Dollars From Pennies

I was thinking about where the real starting place is for someone in the following situation(s):

• You earn a “low” income
• You have excessive debt
• You have no savings
• You are over extended on your bills (ie, can’t get them all paid on time)

I have been in this very place. In fact, I’ve been completely unemployed, with all of the above happening. But now, I have savings, investments, and a little extra spending money. How did I do it? What’s the magic?

There really is no magic. I was poor and in debt, and then I got married. My wife and I were then poor and in debt. She was in school, and the dotconomy had just put me out of a job. The job I had lost paid pretty well, but when I was single I squandered my earnings on toys, booze, food, etc. My first step was to find work.

I took a job that paid much lower than I had been earning. I’ll say that again - I took a huge pay cut just to get employed. The market was bad, and instead of arrogantly holding out for a raise, I decided to focus on getting some type of income together. I think this is an important point, though. You can’t afford to sit around unemployed when you are in the above situation. You might be a genius, but you still have bills. You shouldn’t be above taking *any* job, when you have none.

I held this job for a while, and my wife and I decided to move closer to her school. Here is where I did something foolish, but that ultimately saved us financially. We bought a cheap, cheap starter house near her college. Then, I quit my job and we moved! The mortgage was so much lower than our rent had been, and I was pretty sure I could get a job bartending or doing some other manual labor that would just pay the bills. There isn’t a lot of industry in the college town, so my hopes of working in my field were pretty low.

Then, I found a job in my field in the college town. Go figure. The pay was terrible (less than bartending), but I’d rather have an office job than bartend, so I took it! And it was enough to pay our bills. At this point, we weren’t really making financial progress; we were just holding tight. However, during this time, my wife (without whom I would live in a box somewhere behind a crackhouse) started getting the bills under control. Where I would let them pile up, pay them all barely on time (or sometimes late), she actually got us ahead of the bills. And she started doing something else - saving.

It seemed ridiculous to me to save money when we were barely able to put gas in our cars. This is how your mind works when you are under the gun of creditors and debt. But you know what, it’s wrong thinking to not pay yourself first. You must.

Who do you care more about, Chase Manhattan Bank, or yourself? MBNA or your wife’s security? You have to think of your income as being your income minus at least ten percent. And you need to take that ten percent and save it, every single pay check. Then, with what is left, you need to work on settling your debts.

Debt was the big killer of our financial situation. I had run up some credit, and my interest rates were high.

We got on a plan to overpay every month, and pay early.   After a few months, we were able to renegotiate the interest rates.  So, the new situation was:

• We had some income, and were paying ourselves first
• We were overpaying on debt, and bringing down our interest rates
• We bought less house than we could afford
• We paid our bills early, and never made a late payment

In part two of my story, I’ll tell you how we completely eliminated our debt!  Check back soon, and thanks for stopping by!

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