Several years ago, I found myself in the unenviable position of being newly divorced, paying off a mountain of credit card debt accrued during the marriage, paying child support, and being the owner of a losing business enterprise.
I was in the health care field, so I had an income, but my debts were so massive that bankruptcy was not only a viable option but was recommended by my attorney so that I could “start fresh.” All in all, I owed in excess of $75,000.00 in credit card debt, $2000.00 a month in child support, mortgage payments on a mobile home where I was living and the usual sundry living expenses. My minimum consumer debt payments were in excess of $4,500.00 a month.
I had never considered myself a spendthrift, but these circumstances forced me to take a hard look at myself, my standard of living and the options available. I really did not wish to enter bankruptcy mainly as a matter of pride, but I needed to be realistic. So, one might call this story the guide for the newly single.
Regarding expenses, the single most important concept in curtailing everything was embracing “do it yourself.” I don’t mean handyman type issues — I refer to all the aspects of daily life one takes for granted, especially men. So, in a list fashion:
1. ISSUE: Food, Meals and Dining. SOLUTION: Buy groceries, and learn how to cook. While this may seem obvious, aside from grilling, very few men know how to cook foods from staples, or even cans. Rice, beans, flour, corn meal, pasta — all of these can be bought extremely cheap, and if portions cooked are doubled, can be saved as left-overs. Cooking the basic staples is a no brainer — anyone can read the bag, boil water and time the simmering (buy a $2.00 ding timer). It just takes more time than heating an instant meal in a microwave, but costs 1/10 as much, but some need to be prepared overnight. Canned goods are cheaper than frozen. Used cookbooks can be had for a couple of dollars — sometimes free at garage sales and flea markets. Not Julia Child but ones like “one-dish meals” or “My first cookbook.” Embarrassment needs to take a back seat to learning. Daily take-out and restaurant meals need to be substituted for brown-bag sandwiches and fruit. Simply decline the offers at work to go out. Use refillable water bottles from the tap and bring a Thermos for coffee — it all adds up to substantial savings. Ignore the comments (if any) and remember that all of this adds to your debt repayment.
2. ISSUE: Dry Cleaning and Laundry. SOLUTION: Do your own laundry. Buy soap, read a few articles and wash everything except white underwear and towels in cold water. If you don’t own a washer/dryer, get quarters and go to a laundromat. Buy an iron and cheap ironing board at a discount store, both for under $10 each. Buy spray starch and experiment — you will amaze yourself how fast you will get good at getting nice crisp shirts. For suits that MUST be dry cleaned, do they really need to be cleaned, or just pressed? IF they are not dirty, just wrinkled and do not smell, the price of a pressing is much cheaper than a full dry clean — just ask for the service. Push your case and they will agree to it. For house work, a cheap vacuum cleaner, a bottle of all purpose cleaner and some rags will do you fine for 90%. Get a toilet brush and use it for maintenance. Scouring powder or Soft-Scrub for the hard areas.
3. ISSUE: Entertainment. SOLUTION: Stay at home and watch free TV, Cable, or cheap $1.00 movie rentals (check the grocery store offerings) or if you get a deal from Netflix. Go to the library, the park or free concerts. If you are truly hard-up, this is the one area where substantial savings can be realized, not only from not spending retail for movies and going out, but the gas etc that gets you there. Inevitably dating comes up — try to find a sympathetic person who will respect your plan or maybe needs some help themselves in cost management. My current partner embraced these concepts from the beginning after a frank talk and we are both completely out of debt because of it, albeit some years later. And neither one of us missed the dates at expensive restaurants or other venues, and simply enjoyed each other’s company.
4. ISSUE: Transportation. SOLUTION: Sell the expensive car if you can and buy a reliable, used, gas-frugal vehicle. Many men place great personal store by their cars but you just need to get over it (think what a bankruptcy on your record will do to your ego.) Four wheels and an engine is all you really need, if it is well maintained and costs less.
5. ISSUE: Buying retail. SOLUTION: Cut coupons from the newspaper. Look for sales and stock up when prices are cheap. Shop on double-coupon days. Use the internet to find deals. Check on eBay, flea markets and garage sales for staple appliances or other items but buy only what you need. Use LISTS and try not to impulse-buy. Sign up for email notices from grocery stores and discounters. Check out www.retailmenot.com for online coupons for various online retailers — frequently you can get free shipping or discounts up to 20% or more just for looking. Use www.nextag.com to price compare new items at various retailers. NEVER be afraid to haggle — you never know when they may say yes or get you more value for your money.
6. ISSUE: Existing monthly expenses. SOLUTION: Find all ongoing expenses and try to cut them out. Do you REALLY need all those magazine subscriptions? Do you have ALL the premium cable channels or can you do with one (or none & watch free cable?) Do you actually use that gym membership daily or is there a YMCA near you? Do you belong to music clubs, XXX of the month or other unnecessary recurring expenses? Cut them out, go to the library, sign up for free blogs or e-newsletters, look for free alternatives.
7. ISSUE: Debt Management. SOLUTION: Pay off your lowest balance items first. I certainly will not try to take credit for this concept as I have seen versions of it for the last 20 years, but I have to admit that it does work if you discipline yourself. The biggest hurdle to getting started is usually the overwhelming sense of the “bottomless pit” mentality — the sense that you will never dig yourself out. Getting rewarded by being able to eliminate one payment every so often is a powerful motivator and kept me going. The way to start is to get a copy of Quicken or Money (now they have free online versions at Mint.com etc) and enter ALL your finances, no matter how mundane.
Categorize EVERYTHING, including what is spent as cash (be prepared to get shocked over what you REALLY spend for fast food or other unnecessary expenses.) Use the software to create a monthly budget and stick to it no matter what — if you run out of money for a specific category in a particular month, don’t borrow from another but do without if you can until the next month.
Don’t forget to budget for quarterly or yearly payments such as taxes or insurance. Also budget for contingencies such as repairs and emergencies.
NOW, after all the money is budgeted go to your debt-repayment budget category. Get all your accounts and pay the absolute minimums on all of them except for the one with the smallest balance. On THAT account pay ALL of the money you have left in the debt-repay budget. Continue to do this every month until the account is paid off. Then never use it again. Go celebrate that one of the accounts is paid off and treat yourself to an extra movie or so. The next month, take all of the money that was being paid to the paid-off account and pay it against the second lowest balance account along with the minimum payment you were already making. Continue this process until all the accounts are paid down. If you get raises, bonuses or a tax refund, put the money toward the debt to accelerate the process even further.
There are some that recommend paying off the highest interest items first. This is certainly an option, and may mathematically work out better in the long run, but I simply cannot overstate the absolute joy it gives you to be able to say “I did it! I’m DONE with sending them any more money!” The sooner you get to do this the sooner the much needed reinforcement happens and will keep you on your mission. This is easier to achieve with paying off a smaller balance account first.
Another issue (which some told me I was crazy to do) was even when I was so deep in debt, I subscribed to an automatic savings policy where I had money deducted from my paycheck BEFORE I could get to it and deposited in a money market fund that was hard to access easily. It was not much, but it really helped me psychologically to see that small account increasing every month and even earning interest on it. I felt that despite my crushing debt I was able to show something for all my hard work that was mine alone. And when I had paid off all my cards, all the money I had been paying towards debt went straight into savings, which now is a substantial amount.
Finally, unique to this era versus the past is that credit card companies will cancel a card if you let it go dormant (don’t use it for a while) — this will affect your credit score. So every quarter, use each card at least once (say for the groceries) and pay it all off at the end of the month. That way the accounts will remain current but with zero balances.
The above steps if followed will ultimately get you debt-free without having to declare bankruptcy. The deeper issue is do you have the mental fortitude NOT to get back into the habits that got you there in the first place? If you have a spendthrift partner, can you deal with taking the cards away and giving them an allowance? Can you handle the whining kids demanding the latest and greatest electronic gadget and you saying no? If you doubt yourself and honestly your partner is stronger, then you have to let your ego go and let the more responsible partner handle things.