News Flash: Your Debt is an Emergency!!
I like to think of Mr. Money Mustache as an advanced personal finance blog. We don’t talk about cutting up our credit cards, or clipping coupons to save $5.00 on the newest Swiffer mop, or making a budget that forces us to save 10% of our income while we devote the rest to “guilt-free spending”.
I don’t talk about my own personal battle with consumer debt and how much I struggled to get out of it, because come on, I am Mr. Effing Money Mustache. I was cleaning and ironing my five dollar bills and storing them meticulously in a photo album at age ten*, obviously I was never going to go out and spend so much on my credit card that I couldn’t pay it back at the end of the month!
This unique history and perspective allows me to see some things that are not immediately obvious to people who have been raised in the current consumer/debt society. And for all the Beginner Mustachians in attendance today, I would like to share one of these observations:
YOUR DEBT IS NOT SOMETHING YOU “WORK ON”. IT IS A HUGE, FLAMING EMERGENCY!!!
Let’s illustrate what I mean with a few examples:
One time, I lent money to a friend so he could pay his university tuition. The cash came right out of my own bank account, and since I had already paid my own tuition, I had just enough left to cover my groceries and other expenses for the school year. After the loan, that left pretty much nothing, but I assumed that my friend would have the balance paid back within just a few paychecks. I was therefore surprised when the friend proceeded to live a normal university life of partying and eating out, even during the delayed repayment process. Everything worked out fine in the end, since this was an honorable friend, but I still learned something about society’s differing opinions about debt.
On another occasion I was visiting some friends – a married couple. The guy was showing me his new TV and video game system. Later, the wife came home from working at the part-time second job she had boldly taken to accelerate the paydown of some old personal debts. On the way home from work, she had picked up a bottle of wine and purchased a DVD containing some episodes of a popular TV show. This may sound like a normal Friday night to most people, but note that the purchasing of expensive beverages, DVDs, and video games was put at a higher priority than paying off the debt. The girl thought she was taking a second job to pay down debt, but in reality her second job was to pay for wine, DVDs, and video games.
And finally, nowadays I receive emails from people who are working on developing their own Money Mustaches. They often detail income, spending, and debt situations. Often, there is a category for credit card debt. Yet these budget sketches also include amounts for entertainment, cable TV, and multiple cars.
The final straw was when I ventured out to poke around on some other personal finance sites last week. I found one that had a post from one of the authors, containing a table like this:
Mortgage: $75,000 @ 4.5% interest
Bank of America credit card: $4500 @11.9 interest
Wells Fargo credit card: $17500 @ 18.9% interest (<-we HATE this debt!)
Citibank credit card: $2900 @ 14.5% interest
We’ve really cut down on our dinners out and Brad has even started biking to work once a week to save gas in his 15MPG F-150 truck…
Do you see the glaring problems in these stories? If not, you have not yet developed the appropriate hatred for unnecessary debt. So let me spell it out for you.
The correct response to this sort of debt is, “AAAAAUUUUUUGGGHHHH!!!! THERE IS A CLOUD OF KILLER BEES COVERING EVERY SQUARE INCH OF MY BODY AND STINGING ME CONSTANTLY!!!! I NEED TO STOP IT BEFORE I AM KILLED!!!”
Orig. Op.- Mr. Money Mustache Apr. 18, 2012