Jane was stressed, scared, and angry with herself. She kept telling herself it was okay. “I can pay off debt better than I can save,” she would say. “I’ll just do the debt snowball again, get myself out of this mess, and NEVER get in it again.”
But Jane didn’t quite know just how much trouble she was in.
On February 13th, 2012, she bought a shiny, new four year old Honda Civic for $8,400 with tax. It was a HONDA! The most resilient car in the world! And for a while, Jane was on Cloud 9.
But buying the car had depleted her falsely beefed up savings. And now, Jane knew the power of having money in the bank. The peace she had! She wanted more. So, telling herself that same lie again, that she can pay off debt better than she can save, she maxed out the “off limits” credit card and used the money to pay off her Discover card before saving the rest.
She knew it was most moronic thing ever, but Jane was realizing too late that she really needed an emergency fund. What if something fell apart or broke down?! And as if the universe was just sitting on her roof, looking down and laughing at her, waiting for the right moment to strike, her old clothes dryer went out a week later.
Seriously! Sure, dryers aren’t terribly expensive, but she just bought a car for crying out loud!
And then, like a dark cloud rolling in from the west, that first $225 minimum payment from “old faithful” rolled into her inbox. Icing on the cake? $100 of that was interest!!
Jane cried. This was terrible! She didn’t have enough money for that! So, she started to use the Discover card again, at first, just to pay the satellite bill. She called the company and got them to lower her bill, but it would extend her contract for another six months. NOW, Jane was finally thinking about the future. She had just wrecked her life to get a car. In four months, she went from $10,000 in debt to over $25,o00 in debt — more money than she brought home in a year!
It didn’t help that with the new car, came a new, hefty insurance payment. She had no idea it would go up so much!
Every single extra penny went to keep her head above water. She grabbed Dave Ramsey’s “Total Money Makeover” and read through it again, more serious than she ever been about anything in her life.
She prayed for money to fall out of the sky. She went to an all expenses paid trade show for work in Las Vegas and prayed to win big. She lost $40. A spectator would have thought she lost 10x that amount from the way it made her feel: alone and completely broken inside.
Surprisingly, or perhaps not surprisingly, when Jane wanted another computer that fall (stupid Jane! Stop buying stuff!), Paypal came to the rescue, yet again, this time in the form of a Line of Credit. What the hell? Who gives credit to a girl making $25k a year with, count ’em, SIX credit cards hovering near their limits? But hey! They were offering 6 months same as cash! She knew better. She knew she couldn’t pay it off in time, but she was praying for a bag of money. Everything would be okay.
No. Everything was the exact opposite of okay!
Jane was truly broke now and saw absolutely no way to get out of it. Over the next seven months, she drained her savings, sprouted a few gray hairs, and waited for that bag of money to fall out of the sky and bail her out.
The bag of money never came.
Jane sold more stuff, but again, it was barely enough to keep her from drowning. Her 0% introductory rate on that one card had ran out. Her minimum payments now exceeded the amount of money she had available after her bills each month. Jane started looking into bankruptcy. And she worried: Would they take her car if she filed? Then all of this would be for nothing! Could they take her townhouse?
She combed the internet for any information she find on money. She started reading articles about money on LearnVest.com. She got Dave Ramsey’s “Financial Peace Workbook” and went through it with all the diligence of a straight A student. She was having to sell stuff just to make her minimum payments, and the months she didn’t sell anything or didn’t sell enough, she had to borrow from the dwindling available balance on one card to pay another. The amount of interest she was paying every month was literally making her sick. She was in the hole something very bad.
Jane had to do SOMEthing to get the snowball rolling on this huge pile of debt.