How To Go Into Debt (My Story)

How To Go Into Debt (My Story)

I got married last year and it was, hands down, the best day of my life. We had a beautiful venue, family was all healthy and in attendance, and of course my wife was a straight-up bombshell.

Financially, however, it was a rough day.

Now, we were very fortunate to get some help from our parents with the expense. But we still spent way more than we intended to. And after all was said and done, we were in the hole pretty deep.

But if I’m being honest, the wedding wasn’t the reason we were in debt. It had just put a magnifying glass on our spending problems. It was the little storm that hit and destroyed the poorly built house. The truth is our system was deeply flawed.

Why debt?

People take on high-interest consumer debt for one of two reasons:

  1. They’re comfortable carrying revolving personal debt, even though they have the cash to pay it off.
  2. They have to, by necessity, rely on credit to finance their spending habits.

We fell into the second category–we were straight up borrowing to cover our asses.

So where was our money going each month? Oh, just the classic stuff.

  • Lots of “bad luck” and “crappy timing” financial hits such as an unexpected $1400 car repair and a $1600 vet bill (don’t worry, the dog is fine). Spoiler alert: These weren’t a result of bad luck.
  • Lots of eating out. What do you mean $85 for lunch isn’t normal?
  • Lots of stupid grocery store purchases. Pre-packaged sushi anyone?
  • And lots of wine. I mean, Wednesday is the new Friday, right?

Figuring out any debt situation from a transactional perspective is pretty simple: More money out than in equals debt.

But I needed to understand why I was so bad with money and how I managed to let things get so sloppy. Why didn’t I do something sooner? What allowed me to justify all of those stupid purchases? I consider myself to be pretty smart and responsible, but if this was true, so how could I be so ignorant of basic math?

Everything will be okay

I was raised in an upper-middle class home to good parents. Along with always having the basics like food and shelter covered, we always had an abundance of love and support in the house. Vacations in the summer. Sports year round. It was a great childhood.

Professionally, my parents did well. My Dad was a lawyer and my Mom, trained as a nurse, later got into the health insurance industry and seemed to float up the corporate ladder. As their careers grew, so did their money.

From everything I observed, I learned that if I did well in school, worked hard, and was a decent person, good things would happen. I had no reason to question that philosophy.

It would be many years before I learned how close to the financial edge my parents were earlier in their lives. But being the good parents they were, they never let us see the stress they were dealing with.

I count my blessings. In the poker game of life, I’ve been dealt an insanely good hand. But I do think there’s a flip side to the coin. The truth is, I never faced much hardship growing up. I was aware of things like homelessness and poverty, but those seemed like issues of a different world.

I never had reason to question the stability of my life. And I think this was a good thing. No child should have to wonder where their next meal is coming from.

But financially speaking, I don’t think I ever grew up. I didn’t feel the pressure to take active steps toward my personal finance. Having never experienced real poverty, I never saw it as a threat. As dumb as it sounds, I thought the money thing would just sorta happen. I felt that no matter what, I came from a good family–I would be good.

Even when I started working and living on my own, and the money was tight, I believed it was only temporary. I was young. No one has money when they’re young, right?

And so I went along, spending and acquiring. I felt entitled to enjoy my life with the money that I had. But all I did was take out loans against my long-term happiness to satisfy my short-term desires.

I actually remember thinking, “When I’m 70 years old am I really going to look back to this date 40 years earlier and regret going out for that $80 lunch with my girlfriend?” That logic just proves that deep down, I knew better.

I spent money like it was a foregone conclusion that solutions would present themselves in the future. Once I really started to accept that the universe wasn’t going to organize my finances for me, that I had to make this happen, I began to feel a sense of urgency. And I realized I needed a new paradigm for making decisions.

Failing to track

Part of what allowed me to rationalize dumb purchases was that I had zero understanding of what our monthly expenses actually were. Sure I had a general sense that I made enough to cover my spending, but my analysis of expenses went something like this:

“My mortgage is X, my major bills are about Y, that leaves me with about Z each month. I should be fine to buy this burrito.”

But when you don’t measure, you assume–and assumptions are often wrong. It was only when I started to take a deep dive into my banking history that I really started to understand what my true obligations were. And they were staggeringly more than I had thought.

For example, my mortgage and property taxes are about $3,000 a month, and I was estimating about $1000 a month for fixed expenses like cell phones, internet, electricity, gas, and insurance. Then I actually added it up.

When everything was actually tallied…

$5,069.15 for fixed, non-negotiable monthly expenses. And that didn’t include things like food, car fuel, or loan repayments. It didn’t include irregular expenses like yearly credit card fees or driver’s license renewals. I was stunned. And then I got really scared.

I remember watching a Dave Ramsey video a few months back, and he said something that really touched a nerve. He said “If your household was a business and you were the CEO, would you fire yourself?” 

It was then I realized that my household was a business just like any other. It collected revenue, provided services, and had expenses. Why had I thought that it was exempt from even the most basic accounting systems? I couldn’t imagine my boss telling our sales team, “I we had a good quarter!” 

For the last several months, I’ve been tracking every penny that leaves our account and I’m already amazed not only by what I’ve learned but at the difference it makes on our bottom line.

Having awareness changes everything.

Death by $38

My wife and I don’t have expensive hobbies and aren’t big shoppers–no clothes unless we really need something, no electronics, no power tools, no expensive sporting goods.

Nothing.

Our thing is food. We love going out and we love eating well.

But we never planned our meals. Every day at 4pm we touched base with the dreaded “What do you want to eat tonight?” conversation. We talked it over, I stopped at the store on the way home to pick up what we needed for dinner, as well as anything else we wanted to stock up on. And I usually grabbed a cheap bottle of red wine.

That’s right. I went to the grocery store almost every single day. We never thought beyond our next meal.

I had a sense that our food and drink habit had been the major bleed in our bank account, but I really had no idea how bad the problem was. So to find out, I did a 12 month retrospective analysis of every dollar we spent on groceries and at the LCBO (government liquor store).

The results…

September 2018 – August 2019


Average monthly visitsAverage cost per visitAverage cost per monthTotal yearly cost
Groceries27.8$38.01$1.037.93$12,455.10
Wine9.5$27.01$259.09$3,109.06
Total


$15,546.16

WHAT. THE. FUCK.

I had no clue we had spent this much. 

  • An average of 28 visits to the grocery store per month.
  • An average monthly cost of over $1,000 on food. And this isn’t including eating out at any restaurants or lunch time burritos.
  • Three grand on wine.

The problem with our “method” of grocery shopping is that no single visit felt that expensive. When the average cost per trip is $30-$40, it makes adding another 5-10% of useless shit into the basket barely noticeable.

But getting a $3 protein bar to snack on for the ride home 20-25 times a month quickly becomes a significant expense. I’m not kidding when I say that in an average month, I spent more on pre-made sandwiches, grocery store sushi, and single purchase protein bars than I did on our water bill.

It’s not the big purchases that sent us into debt. It was the sneaky, subtle little expenses here and there that bled us dry. It’s what I now call “Death by $38.”

Not planning for irregular expenses.

Every March, I complain about having to pay the government $120 to register my car. I mean, it is kind of a lot. And I’m not sure where all that money goes. But it was $120 the year before and will be $120 the year after. So instead of preparing for the inevitable, I acted like a victim. I buried my head in the sand all year and then when March rolled around I acted surprised.

The truth is, a lot of life’s expenses happen on an irregular or non-monthly schedule, but we’re taught to think of finances in terms of The Month, so people rarely account for them in their budget.

The result is an over-estimation of how much money we have available, which then gets spent, forcing us to rely on credit when something “pops up.”

The budgeting software I use, You Need A Budget, calls this “Embracing Your True Expenses.” And part of why I love YNAB so much, is that accounting for life’s non-monthly purchases is fundamental and baked right into the program.

Wrapping Up

I spent a lot of time thinking about our money woes and what got us here. As it turns out, hope and ignorance isn’t a very good financial plan.

I had been willfully spending in the dark and just living in on a prayer that things would go my way. As I finish writing this post, what strikes me is how ridiculous it all is. But at the time, when I was engaging in these thoughts and actions, it didn’t actually feel like I was doing anything wrong.

In fact, it felt like I was being responsible by not treating myself to an iPad. It felt responsible to choose the $14.95 wine rather than the $20.95 wine that is soooo much better. It felt responsible to only shop for one meal at a a time so I could ensure I only bought what was needed.

Turns out I was wrong.

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