About 8 years ago, when the adult world was a fresh and new place for me and well before the world markets came crumbling down, I made a series of decisions financially that taught me lessons to prepare for what was to come, and laid the ground work for a cycle that I have been able to maintain.
I was newly married, I had one child and was working on the second. My husband and I were looking at purchasing a home and preparing for the onset of a second child. We went through the process of pre-approval; he had destroyed his credit and I had none. Looking at what we were going to have to pay to borrow, and therefore what price range the homes we could afford were, I took immediate action. I was a business student, seeking my bachelor’s degree at the time, so I had access to material, resources, and people who knew through education and experience how to handle money.
First I looked at all of our bills, I got rid of the land line phone, consolidated our cell phone plans to 2 lines and one carrier, got the cheapest internet deal I could find for our desktop computer and opened two, as low of a rate as I could get, credit cards, one in each of our names. We began charging all else and paying off the total at the end of the month-as we did not use our debit cards at all. The checking account was merely a means to pay bills from- and the credit cards had max balances of 500.00 each-so we could never go over what we could pay at months end. Nothing got purchased without a coupon- and I mean nothing-from food, to dinners out, to larger ticket items-unless it came from goodwill or an estate sale-and even that was not without haggling.
After 6 months of this, our credit scores began to rise, we had savings, I had no student loans, as we were paying my tuition in cash each semester, and we were now officially expecting our second child; we were well on our way to financial security and stability. That was when the test began. On February 13th 2004, the restaurant we both worked at – which made up 75% of our income – abruptly closed. Just like that we were going to have to live on 25% of what we once were. So we took the last cash we had in our pockets and we went out to dinner at the place where we went on our first date, with no coupon, and no restrictions on what we would order, and we treated ourselves one last time.
The next day we took out store credit cards in all of the places we knew we would need. He got a job at another restaurant making only about half of what he used to bring in, and no one would hire me because, and although illegal, I was visibly pregnant at the time. I continued school and we shelved the dream of buying a house and we moved in to his mother’s flat. We paid rent only the months that we could do it for the first year, and paid $300 per month after that. I worked internships through school which were temporary influxes of income -and this money went to pay down and close our 11 credit cards and more than $10,000 total balance. By the time I graduated and brought in a real income we had it down to $4,000, and paying that off and buying a house that same year.
When all is said and done, 6 months of planning and preparing saved us and enabled us to create necessary survival debt that we diligently paid off-and we never broke the cycle the entire 3 years it took us to pay it all off. What we didn’t know, or at least what I didn’t know, was how I would be tested again in a little over a year from that point.