It’s ironic -- and hard to admit -- that, while I advise clients on money management, my husband and I have racked up $40,000 of credit card debt. That's why a few weeks ago, in order to save money, I moved to my dad’s house with my husband and two toddlers.
How did this happen?
It began with using our credit cards to pay for home improvements and furnishings because we were obsessed with creating our “perfect” home. We also made the arguable mistake of buying an older house, not realizing the maintenance costs that could come with it:
- $9,000 for a basement waterproofing system
- $5,000 for a new furnace
- $10,000 for doors that lock and windows that don't leak.
Then, my husband lost his job twice in four years—a period during which we had two children. For several months, many of our essential expenses went on credit cards. We’ve only been able to make the minimum monthly payments, resulting in thousands of dollars in additional interest-related debt.
So how do we stop this revolving door of debt? To buy time, we can transfer balances to cards with promotional low rates. We can consider a cash-out refinance, home equity or other kind of loan. We might be lucky enough to have a friend or relative willing to lend us money to pay off our high-interest debt, although the relationship risks may not be worth it.
But none of these options would address the root of the problem: living beyond our means. If we can’t (or won’t) budget properly, the debt door will keep spinning, faster and faster. No matter what we do to pay down our debt, I am determined to stop adding to it and pledge to NOT live beyond my means anymore.
Learn from Joanna’s mistakes. Follow her on Twitter @MoneyMsManager