Do you ever wonder why you can’t get ahead with your finances? I used to ask myself that all the time. I’d go to work, get paid, and have no money left after bills. I often didn’t check my bank balance for fear of how deep into the negative I would go after paying necessities. Strange phone numbers went unanswered because I was afraid it was a bill collector. Little did I know it was my fear that allowed me to get into that situation, and it was keeping me in it.
In this post, I will share my story of how fear got me into debt, and how facing that fear stopped me from going back into debt.
Living in denial
In 2003, my girlfriend (future wife) and I were on top of the world. We were both in college, had decent jobs, and just moved into an apartment together. The only debt we had was all mine. I had three credit cards, a Dell installment loan for a laptop, and my student loan. The credit cards and the installment loan totaled about $3000 and I was making more than the minimum payment. I didn’t have to worry about the $20,000 student loan yet because I was still in school.
Everything fell apart when my girlfriend lost her job. We were able to keep up with apartment payments with a few trips to the pawn shop. I began to pay the minimum the cards and installment loan but eventually didn’t have the money to do that. I had to quit college because I didn’t have enough to pay the balance after the student loan, so now I was expected to start making payment on my student loan. Needless to say, I never even tried to pay off the loan. By the time my girlfriend found another job, it was too late. The $3000 in credit card debt had ballooned to $10,000, and the creditors were wanting the total amount right then. That’s when I just gave up. I started avoiding phone calls and not even looking at letters hoping it would just go away. I was so wrong.
After about a year of avoiding calls, I received a summons to appear in court. I was being sued by Discover Card. I ignored it and didn’t show up. A few months later, Discover began garnishing my check. Then, a few more months went by and I started being garnished by the student loan. We lived paycheck to paycheck and every time we thought we were getting extra money, it got taken away. For years, every tax refund automatically went to the student loan. Those were the most stressful times of our lives, but it all could have been avoided.
Perceive and Believe
The year was 2010 and the debt was finally paid off. I was married with a young child and making payment on a house. Our life was better but we still weren’t where we wanted to be in life- we had bad credit and still living paycheck to paycheck. I wanted better.
One day, I was listening to a podcast (I forget the name of the show) and the hosts were talking about Laurence Gonzales and his book Deep Survival. During the podcast, they talked about Gonzales’s “12 Rules of Survival”- you can read them here. What got stuck in my head was the first and what I think is the most important rule- “Perceive and Believe.” I saw how that one rule could be applied to situations beyond life-threatening- I could use it in everyday life.
Perceiving and believing involves accepting the situation you’re in. Accepting the situation doesn’t mean giving up. According to the first rule, accepting the situation involves telling yourself, “Okay, I’m here. This is really happening. Now I’m going to do the next right thing to get myself out.” You don’t deny the situation you’re in. When you’re in denial, you try to ignore it and end up doing nothing. That’s what I was doing in my life.
I tried to ignore my debt, and that made my situation worse. Debt doesn’t go away by ignoring it- no problem can go away by ignoring it. Sure, some creditors stopped calling over time, but I still owed the money and the debt was still affecting how I lived my life.
Perceiving the situation
That one rule, “Perceive and Believe”, made me realize that even though I had made it out of debt, I was still in denial about my situation. I had never checked my credit score because I knew it was bad. Phone calls were ignored because I’d still randomly get calls from debt collectors. I knew I didn’t have to pay because it was past the statute of limitations. As long as I lived like that, I knew there was a chance my family could end up in the same bad situation we had just gotten out of. That’s when I decided to “perceive” where I was in life and how I got there.
I did this by focusing on everything that caused me to get to where I was at that present moment. I focused on my mistakes and the roles other people played. When I this, I did it objectively and without assigning blame. I was able to fully analyze the situation, and find that all of my past problems could have been fixed had I not been afraid and acted earlier.
In 2003, I had been acting on fear. I didn’t want people scolding me to pay my bills. I was afraid of the embarrassment I could face if I explained my situation to them. If I had just answered the phone sooner, the creditors may have worked with me on a repayment plan. Then I realized I was still acting on fear in 2010. I was afraid of confrontation, afraid of embarrassment, and afraid to ask for help. I didn’t want to be confronted with how bad my credit score was or how much money I had in the bank, so I ignored them both. Now I knew the reasons for my problem. I had finally stopped being in denial and accepted my situation. Now, I had to “believe” that I could fix it.
Fixing the situation
The only way you can fix a problem is to recognize that there is a problem. Once you recognize the problem you can take responsibility for it and fix it. I had just recognized my problem- fear of confrontation. I decided I wasn’t going to be afraid anymore.
My family was living paycheck to paycheck, which meant that if something unexpected happened, we had a chance of losing our home. So, I opened a savings account. I was able to put $30 a week in it- it wasn’t much but it was something. Then I opened up a 401k at my job- my wife did the same.
The next order of business was to take control my credit. I got the free copies of my credit report that everyone is allowed once a year. Then, I opened up a Credit Karma account and a Credit Sesame account. Using information from my credit report, I was able to remove some bad debt from my credit report and eventually raise my credit score from 540 to 710. With my increased score, I was able to refinance my mortgage and get lower payments. That also freed up more money to go into savings.
We were able to accomplish this just in time because, in 2012, my wife was laid off from her job. She had unemployment benefits for a few months and, unfortunately, had to cash out her 401k from her previous job after that. We had to make small cutbacks, but we would have been worse off had we not taken steps to confront and improve our situation beforehand. My wife was even able to use her time out of work to go back to school and get a better paying job.
Face your fear
If you’re deep in debt, don’t deny it- accept it. Once you accept your debt situation, you can take the necessary steps to get out of it. You can accomplish this by analyzing the situation your in with a clear head. You need to be honest about how you ended up in debt and what steps you need to get out of it. If you don’t, you could end up back in the same bad situation.
Thanks for taking the time to read my post. I’ve explained how fear got me into debt and kept me from living a happy life. Is your fear of something keeping you from getting ahead in life? If so, face that fear so you can live a more fulfilling life. Don’t ignore your debt- take responsibility for it. If you’re at a point in life where you know you can’t fix your debt alone, don’t be afraid to ask for help. The National Foundation For Consumer Credit is a non-profit organization that connects people with free credit counseling.