How I Recovered From Financial Disaster

My water service was shut off because I couldn't pay the $30 monthly bill for three months.

I was flat broke 11 years ago. I had less than $100 in my checking account, and nothing in my savings. A large portion of my retirement account and lump sum pension vanished in the stock market crash of 2009. The rest was used to pay living expenses and medical bills. I had a big mortgage, and large credit card balances. I was unemployed. And, I was battling cancer.

My early retirement from Verizon in 2007 was cut short, and I had to go back to work. In the depths of the Great Recession, with an unemployment rate of 9.5%, the pickings were slim. All I could get was a job selling furniture on commission. I wasn’t very good at it. It didn’t last long. After searching many more months I finally landed a full-time job at a casino. The starting wage was $13/hour, a far cry from my $7,000 monthly salary at Verizon. Still, it was a steady job, and I was grateful to have it. I had to make it work for me.

It was a big step forward to have a steady paycheck again when I really needed it. But, I wasn’t making nearly enough to cover my expenses. The bills continued to mount. The stress was tremendous. I didn’t want to open any bills because most of the time I didn’t have the money to pay them. My credit score, once a source of great pride and the ticket to lower interest rates, was in the toilet.

The low point in my financial struggle came when my water service was shut off when I didn’t pay the bill. $30/month. I let it slide for three months. They weren’t playing around. I went down to the kitchen one morning to make coffee, turned on the faucet, and nothing came out. I had to go to the Water Department’s main office with cash in hand to get my service restored. The experience was demoralizing, and emphasized how low I had fallen.

It got worse. In 2015 I fell behind on my mortgage. I missed seven payments, and certified letters started arriving. Foreclosure was imminent. But, amazingly, 2015 was also the year that I started to turn the corner financially. Suddenly, vast amounts of overtime at work suddenly appeared, and I took advantage of it. I worked 3,028 hours that year for an annual income of $71,000. This gave me some breathing space to deal with my bills. I took out a loan with a co-signer to pay off my mortgage arrears, and saved my house.

I wasn’t out of the woods yet. I still had very large credit card balances at sky-high interest rates, But, I was able to make more than the minimum payments every month. By 2018 my finances improved to the point where I got a debt consolidation loan for three years at an interest rate below 7% from my bank. I paid off every credit card balance I had, and closed some accounts.

It was once impossible for me to even imagine being where I am today. My bills are paid on time. I have no credit card debt. I have a savings account, so I won’t have to borrow money if an emergency comes up. I sold my house which relieved me of the mortgage burden. I used the proceeds to strengthen my emergency savings fund, and make some prudent investments. It took years of hard work, saving, and sacrifice to reach this point. Today, just about everything I buy is paid with cash or debit card. If I use a credit card to shop online or pay for groceries I don’t carry a balance. I pay it off during the interest free payment period.

Here’s the plan I used to rise from the ashes of financial disaster to solvency. There’s nothing new here. Any reputable debt counselor will give you the same advice. The most valuable lesson I learned from my painful, arduous ordeal is this – you can be financially secure if you keep your wants few, and stay out of debt!

Facing Financial Disaster? Here’s What To Do!

STOP DIGGING – they don’t call debt “being in the hole” for nothing. It’s like being trapped in a pit with no way out. Every time you borrow or charge something you make the hole deeper. Eventually, if you keep it up, you’ll sink so low that you’ll never get out on your own. Your only hope for a rescue might be bankruptcy. That may get you out of the hole, but you’ll suffer a lot of pain on the way out.

ASSESS THE DAMAGE – I knew I owed a lot of money, but I had my head in the sand. I didn’t know the total amount of my debt for a long time. I didn’t want to know. It would be too painful for me to bear. So, I just plodded along, barely making minimum payments, and praying for a miracle until I finally accepted that I couldn’t get to where I needed to go without knowing where I was. One night, I made a pot of coffee, opened a blank spreadsheet, and listed ALL my debt balances, income, minimum payments, and other expenses. When I added everything up I almost fell off the chair. It was worse, way worse, than I thought. But, after a while, a feeling of calm wrapped around me. Finally, I made the decision, and I acted. I knew exactly where I stood. I could now make a plan.

DEAL STRICTLY IN CASH – I opened my wallet, and took out every credit card except one that I kept for extreme emergencies only. This was a do or die situation that called for extreme measures. Go back to Rule #1. In you’re in a hole don’t make it deeper. If you can’t pay cash for something today you can’t afford it. Plain and simple.

STOP MAKING MINIMUM PAYMENTS – lenders are obligated by law to tell you how long it will take to pay off the balance, and how much interest you’ll pay, if you make no new charges, and make only the minimum payment. In my case, the period was more than 20 years, and many thousands of dollars in interest. A fortune down the drain! It was far more likely that I would die before I got out of debt, at that rate. I started paying a little more than the minimum, $10 more to start with. It didn’t save me a lot of money, but it was a big psychological boost. I was doing more to solve my problem, and it motivated me to increase the amount whenever I could. It was a small step, but a journey of a thousand miles begins with a single step.

CUT EXPENSES RUTHLESSLY – one of the first expenses I got rid of was my cable bill. Without cable the TV was useless. So, I sold it. I never replaced it, to this day. Next to go was dining out, or ordering takeout. This is a big annual expense for many people. I cancelled magazine subscriptions, printed coupons, looked for sales, and negotiated discounts on my phone bill, car insurance, and homeowners insurance. If I didn’t need something I got rid of it along with any recurring payment that was attached. Think about it – our actual NEEDS are really very few. Most of what we buy are things we WANT. When you’re fighting for your financial survival every dollar counts. If you don’t really need it, think twice before buying it. It’s painful. But, it’s the only way out.

BRING IN MORE MONEY – build additional income streams, like a part-time job, odd jobs, maybe a business venture on the side. Sell things you no longer want nor use on eBay or craigslist. I became an expert at that. Look for opportunities at your current job. That’s what I did. For a couple of years overtime was plentiful, and I took advantage of it. 18 or more straight days of work was common for me. In 2015 I worked 3,028 hours, and made a ton of money. It was a big victory in my financial battle, as I used much of it to pay down high interest credit card debt, and start a savings account for emergencies.

PROTECT YOUR CREDIT REPUTATION – it can save you a lot of money when you borrow, or force you to pay a lot more. My credit score plunged to “Poor” during the deepest depths of my financial crisis. Today, it’s above 800. It helped me consolidate my high interest debt into one payment at 6.74% interest, a rate unthinkable at one time. No lender was interested in giving me a loan when I was struggling. Now, they send me a deluge of offers at great rates and terms. I put them through the shredder.

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