The ability to service your debt

Oct 092008

I remember someone I know telling me about the first time that he received notice from the bank that his mortgage payments were past due. For him it was deeply upsetting. He had a lot of pride and was of the ‘a man’s word is his bond’ attitude. For him to receive something like this from the bank was devastating.

He knew it was coming. He was not ignorant to the ways of the world. In fact the reason he was in debt was because he had taken out a loan to invest in a business. He says it himself that he was trying to be too smart. He was trying to leverage his good credit score and good job to make some money.

Now I don’t know what you think about what he was trying to do. My feeling is that he deserves respect and admiration that he was willing to take a big risk (because we’re not talking small change here) to make money so that he could secure his and his families financial future. Others might argue that he should have left well enough alone as he already had a good job, some savings and a good credit score.

Anyway the fact of the matter is that he got himself into a bind. The business he invested in collapsed and he didn’t get any of his money back. For a period of about six months after the collapse he was okay because he was using his small savings to meet the loan repayments. All his cash ran out and his salary simply couldn’t cover both the loan repayments and the mortgage repayments.

Things started to get tight for him. Eventually it got to the stage where he was borrowing on his credit card to repay his loans. That source of funding eventually ran out as he hit his credit card limit. Somehow he was able to keep all this from his family as he was the one who looked after the finances.

Reality check

He knew the game was up when he received the past due notice from his bank. The sense of failure was overwhelming. Up until that point he had always maintained that once he could service his debt and keep the wolves from the door for one more month then he would be okay.

The problem that he faced was that while he was servicing his debt and living month to month every now and again unexpected expenses would occur. One of his kids might need to go to the doctor one month or his car might need new tyres. It was these unexpected events that pushed his finances over the edge and almost pushed him over the edge too.

His wife had noticed that there was something wrong and thought that he was having an affair. As a result he had to confess to the financial mess that he had gotten himself into. She was relieved that he wasn’t having an affair but upset that he felt he couldn’t talk to her about his problems. The upshot of it was that they decided to work through the financial problems together as a team.

A few adjustments

His wife agreed to go to back to working full time as the kids were now both in school. They figured that she would only need to do it for about eighteen months before their financial situation would be corrected.

Along with this change they made other small but significant changes to their lifestyles that allowed them to gain greater control over their expenses and income. I won’t bore you with the details as I have outlined similar changes in previous articles but suffice to say it involved being more frugal and starting an emergency fund.

They all lived happily ever after. The End.

And moral of the story is what Mike?

Ok the story came to a bit of an abrupt ending. The point wasn’t how it worked out for them in the end. The key point of the story and the thing I want you to think about is how easily he got seduced into thinking that his ability to service his debt was much stronger than it actually was.

His first mistake was that he thought that because he had a good job and a steady income that he could afford to take out a loan to invest in a business. There was simply too much risk involved and as a result when things went wrong his finances started to struggle. He should have used his savings to invest in the business and if he didn’t have the savings then he should have waited until he did have the savings before investing.

His second mistake was not getting help early enough. Pride before a fall. He had a big sense of pride and honour and a misplaced sense that he should be the sole breadwinner. That way of thinking is okay if we lived in the 1950’s but in today’s costly world it is very difficult to get by on one income even if the family is extremely frugal. Had he told his wife earlier on about the problems then thing might not have gotten so bad.

His third and final mistake was that once in debt he came to the conclusion that he could live paycheck to paycheck and somehow survive in the long term. He was living on a financial knife edge and it was only a matter of time before he fell off.

How many mistakes?

Of the three mistakes outlined above I have made them all – over and over again! My biggest mistake has definitely been my misplaced confidence in my ability to service my debts. Too often have I thought that I could earn more or save more or simply just magically pay off my debt each month. As the months would drag on by and I struggled to make the payments I soon would realize that all was not well in my financial story book.

Fool me once shame on you, fool me twice shame on me.

Well it took about eighteen months of trying before I finally began to realize what I was doing wrong. So I’m not sure what you could say about that – fool me eighteen times…shame on???

How confident are you in your ability to service your debts?

This is a question you need to answer as honestly as possible. While you might be able to meet your debt repayments at the moment, project your financial situation forward a year or two. Are you still confident that you will be able to service your debts then? How about it you lost your job? Or if you have lots of unforeseen expenses – would you still be able to service your debts?

If you have even the slightest reservation about your current or future ability to service your debts then now is the time to get real about it. There is no point in hiding from the problem because the longer you hide the more painful the readjustment to both your finances and your lifestyle will be when you do face up to the issue.

For more of my musings on Debt management and Personal Finance please subscribe to my RSS feed. Alternatively if you would like a free copy of my Debt management ebook “Understanding and getting out of debt” please sign up for my free newsletter.

Doing an intervention for someone who is addicted to debt

Sep 222008

At what point do you intervene when you can see that someone that you care about is heading for serious financial problems?

Do you sit and wait until they come to you?

Do you offer advice and hope that they will heed it?

Do you organize an intervention?

In my mind an intervention was always done for some form of serious addiction – drink or drugs. I now see that I have been too narrow in my thinking. An intervention for someone who is addicted to debt can be just as important as if that person was on drugs.

I’ve never ‘done an intervention’. Sure friends and family have come to me for help in the past and I outlined my experience of one such time in my article ‘The pain of debt’. But I have never actually taken the initiative and gone and intervened where I have seen there was a problem.

Why not?

Well to be honest the saying ‘people in glass houses shouldn’t throw stones’ always comes to mind. It would be very easy for the person that I am trying to help to turn around and say to me that I wasn’t so hot when it came to my own financial situation. But that is the whole point – the fact that I haven’t been so ‘hot’ in the past means that I have lots of painful experience that I could share to help them avoid making the same mistakes.

I suppose it is the fear of rejection that prevents me from doing it. When I blog there is a distance between me and the reader – it is not face to face and as much as I respect my readers the closeness that I have with family and friends would make it all the more difficult to give advice.

Then at what point?

The question I have to ask myself is what would it take for me to intervene to prevent someone from going over the edge financially?

Honestly I don’t know. I could say that if I saw a friend or family member seriously upset about their situation but too proud to ask for help then I would intervene but I would always let them try to solve their problems themselves. If I felt that they were truly struggling then I would intervene.

But I didn’t know.

In a lot of cases people keep their financial problems to themselves and maintain a façade of normality. A lot of people don’t want to be seen as weak or unable to cope so they internalize their problems and hide them away. For example any bills that come in the door go straight into the bin or in more dire circumstances they may take on even more debt to maintain the show.

In these cases it is very hard to know if someone has a problem. In a lot of cases like this it is only when the sheriffs are calling is it acknowledged that there is a problem.

In situations like these there is not much you can do. I suppose the only real thing you can do is be on the look out for warning signs. If you suspect a friend or family member is having financial difficulties then I suggest that you let them know in an indirect way that you are there to help them should they ever need it.

Have you ever ‘done an intervention’?

I would like to know if any of the readers have ever had to confront a friend or family member about their spending. I am curious to know how they tackled it as I am having difficulties trying to imagine how to do it properly. Please leave a comment in the comments box if you have ever had to confront someone about their spending.

For more of my musings on Debt management and Personal Finance please subscribe to my RSS feed. Alternatively if you would like a free copy of my Debt management ebook “Understanding and getting out of debt” please sign up for my free newsletter.

Help with Debts

Jul 222008

Getting help with debts can be hard. Based on my past experience one of the key stresses on relationships is when there are financial problems and each person in the relationship is looking to the other for help with debts. One is hoping that the other will come up with something to solve the problem. Instead of looking to themselves to solve their problems they look to the other person in the relationship to carry the burden.

While the mantra of ‘we are in this together’ is a powerful one, the reality of most relationships is somewhat different. Debt and money related problems will create a claustrophobic atmosphere in any relationship. Self preservation instincts kick-in in negative ways. After a while it is no longer a case of ‘our’ money problems but more likely ‘his’ or ‘her’ money problems. A split in thinking between the couple becomes apparent and if nothing is done to heal this split then it usually is not long before the split becomes real and permanent and the couple go their separate ways.

For those of you in a relationship that is currently experiencing money and debt problems then it can be very hard to see the ‘wood for the trees’. Your debt problems are probably so big, real and pressing that you do not have the time or perspective to look at the small problems developing in your relationship. This situation is highly understandable but unfortunately it can lead to serious trouble.

What to do?

I’m no relationship expert and I don’t claim to be. What I am suggesting here is based on personal experience, research and huge dollop of common sense.

One of the simplest ways to solve your debt problems and in turn help heal any rift in your relationships is to take the initiative and lead by example.

What this basically means is that you are no longer sitting around looking for others to help you but instead you are out there making it happen for you. Whether this means you getting a new or second job or selling your car for a smaller model or even cutting coupons – it doesn’t matter. It is the fact that you are demonstrating leadership and determination to make right past wrongs. You are out there fighting the good fight. At the end of the day your partner will see that you are taking action and making every effort to turn the situation around.

The hope is that your partner will, having seen your efforts to change, be encouraged to make changes of their own. When this starts to happen and they have made a few changes you can begin to plot a common strategy that both of you can work on. Common goals lead to teamwork and in turn lead to a move away from the blame and shame tactics that are so often used to hurt.

Generally a catalyst is needed to kick start change. In a relationship it can sometimes be the case that change doesn’t happen unless an external force comes into play. I say why not pre-empt change and be that catalyst? By taking the lead you are the one in control and you can direct the flow of action.

Debt is the slow rot that will sink your relationship. The guilt, fear and worry that it brings is enough to unsettle even the most solid of foundations. Stop that rot now. Take the small messy and ugly steps towards paying off your debts. Your actions don’t have to be pretty, clean and clever – they just have to move you in a positive direction.

The more serious you can show your partner that you are about repaying your debt and sorting your finances the more likely you are to stop the rot.

Look after yourself first – your debt second

Jul 212008

I recently read a comment on a finance website by a guy who was deeply in debt. He had a huge mortgage and had major debts that he incurred when his business failed. The thing that struck me was his comment that he thought he was losing his mind. He was having sleepless nights and during the day he was too tired to take any meaningful action on his debt.

In a previous series of articles I asked the question “Do you have the energy to fight debt?”. In most peoples cases the answer is a resounding no. The comment by the guy in debt is typical of the emotions and feelings that people experience when they are confronted by a wall of debt. Sleepless nights, worry, stress and the inability to take positive action seem to be the order of the day. I should know as I’ve been in that situation on more than one occasion.

The energy aspects and how to motivate yourself are dealt with in the ‘do you have the energy to fight debt’ article. In this article here I want to focus more on the fact that most people don’t seem to put themselves first when it comes to sorting out their debt.

When debt is coming at you from all angles the general tendency is to curl up into a little ball of negative emotions. Lack of knowledge as to how to deal with debt and lack of income to pay down the debt combine to create a very tight corner. A lot of people who find themselves in this situation tend to constantly beat themselves up. Somehow believing that things will get better if they beat down on themselves, that somehow the harder they are on themselves the quicker the debt will get paid.

This logic is clearly flawed yet the phrase ‘how could I have been so stupid’ is one that is repeated hundreds if not thousands of times.

What I learnt from my time in this tight corner is that the only person in that corner is YOU and the only person who is fighting your corner is YOU. You can be your own best friend or your own worst enemy. By beating on yourself you are not solving any problems. No matter how hard you try you cannot beat sense into yourself.

You need to be your own best friend.

The truth is that the only way you will ever get out of debt is by being your own best friend. You need to put yourself first. You need to tend to the worries and stresses you have in order for you to be effective in dealing with your debt.

What is one of the main things that the air hostess says when you are being shown the how to use the oxygen masks on a plane? Make sure to put your mask on first and then help your family. This makes perfect sense. If you can’t breathe and are losing consciousness then you are no good to anyone. By tending to your own needs first you ensure the maximum odds of survival for the people around you. If you try to solve everyone else’s problems first you are doomed.

The exact same logic applies to debt management. Look after yourself first. You are no good to anyone if your health – both physical and mental – is suffering as a result of you trying to dance the merry dance with your debtors or your family. Put yourself first. Be selfish – initially at least. Be selfish until you can steady your ship and get your finances in order. What use are you to anyone if you sit up half the night worrying and stressing and are too tired during the day to do anything about your debt?

Too often people try to tackle their debts when they are emotionally and mentally exhausted. Their efforts tend to be half hearted and misdirected. Their energy levels have been sapped by months of stress and worry. As a result their efforts tend to have minimal impact and they end up becoming more and more frustrated.

So how to put yourself first and your debt second?

Your goal is now to focus on giving yourself some breathing space so that you can get some perspective on your problem. I’m not saying you should go on an expensive holiday – far from it. I’m saying that you take a day or two to sit down somewhere quiet and brainstorm two lists.

The first list is all the things that you can do that will improve your mood. These activities have specifically to be low cost or no cost. Things like improving your diet, more exercise, more time with friends and family, a new low cost hobby. You get the picture.

The second list is a list of all the things that you can do to get yourself out of debt. These things can range from the simple to the hard – from selling your home to collecting coupons. Write them all down.

Now for the hard part, take one item from each of the lists and do them. Continue to do them until they are having a positive impact on your debt and on your mood. Once you have established these items as habits move on to the next item.

The key message here is to look after yourself – both mentally and physically. Otherwise you won’t be able to look after your debt. You will be no use to anyone if you’re a burnt out physical wreck.

Do we have a moral obligation to pay our debt?

Jul 022008

Moral obligation is defined as “A duty which one owes, and which one ought to perform, but which one is not legally bound to fulfil.”

With debt you are legally bound to pay but do you also have a moral obligation to pay? If you simply avoid paying your debts by say filing for bankruptcy would you feel guilty? Or would you just carry on as if nothing happened?

Most people’s initial reaction would be that we do have a moral obligation to pay our debt. It is this moral obligation that causes a lot of people mental anguish as they struggle with their debts. Wouldn’t it be nice if we could just walk away from our debts and not think twice about it?

Sometimes I hear the attitude that credit card companies and banks have been making a fortune from us on the back of high interest payments – wouldn’t it be nice to get one over on them? I don’t know how comfortable I am with this attitude. I am a firm believer in karma and what goes around comes around. If I were to default on my debts without making any attempt to pay them back then one very obvious consequence for me is that my credit rating will be shot to bits.

So where does this leave the question of moral obligation? The reality is that if you have debt but have no money then moral obligation or not you are not going to be able to pay your debt. The feeling of moral obligation is just going to hinder your progress with coming to an arrangement with your creditors. You are just going to be weighed down by this and won’t progress until you have resolved this inner conflict.

My feeling is that if you can honestly stand up and say that you have done everything in your power to pay off your debts and that you have explored every avenue to find a solution then I think that you can move away from the notion that you have a moral obligation to pay your debts. Of course you still have your legal obligations but you can go into any arrangement with your creditors with the feelings that you tried your best and unfortunately things did not work out for you.

The feelings of moral obligation are entirely a personal thing. Some people will feel little moral obligation to pay their debts especially if they have been treated badly by banks or feel that they have in some way been duped into taking on more credit. For most others the thoughts of not paying their debts cause allsorts of internal feelings of dread and worry.

In order to effectively tackle your debts then you need to decide where you stand on the position of moral obligation. This is entirely a personal choice. It doesn’t matter what other people say or do because at the end of the day it is you who will be carrying the can.

Once you have decided on your position then act accordingly. But don’t try to cheat your creditors if you think you can or want to. That will surely lead you to a place where you certainly don’t want to be. If you don’t feel morally obliged to pay your debts then go about arranging a legal agreement that suits all parties if possible. Just because you might feel that you want to get back at your creditors don’t end up making things worse for yourself. Effectively you will be cutting off your nose to spite your face.

If you do feel morally obliged to pay off your debts then use it as a motivating force. Don’t succumb to the negative thinking that your creditors are out to get you. Make a pact with yourself that you will do everything in your power to pay off your debts as soon as you can. However, one thing you must avoid is self flagellation. If things don’t go your way and you end up not paying your debts and in bankruptcy – don’t beat yourself up. Be happy that you did your best and instead use that energy to propel yourself through the tough times.

Pets and debts – Isn’t it time Frodo start pulling his weight?

Jun 102008

So you love Frodo or Bobo or whatever you called your pet dog/cat/snake. You’re pretty sure they love you. Great! Good for you but now lets get down to serious business. If you are in debt then that great big ball of fur could be keeping you there. The costs associated with keeping a pet can be huge depending on your level of attention to detail and how much you want to keep up with the Joneses.

Pets are often treated as another member of the family – a very expensive member of the family. Even the smallest pet is not cheap. When they look up at you with their big loving eyes little do you realize that they are eating away at your budget.

Now before we go on I want to point out that I am not some cold hearted monster that is going to recommend that you leave Frodo at the side of the road. Far from it. I love animals. I’m more of a dog person but I have to admit that I admire the way cats can fend for themselves and give a collective two fingers to the world. I also have a soft spot for turtles but who hasn’t? Spiders and snakes are not really my buzz but I can see the appeal of an ant farm. Oh and fish, I really like tropical fish.

Now the thing is this website is about debt and your relationship with debt. The unfortunate thing is that most pets are expensive. As a pet is almost always seen as member of the family it is generally the case that you want the best for them. The clever marketing people know this and charge you accordingly. Pet expenses can be unpredictable and costly and this makes them hard to budget for.

So what’s the alternative?

Well there are a couple of simple things you can do to allow you to properly budget for your pet expenses.

The first is to buy pet Insurance. I know this is an extra cost each month but the way I look at it is it will help smooth out the annual cost of your pet. Each month you know that you have to pay a set small fee and as a result you can incorporate this into your budget. If you have to take your pet to see the vet then the insurance should cover most if not all of it.

The second step is to buy your pet food in bulk and online. If your pet is like 9 out of 10 cats and prefers a particular brand of pet food then shop around for the cheapest offer on it. The good thing about pet food is that it is usually long dated and it is a long time before it goes stale. This will allow you to buy in bulk and buy cheaply. Amazon is a good place to start but I highly recommend that you shop around.

Budgeting for a pet?

Yeah I know it does take a certain amount of the fun out of having a pet and it does add to the list of tasks that we need to do when we have a pet. I would put budgeting for a pet in the same category as cleaning up dog pooh. Not a nice task but something that needs to be done. The fact is that if you don’t budget for your pet and it gets more expensive to keep them then you will begin to resent them.

Another way to think about your pet is look at them from the point of view of cost of keeping them versus the benefits that they bring. Homes with pets in them seem to be filled with more joy. There seems to be a lot more going on if there is a dog or a cat running around. Studies have shown that the mood of people who are depressed improves when they have a pet. The pet takes the persons focus away from themselves and their problems.

The simplest way to increase the benefits of having a pet is to reduce the costs of having them. This way you get the same benefit but for a lower cost. Pets are great. They can be a little hard work and if you want to reduce the cost of having them they may require a little more hard work but the benefits far outweigh the costs involved.

What is your problem with people in debt?

May 212008

I was browsing the web recently and I came across an article about people in debt. The article outlined all the facts and figures about how we are all doomed. Then I got to the comments section and I couldn’t believe what I was reading. Almost every single comment was in a negative and derogatory tone against the people who were in debt. It was unbelievable. Some of the people’s comments were pure poison.

One such comment went something like this

“Don’t try to educate these fools. Having their homes taken away from them and their lives destroyed will teach them”

I mean come on what is that all about? I was a little shocked to say the least and this got me thinking. Why were these people so angry at people in debt? What motivated them to post such vitriolic comments? 

I think some of these people who posted the comments feel that they lost out during the boom times and for whatever reason feel angry about it now. They seem to want to blame the people who were trying to make a better life for themselves. I’m not denying that there were excesses during the good times – this is always the case. Some people went overboard with the easy credit. But in my opinion the vast majority of people who find themselves in trouble today do so because they were simply seeking a better life. What’s wrong with that? What’s wrong with trying to make extra cash doing something like flipping properties – ok it is highly risky but you got to admire the people who were willing to take those risks. A lot of people got burned but they will be back again doing something different trying to better themselves and improve their lot.

I know people who simply wanted to improve their kid’s education. Give them the best start in life. How can you judge someone who goes into debt for that? How can you judge the college graduate who is up to their eyeball in debt as a result of tuition fees? Man some people can be cruel.

The Germans have a word called “Schadenfreude” which basically means “to take pleasure in someone else’s misfortune”. A sort of “serves them right” mentality. This kind of attitude is wrong and unhelpful. How are we supposed to solve our debt problems with people beating on us?

Amid the negative comments there was one comment that I agreed with. The comment went something like this.

“People need to live by the choices they make and accept responsibility for them”

Yes I couldn’t agree more but just because some makes some bad choices about their finances should they be labelled a fool? These people who have made bad decisions about their finances are paying the price whether they like it or not. Some may lose their homes or have their credit rating ruined – is that not penance enough? Why start the name calling as well?

In the end we are all responsible for our own financial wellbeing and it is only us that can put it right. So what if we make a few mistakes along the way. It’s how we learn. Mocking people who are in debt now is like laughing at someone who has a car crash and saying – you should have learnt how to drive properly. You just don’t do it or at least you shouldn’t because someday that person could be you.

To those people who are in debt and are struggling to get out of it I salute you. Pay no remarks to those little people who are trying to exercise some sort of moral superiority. Simply by trying to do this they show that they don’t have any moral superiority – no one does. Stick with the fight. No matter what happens simply by going through your debt situation you will come out the other side as a stronger person.

Debt and relationships – this ship is sinking

Apr 162008

Which of the following two scenarios seem more realistic to you?

Guy meets Girl. Guy likes Girl and buys her presents. Girl really likes presents and falls in love with Guy. Guy asks Girl to marry him. Girl says YES. They both live happily ever after. The end.

Or

Guy meets Girl. Guy is already in debt from four years at college. Girl is in debt too from four years of shopping. Guy tries to impress Girl by bringing her for nice dinners on his nearly maxed out credit card. Girl is suitably impressed. Guy can only keep this up for so long before his bank manager starts joining them on dinner dates. Guy gets a couple more credit cards and the relationship continues. Girl happy with all the nice new shiny stuff that Guy has bought her. Guy really likes girl and asks Girl to marry him. Girl says yes once she sees the nice ring. Girl plans a nice wedding, ‘That’s another $20,000 thanks honey’. Ok so far so good. Guy gets a promotion – more spending follows, the house, the SUV, the golf clubs, the joint gym membership, the dinners out, the nice holidays.

Things are good…for a while. Then Guy gets worried. His loan application is rejected. He takes stock of his debt and realises that he owes far more money than he thought. Guy tries to talk to Girl. Girl is not listening as she has become accustomed to the nice shiny things. Guy is determined to stop spending and control his finances. Girl not happy, thinks that Guy no longer loves her. Guy thinks girl is being selfish. Interest rates rise on the mortgage. Guy and Girl in even more financial difficulty. Not a nice situation. Guy and Girl fighting a lot now. Guy can’t take it and leaves. They both do not live happily ever after. The end

Before I have the women’s lib organisation firing like a million emails at me let me explain that the examples above are tongue in cheek. They serve a purpose of outlining the fact that relationships are expensive and can ultimately lead to a lot of debt. The roles could have been reversed Girl meets Guy or even Guy meets Guy. The point is not so much of the make up of the relationship but the fact that money is often a factor in a relationship that is not considered important until it is too late.

So what is it about money that makes it such a dirty word when it comes to relationships? The lack of communication and understanding around money in relationships can be the Achilles heel that causes a lot of relationships to end. Money in itself is nothing but pieces of paper and numbers on a screen but it’s the meaning that people assign to money that causes the real problems.

Different backgrounds

If the relationship is made up of two people from different socio-economic backgrounds then straightaway there will be a conflict in attitudes towards money. Someone from a middle class background will have a different attitude from someone from a working class background. It is this difference in attitude that can cause problems in the future. I’m not saying that these relationships can’t work what I am saying is that this difference in attitudes towards money in all relationships needs to be understood and appreciated so that it can be removed as a road block to a happy long term relationship.

Different financial educations

This is related to different backgrounds but does not necessarily always apply to people from different socio-economic backgrounds. Financial education can vary between people from the same socio-economic background. The level of financial education largely depends on their parents attitudes towards money. Some people (not many!) have an aversion to debt while others have no problem embracing debt. This in turn can lead to conflict.

Debt in relationships

Debt in a relationship is a strange thing. When a couple first get together they each bring their own financial baggage with them. The financial baggage usually comprises of debts and an attitude towards money. Now when people first meet they are unlikely to begin discussing how much in debt they are in. On the contrary people usually try to project how successful they are and that they are in some way financially secure. It is not until later in the relationship does it come out that Guy has $50,000 in student debt and has creditors chasing him.

If the dominant attitude in a relationship towards debt is relaxed then it is likely that this spells trouble down the line. So what if we live pay check to pay check? Relationships can be tough enough without having the unrelenting pressure of having to go to a job you hate to pay off debt you got into as a result of a relationship that you are beginning to dislike …and the spiral continues.

Social pressures to conform

Once in a relationship the tendency is to socialise with other couples. Your single friends don’t want to be reminded that they not in a relationship or simply don’t want to see you two cooing like babies! Get a room!!! Anyway the point is when you socialise with other couples a certain type of weird competition forms – which couple is the best? I’ve witnessed this first hand and it’s bizarre!

Picture the scene. Guy and Girl are out for dinner with two friends Paul and Cindy. The conversation turns to travel and holidays and it suddenly becomes a case of one-upmanship between the couples. As a result Guy and Girl come away from the dinner feeling deflated. They silent vow that the next dinner date with that couple they will outshine them whatever way they can.

Now I know to the casual observer the above scenario seems unrealistic but I’ve witnessed events like this happen first hand. I’m sure if you think about it you too have probably witnessed similar events. Adults acting like kids in the playground. Oh I’ve got the latest BMW which is way better than the latest Mercedes or whatever.

This social pressure can cause some couples to take leave of their senses and start accumulating ridiculous amounts of debt. For what? To look good? Well in truth a lot of the time these couples end up looking stupid as their cars are repossessed and they struggle with their mortgage payments.

Don’t get me wrong. I do have sympathy with the couples who find themselves in such situations. As with any situation where there is a lot of debt involved there is always a positive way out.

How to get that positive outcome and make the relationship last

Assuming that the underlying problems in a relationship are caused by debt then there are a few simple but highly effective steps that can be taken to rectify things.

1. First off there needs to be acknowledgement that it is the financial strains that are causing the problems not something else.

2. Get a complete picture of all the outstanding debts – every last one. This will allow you to know exactly what you are facing. Don’t hide bills away. This exercise needs to be carried out with 100% honesty.

3. Look at all the options available. This will involve researching every possible option open to you from debt consolidation to remortgaging to bankruptcy. No option should be off limits.

4. Reduce the number of options to the ones that you have agreement on – both parties need to be happy and prepared to go along with it.

5. Decide on the best option and make a join commitment that whatever it takes that you will see this out until the debt situation is more manageable.

6. Set a timeframe – there is not point in saying “someday” make it “TODAY”.

7. Take action. Assign tasks and follow through on them. There is no point in just paying lip service to the need to change. You need to actually go out and do something or not do something like not going out for an expensive meal.

8. Keep track of your progress. Follow up on the debt daily, weekly and monthly. Whatever it takes.

9. Continue to support each other in the process. Stop playing the blame game as there is absolutely nothing and I mean nothing to be gained by fighting. The debt will still be there at the end of the fight and you will only feel worse as you have fought and yet the debt is still there. Use that energy to get yourself to take action.

10. Once you have reached your target agree a common debt strategy that you are both comfortable with long-term.

Now it’s obvious from the list above that it is aimed at people who have been in a long term relationship and share financial commitments. I mean if you just met someone you’re not going to be talking debt management in relationships from the word go. However, while this may be true it is always worthwhile laying down a few financial markers once the relationship starts to get anyway serious. This could be simply a case of letting the other person know what your attitude towards money is and finding out what there attitude is. In the long run this could save you a lot of time, energy and in particular money.

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