Just How in Debt am I?

You may be wondering. I am an intelligent woman, with a college degree from a prestigious university. People like me should know better. I did, certainly. But it was all of the small things that added up to big debt. Presently, after our $273,000 mortgage, we have a $57,000 home equity loan, an $7000 car loan, and consumer debt, i.e. credit cards, in the tens of thousands. I hear you saying, "Wow! At least I'm not that bad off!" Congratulations. I hope that your debts are considerably smaller, or nonexistent.

Now, my husband makes a good salary, in the low six figures shall we say, and we aren't living in a terribly expensive area. I've have been a stay at home mom to our four kids for sixteen years. We have a special needs child, who needs a lot of my time and attention, which is why I do not work outside the home (yet). We have managed to keep our credit score in an acceptable range (above 700) but we used to have a credit score up in the 800s before we racked up so much debt. We have been able to manage the payments on all of this debt but now we are uncomfortably SQUEEZED. We can pay for the necessities (we have never missed a payment on anything), but not much else is left for savings or date nights, or vacations, or anything in the "incidentals" category.

Our financial situation went from okay-could-be-better to really-stretched when my husband was out of work two years ago for almost five months. We didn't have five or six months of income saved up (which would have been 50,000 in short term savings), only about one month's. When we ran out of cash, we used our home equity and our credit cards. Big mistake. We should have asked for help, and I probably should have gotten some part-time job, but we didn't think it would take that long to find a job. In the end, we added about $40,000 more to our debt. We have dipped into our college savings for our oldest (the only that we had) until it is almost gone, and she goes to college in two years! Our 401Ks and our Roth IRAs were cut in half due to the plunge in the stock market. We have only about $4500 in short term savings.

So we are in a hard place of looking at selling our home to move to a different school division where we won't have to pay for private school anymore. Yes, for about nine years we have been paying for private school for all or some of our kids because our district is not a great one. This extra $10,000 a year meant that we were not saving for emergencies, and using our credit cards to make up the monthly difference. Why were we doing the private school thing if we couldn't really afford it? Well, we live in a neighborhood where probably 90% of the families send their kids to private schools because of the substandard educational environment in our district. It is sad, but a result of a very high rate of teen pregnancies in our city. The local schools are filled with kids who are basically parented by kids themselves, resulting in a lot of discipline issues and dumbed down standards of education. So that is why we need to move.

I figured out it will take us about five to seven years to pay all of this off. I will tell you how we intend to do it next time. Keep dropping that change in the jar!