My Financial Epiphany

February 28th, 2008

Though it’s a very busy week for me, I ran across a couple of bloggers posting their "epiphany" moments in response to an invitation from GatherLittleByLittle to do so.  I just had to take a few minutes to share mine while I’m going through all my bills and budget today.  Though I don’t find it very glamorous, it is sort of ironic.

 

I Had It All Figured Out

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Photo by Fighting Tiger

A couple of years ago, I was financially invincible.  Nothing could stop me from being able to provide for my family, enjoy eating out all the time, go on vacations, and continually upgrade my list of toys and gadgets.  I was making over $70K/year, had a nice house, and a stack of debt.  Everybody did though, it’s just how things were, right?

Well, in my glorious plan to start working my debt without actually WORKING my debt…I suckered myself into a sub-prime loan for 115% of the value of my home.  (Though it’s probably closer to 120% of the market value now.)  This allowed me to consolidate almost all my credit cards into one payment with an average interest rate well below my then 18% average.  The plan was to pay down the 2nd mortgage before the 3-year term was up, then refinance again.  With appreciation on the house going up and me paying down, I could probably do it two years, right?

This plan had a ton of risk…but I was invincible!

 

Enlightenment Begins

I was working late a few nights a week during a really big project, and I started driving home when this financial guy, Dave Ramsey, was explaining to people how to best approach their financial issues to get out of debt.  I really started liking the guy and agreed that just about everything he was saying had potential to help me really change my life.  I started talking about some of his principles so much, that my wife got me his book The Total Money Makeover (aff) for my Birthday.

I don’t remember the last time I devoured a book so quickly.  But, something in the book contradicted the plan that I was currently on.  He didn’t seem to like the idea of consolidating loans, and he certainly didn’t like the idea of borrowing more against your home than you own.

Oh well, I can still manage.  My plan wasn’t that different after a few tweaks.

 

The Dreaded Realization Approaches

I was in my car one evening, when I heard Dave going on about something he seemed REALLY passionate about.  Whoa, was he livid.  However, it really hit me hard when I heard what he was ranting about.  Sub-prime Loans.  Um, ouch.  I’ve got one of those…

Well crap.  Everything he said really made sense.  I was totally putting my entire family at risk.  I pulled a STOOPID move doing that consolidation.  My problem wasn’t my debt, it was my spending.  I’ll just go down to the bank this week and get on a plan to get rid of all this and get back on track.

 

The Epiphany Moment

So I’m in the bank talking to the VP that did my original loan when I moved to my city a few years ago.  We’re talking and I’m spewing out the whole Dave Ramsey enlightenment mess with plans to get back on track with a refinance ASAP.  She’s on board and excited to help me out.  We talk income, credit checks…no problems there.  I don’t have a great credit score, but it’s not bad alongside my income.

Then she asks me how I plan to pay off the 2nd mortgage.  (The $35K that’s borrowed above and beyond the value of the home.)  Umm…I thought that’s what I was sitting in her office for.

"Do you have any other assets worth this amount?"

"No."

"What are your vehicles worth?"

"Hmm, maybe $4-5000 combined."

"Do you have a 401K savings you could borrow from?"

"Maybe a couple thousand."

"Sir, I’m afraid I can’t help you until you can pay that off…or your home value absorbs it."

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Photo by carpolena

Oh…CRAP.

So much for my glorious invincible plan.  I was screwed.  It was time to clean up my act, get on a plan, and never put myself in a situation like this ever again.

I can’t emphasize enough how horrible it felt to be in there asking this lady to help me get out of my problem…and get rejected.  At that moment, both of us in that room knew exactly what I was up against.

 

In Retrospect

So, here I am about a year later.  I’ve got just under two years to clean up this mess before my ARM rates can increase, and I’ve made very little progress actually paying down the mortgage.  We are, however, much more aware of our situation and striving to make progress toward cleaning things up.

I remember my epiphany moment just as clear as if it were yesterday, and I actually think about it all the time.  I DISPISE remembering that moment, but it keeps me going every time I think about how much I gotta get out of debt.

When was your financial epiphany moment?  Share it, post it, link up to GLBL and join in the conversation!


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2 Responses to “My Financial Epiphany”

  1. Carnival of Personal Finance #142 - The Homeless Edition — The Baglady Says:

    […] Mr. Debtbeater from Debtbeater tells his personal story of debt titled My Financial Epiphany […]

  2. susan Says:

    Thanks for the opportunity!

    My financial epiphany moment was about 15 years ago. I was in the habit of writing checks for the current bills on the night before payday. I had not been late on a bill in years and had a bit of wiggle room.

    I had the thought that if I had just $300 more per month, I would have it made. It dawned on me that I had always thought that way. In the beginning it was just $50 per month. BOOM (V8 moment)! It was not the income, it was the life style! I cut back on spending and decide to get rid of the pesky little bills. Years later I happened upon Dave Ramsey and further refine my plan (mini emergency fund).

    My last debt was the car and at that point I was paying at least 3 car payments per month. How good it felt to pay off the car (yes, it does drive better).

    The greatest feeling came when I sat down the night before payday and realize that my paycheck was mine. I only had rent and living expenses.

    I saved up and put down about 13% on my house. Life is pretty good now.

    Good luck in your journey! It is definately worth the effort.

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