploding. So the following weekend, with a water heater successfully installed by J and a friend, I faced my fears of actually looking at our finances closer. I had spent the prior week looking at financial advice articles and I found a few online forums, including one that followed the Dave Ramsey advice. I read other people’s stories, looked at their suggested steps for those who are finally taking a hard look at their finances, and printed off a suggested budget template. After I put W down for his nap that Saturday, I gathered all of our bills that I could find (which was difficult because there was no method to my financial paperwork organization). I printed off our bank statements from the last few months. I found credit card statements, medical bills, daycare receipts. I gathered it all into a stack in our dining room and sat on the floor and started sorting. Honestly, I really wanted to throw up at this point from the stress of what I was facing. I ended up not getting sick but I honestly thought I was going to develop an ulcer by finally doing this.

It was one of the scariest things I had done in my life at that point but afterwards, it was also one of the most liberating things I have done. They say that knowledge is power and by golly, that is so true when it comes to examining your financial situation. I made two lists: bills and debt. I wrote down in a list every single bill we had each month along with when it was due and how much the monthly payment was for. I organized that by due date so I could see exactly when I should be expecting these bills to appear in my mailbox.

The second list was our debts. This was honestly a wee bit horrifying because we had a lot of debt – mortgage, two vehicle payments, my student loans, five credit cards, and a small personal debt to my mother. I think it totaled close to $140,000, including the mortgage which wasn’t a super large one. I also wrote down the interest rates. Yeah…. five credit cards with interest rates varying from 18% to 24% was shocking; I had honestly never paid THAT close attention to the interest rates and that was certainly a mistake. These I organized from least amount to largest amount with the monthly payments.

So I had my two lists – monthly bills and debts – and I had pay stubs so I could see how much income we had coming in. According to the math, in theory, we should’ve been okay because the income figure was greater than the expenses and yet we weren’t. That’s when I looked at our bank statements to see just where our money was going. I used different colored highlighters to group things together so I could see how it broke out easier. If you have not figured it out yet, I am a visual, creative person. I like using colors and markers and breaking things into organized lists to know what I am looking at. House bills (those that pertain to living in the house like mortgage and utilities) were one color, credit cards another, groceries a third, gas for the vehicles, etc. I thought broad categories and colored away.

Unless you are keeping a collection of your fast food containers in your car or on your kitchen table, it can be hard to realize just how much you eat out. Eating out was its own category color and the pages were pretty dang bright with green lines. Of course, it doesn’t help when there is a Sonic within walking distance of your home and those ice creams just call your name with their sweet, cold deliciousness. We were blowing more money on dining out than we were in groceries and we spent a pretty good chunk on groceries as it was. There was also a wonderful store called Hastings (which declared bankruptcy a few years back) that we LOVED going to for movie rentals, purchases, they had books, all sorts of nerdy memorabilia like Serenity/Firefly-themed board games and Dr. Who house decor, comics, music CDs, and clothing as well as toys for all ages. We spent quite a bit more than we probably should have as renting movies was usually at least 2-3 times per week and I couldn’t resist their used books selection.

At some point that afternoon, I brought J into the dining room to see what I had learned. I had paper stacked everywhere around me and notes written all over the place. This was a critical moment for our financial situation: having a partner who is on board with making changes and J was whole heartedly in agreement that we needed to do some things differently. Our finances were broke and needed to be fixed; the only ones who could do that were us.

Join me in next week’s Financial Friday where I will share the next steps of our journey, including some suggestions that might help you with your financial goals.