The following is part of an ongoing guest post series titled Mondays with Mike.
"How did we get here?"
That was the question my wife and I were asking each other during the fall of 2008. My heart was pounding as I was going through bill after bill, paying the minimums, and trying to get through to the next month. During the previous six months we had moved from New York to Nevada and besides basking in the neon of the Las Vegas strip (which we really didn't do that often), we were swimming in an ocean of debt.
The problem with bad choices is that sometimes they work out. The problem with them working out sometimes is that those are the only ones you remember. It's kind of like gambling. Do you ever hear anyone telling you they had a great time in Vegas when they lost $1500? Of course not (unless they're a masochist); you only hear about the times that they've won. Hopefully you understand where I'm going with this.
Here are a few examples:
2001: Decided to put our honeymoon on a credit card - bad idea!
2003: Decided to buy a house with 3% down - bad idea that worked out.
2005: Bought(yeah right, financed) a car with 4WD, so Kate would be safe driving country roads to work- bad idea that we broke even on.
2001-2006: Put 20K on credit cards for dinners, gifts, work expenses, clothes, and general home needs - really bad and stupid idea!!
2006: We refinanced our house (because it was worth a bunch more) to pay off our credit card debt and do the smart thing of paying it off at a lower rate: Bad idea!! We didn't learn a thing and started charging again...
2006-2008: ran up another 25K in credit card debt and traded in (see 2005) for an upgraded vehicle. I work in the auto business and during the fall of 08 the car market was in the toilet. If you have the gumption, that is the time to buy. We did (finance), and it worked out great, but that is only because I've worked in the business for just short of a decade and understood the cycles. I would not recommend financing something (like a house or a car) on a hunch.
For those keeping score: 25K credit card debt, 15K car debt, oh, and just bought a house in really good housing market LAS VEGAS!!!
And that's when the crap hit the fan. You see, after our daughter was born in 2007 we calculated (correctly by the way) that it was cheaper for Kate, and better for our daughter, to stay home with our daughter than to pay for daycare, and fuel our 4WD vehicle for an 85 mile daily commute.
So, we were living on one irregular income, a mountain of debt on top of us, living in a new place with no family, and the auto business (which I work in) wasn't exactly humming along (see GM, and Chrysler bailouts/bankruptcies for reference).
I was extremely scared for my family, my career, and for me personally.
Keep reading next week on what we decided to do about it...