A little over 5 years ago, I got the best idea ever. We had a good amount of money in savings, which we were supposed to save for our wedding and honeymoon, but we also had some debt (this is referring to my 2nd encounter with debt, the first one is here).
Sure it wasn’t tens of thousands of dollars in debt, but still it stressed me out. I thought it would be so much easier and smarter to use our savings to pay all our debts off and replace it with the money we would have paid on the debt.
I would save tons of money in interest charges and that would outweigh the interest we were earning by keeping it in the bank. So many great reasons to do it; I couldn’t come up with a single negative no matter how hard I tried. Of course after doing this, I can.
It took no more than 10 minutes to pay off all of our debt and drain our savings account. Did it feel good? Yeah, it felt good. We had a clean slate and could only move forward from there, unless we didn’t. We didn’t.
We might have erased our debt, but at the same time, we emptied our entire savings account to do that, and we didn’t even have an emergency fund. We didn’t feel the pain of paying off our debt because we took the easy way out.
The problem wasn’t just the debt; it was the lack of budgeting and being really stupid with our money. We made it a whole two weeks without using credit cards to pay for stuff we couldn’t afford. After that, we went right back to everything we were doing before.
We hadn’t changed our habits at all, so of course the debt came right back. Only this time, we didn’t have the money to pay it off again.
If instead we would have figured out the problems, fixed them and then started to dig ourselves out of debt, we still would have had all that money in savings. But we chose to take the easy way out and not deal with the real issue.
We also didn’t replace the money we took out of our savings either. When you are already living beyond your means, sometimes saving a lot of money doesn’t take priority over bills and minimum payments.
Each month, we spent more money than we brought in and it just kept building up. It’s easy to tell ourselves that we’ll replace the money but it’s another thing entirely to actually do it—especially when there isn’t any money left.
I thought I would share this because I was reading old comments on one of my evil credit card posts and thought maybe it could help somebody else out. I needed to feel the pain from the interest and stress of the evil credit card to avoid slipping up again so easily in the future.
I didn’t get the evil credit card because of budgeting and spending issues though; I got it because I didn’t have any dental insurance (irresponsible of me) and knew that if I took the money out of savings that I wouldn’t replace it with the same urgency that I’d pay the credit card off with.
Maybe some people can successfully throw their money at debt…eliminating it quickly, but if there is a problem with their finances, it might be good to feel the pain.
Have you ever taken the easy way out with your finances?
How did that turn out?
Image Credit: http://www.flickr.com/photos/shalaladali/958212600/