Beating Broke

Personal Finance from the Broke Perspective

How Your Confidence Affects Your Finances, Part One

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The other night, my husband and I watched Maxed Out, a documentary about the credit card industry and the effects using credit has on individuals’ lives.

While the movie itself had some dry sections, the heart of the movie, to me at least, was how people responded to heavy debt loads.

Of course, heavy debt loads is a relative term.

The Worst Case Scenario

One college student who was $12,000 in debt chose to take her own life rather than face the endless collection calls about a debt that she obviously felt was insurmountable.

Another woman, Yvonne Pavey, was in debt, but then, with late fees and penalties, the amount of debt she faced spiraled out of control.  Her solution was to simply drive her car into a nearby lake.  Her body was found at the end of the Maxed Out documentary.

The Endless Anxiety and Despair

Stay Confident and Pay Off DebtAnother woman in the documentary began to struggle financially after her husband died and she could no longer keep up with the house payments.  Rather than sell the house, she chose to finance her monthly $4,000 house payments on her credit card.  When she was interviewed for the documentary, she was weeks to days away from foreclosure.  The pain and despair she felt was palpable.  While she hadn’t taken the drastic measure of taking her own life as others had, it was clear that she thought her life was over and that she had failed.

She had mentally checked out of the game of life and felt that she had failed and there was no escape.  This feeling of despair among those who have debts is common.

The Effects on Your Health

In addition, carrying a heavy debt load can take a physical toll.  “Experts say there’s no question that being in debt can be stressful.  And a wide body of research has tied stress to health problems including high blood pressure, cardiovascular disease and stomach disorders such as colitis.  ‘As with any serious stress’ debt does have an ‘impact on one’s physical health,’ said Elizabeth Carll, a New York-based stress and trauma psychologist.  Financial worries may cause a person to be ‘run-down, have more colds, migraines and headaches, [and] their current medical conditions may get worse” (The Washington Post).

As someone who is on a journey to pay off nearly $58,000 in credit card and student loan debts, I can attest both to the sense of hopelessness and the health risks.  For nearly 18 months in our debt payoff journey, the debt was literally all I could think about, and it affected my health.  I didn’t sleep as well as I should, I was quick to anger because of the stress from the debt, and my health failed me.  In fact, it’s taken me 15 months to restore my health and almost begin to feel like myself again.

We have been paying down our debt for two years now, and we have just reached the halfway point.  Our debt now is at $29,000 in student loans only, and we finally feel like we can breathe.  I’m not out of debt yet, but I’m far enough through the process that I can see how much that debt weighed on me like a ton weight around my neck.

Through this journey, I’ve learned that your mindset can make or break you when it comes to both your feelings about your debt and your debt payment.

Stay tuned for part two. . .

Achieving Your Goals Takes Time: Remember This As We Head Toward the New Year

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I loved to bake.  Muffins, homemade French bread, homemade sandwich bread, cakes, brownies, you name it, I made it.

And then I found out I was gluten and wheat intolerant.  I tried to bake gluten free items, but I didn’t understand how all of the different flours worked, and after making pan after pan of hard, tasteless gluten free baked goods, I gave up.

Just recently I tried again, and this time I hit upon success.  I learned how to make my own gluten free all purpose flour (thanks to the Internet), and I found a recipe for gluten free pumpkin bread.  I used that recipe and altered it to make a delicious, sugar free, GF banana bread.  But my daughter is egg intolerant, so, after I perfected the recipe, I experimented with making it egg free, and again, I came up with a good bread.

My love of baking is returning.

What does this have to do with personal finance?

Actually, quite a bit, especially as we enter the last few weeks of 2013 and head into 2014.

In just a few short weeks you’ll notice blog writers changing their focus from how to save on holiday gifts to setting goals for the new year and steps to achieving your goals, especially financial goals.

Maybe it’s that people drink too much during the holidays, or maybe it’s that people are unbelievably optimistic as they head into the new year, but many of us set ridiculously difficult New Year’s goals.  And then we’re disappointed with and hard on ourselves when we fail.  (And often we fail the first week of the new year.)

Change takes time

Change is a step-by-step processMaking any big change doesn’t happen overnight because the calendar turns to a new year and you’ve made a list of things you want to accomplish.

Change is a step-by-step process, and it can be a long, painful journey.

It took me a year to finally learn how to make a good gluten free bread and enjoy cooking again.

Likewise, my husband and I are 25 long months into our debt repayment journey, and we’re only now reaching the halfway point.

In those 25 months, though, we’ve learned how to wait to purchase things we want rather than rushing right out and buying them, and we’ve learned to stay within our budget.  Would I like to be debt free now?  You bet.  But I also appreciate the valuable lessons I’m learning along the way.  After all, those lessons will help us stay out of debt forever in the years to come.

As you enter this holiday season, go ahead and think about things in your life that you’d like to change.  Maybe you’d like to put more money in an emergency fund or add to your retirement account.  Set your financial goals, but don’t expect changes in your behavior to happen automatically.  Know that any good change in habit takes months, maybe years, to be cemented in as a permanent part of your fabric.  Be patient with yourself and know that each step you make in the right direction is a step that is getting you closer to your goal.

What steps do you take to make sure you are achieving your goals?

The Smell of Napalm

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Napalm is a sticky, flammable substance that was invented in the 40’s, and used in several wars.  Because of it’s stickiness, it attaches itself to everything, then burns at somewhere over 800 degrees.  When it’s done, there’s no more jungle.  No more enemies walking around.  It’s vile enough, that it’s use on concentrations of civilians was declared a war crime by the UN in 1980.

By now, you’re probably wondering why a site about personal finance is discussing Napalm. Well.  Here’s the thing.  Debt is a funny thing.  Most of us have it.  Some of us have quite a bit.  And most of us would like to get rid of it.  In fact, most of us would just love to Napalm our debt.  One fell swoop.  Drop some sticky burning substance on it and have it gone in a few short minutes.  We’d like that so much that we buy lottery tickets, raffle tickets, and buy books and products that promise some get rich quick scheme.  People with debt are always looking for the debt Napalm.

We like to fantasize about what we would do if we won a couple million in the lottery and set our debt on flames.  Erasing it, with one fell swoop, while getting rich at the same time.  Much like Kilgore in Apocalypse Now, we love the “smell of [debt] napalm in the morning.”

Napalm: War on debt Crime

Instead, we’re given the “debt snowball“, or the “debt avalanche.”

The truth is that debt is so easily gained, we want to find a solution to it that is just as quick.  An afternoon with a credit card and a shopping mall can add thousands to the total. Thousands that could take us years to pay off.  We wish we could find the Napalm to incinerate our debt.

Some people think that bankruptcy is that Napalm.  But, as quickly as a bankruptcy can eradicate your debt, it doesn’t leave you without any scars.  For many years afterwards, you, and your credit score, will suffer the consequences of the bankruptcy.  Credit will be nearly impossible to attain.  Prospective landlords and employers are even running credit checks before renting or hiring people.

We need to stop looking for the Napalm.  We need to stop assuming that all is lost.  We need to take some responsibility, find ways to make more money, save more money, and pay down more debt.  We need to stop adding more debt.

If you want to get rid of your debt, it’s a slow burn, not a Napalm strike.  Even in the world of personal finance, Napalm is a war crime.

Original image credit: korea by the U.S. Army, on Flickr