In Debt Above Our Heads

In my last post I stated that my primary “quest” (and the main focus of this blog) is to become debt free. I intend to share with you my goals, thoughts, struggles, successes, and progress during my quest one step at a time.

In my attempt to make this a reality, I will be using concepts from Dave Ramsey; however, I am in no way endorsed by Dave Ramsey. I have never taken a Dave Ramsey class, read a Dave Ramsey book nor was it a Dave Ramsey website that introduced me to the program. I will do more research on the program while on my quest; however, I may do things along the way that Dave would frown upon. So, if you follow my blog – realize that this is my journey; it is my plan to be debt free, now on referred to as “my plan”. With that being said, if you would like to learn more see Dave Ramsey’s Official Website or Simple Mom, the page that introduced me to Dave Ramsey.

My Financial Background

Shortly after the birth of my son, I decided that it was in his best interest for me to stay home. In doing so, I reduced our income by about $36,000. After six months of not working I found a legitimate work at home job. Hourly, the pay is only about $2.00 per hour less then I was making before; however, I only work on average 10 hours a week, so I still make significantly less then I did before the birth of my son.

We have been living pretty tightly and often struggle to make ends meet, but I didn’t really know where we were financially. Near the end of April 2008, I realized that we needed to make a change and before that could be done I had to know exactly how much in debt we really were. I carefully gathered all of our bills (student loans, mortgage, 2^nd mortgage, utilities, credit cards, medical bills) and calculated our total debt and monthly payments. The result was overwhelming; after paying all of our monthly obligations we are only left with about $180 to purchase groceries, gasoline, baby necessities, non-food items, medical expenses, and so forth.

I looked at some of our options: 1) Debt consolidation - assumes we could be approved for a loan that had interest rates and monthly payment less than current. 2) Debt management - charges a monthly fee, only works with the credit card debt and will damage our credit. 3) Bankruptcy - the option that I fear most, we could lose everything and we would have to file Chapter 13, so we would still have debt to pay back. I refused to accept that these three options were the only solution.

So where does that leave our household? Right where we started, debt above our heads and no help in sight. We accept responsibility for our debt and we do not expect an easy way out of it; we have to pay the consequences of our actions. There has to be another way…