Why Are You In Debt? (Part 3)
Posted by Gail | Filed under Debt Traps
There are people who are up to their armpits in alligators who know just how it happened. But it isn’t their fault. Nope. It just happened to them. These debt victims still feel so much like victims they can’t find a way to take control of their situation and make the life they want. They are the saddest of all. If you’re in Debt Hell and are too depressed to think about it, you should ask yourself these three questions:
Are you married to or dating a spendthrift? If you have someone in your life who spends money faster than they (or you) make it, you’re never going to fix the problem by sitting where you are and whining about it. There are people who have no self-control, no ability to defer their own gratification. There are people who don’t give a whit about the danger to their family or the impact of their spending on their loved ones. And there are people who are perfectly happy to live high on other people’s wallets. If you’re married to, or in a relationship with, one of them you can leave their dumb asses or you can stay and suck up the misery. Yes, I’m being very blunt. No I’m not suggesting you throw your partner out today. But if you can’t come to an agreement on how you will work together to ensure the safety of your family, maintaining the status quo shouldn’t be the option.
Hey, some people like living on the edge. It makes them feel alive. If you’re all for a life of danger and not knowing what comes next, enjoy yourself. But don’t complain about it. If you’re complaining you’re not happy and it’s time to act.
The first step is to protect yourself (and your children). That means a) building a wall around your finances to keep the aberrant behaviour of your partner from affect your family’s stability. So no joint anything. If your partner is responsible for paying bills, it must be the bills that will have no real downside if they go unpaid, so it can’t be things like the mortgage. Let him pay the utilities and the extras, and make sure those bills are in his name. Or let her pony up the money for food, so that if there is no money, the impact is immediately apparent. Make sure your credit is separate: no joint credit, no co-signing. Make sure your savings are separate. And make sure you’re doing whatever you have to in order to become financially independent. (If you want more about this, go read Protecting Yourself.)
Have you gone through a divorce? A divorce can decimate a family financially regardless of whose fault it is. Compounding the problem are the legal fees that people rack up to claim “what’s theirs” including fighting over custody of the children. I’m always appalled at the horrible ways in which parents going through a divorce will behave. But I’ve seen it enough to know bad behaviour seems to come with the territory, no matter how harmful it may be to everyone involved. The only way to avoid this is to never get married and have children – a pretty poor solution, don’t you think? So the next best thing to do is make sure you’re armed with a really healthy emergency fund and the best lawyer money can buy if mediation won’t work.
Marriage isn’t something to be entered into lightly – although most of us are more diven by hormones than by common sense when it comes to choosing our LIFE partner. Even when you do choose well, people change and you can end up with a lot more or less than you expected.
Sometimes just knowing how much you stand to lose financially is enough to get some people back to the table talking about what’s really important to them. I have a friend who left her husband for several years, raising her boys on her own. Later, she and her love found their ways back to each other and the family is again united.
Are you sick or disabled? Major medical problems can annialate even the best-laid financial plans. Living on a disability income is no easy thing, and if you have big medical bills that aren’t covered, you can find yourself turning to credit to cover your basic needs. Ditto parents who must deal with a sick or disabled child. I’m sorry there are no easy answers to this dilemma. Assuming you didn’t have enough or the right kind of insurance to mitigate your risks, you’ll have to work hard to find resources you can use to cover your expenses or supplement your income. And you shouldn’t worry too much about the future since your present is tough enough. However, you do have to find ways to take pleasure in small things. Look to family and friends for love and support. Try to find a way to share. In giving to someone even less fortunate you will find strength. In focusing on what you do have, you will find joy.
Tune in tomorrow for the final five questions.
BTW: If you tried voting on the poll and couldn’t try again. I think I fixed the problem.
January 7, 2010 at 5:37 am
I have been divorced for ten years, and can honestly say that we never discussed money properly. Ditto the only long term relationship since the divorce. I have been ’single’ for almost seven years now, and shudder at the thought of inheriting someone else’s debt/problems. The blinders are off, it’s gonna have to be a really special fella to fit into my lifestyle this time. Far too often I see friends/co-workers blowing their money and saying “Don’t tell so and so you saw me”, or trying to cover their tracks. This past year, I discovered that someone who I thought had THE perfect relationship had hidden money from his partner! Makes you wonder. My sister-in-law seperated before Christmas from her spouse of 8 years. Within a week, he had her name removed from their JOINT account. I thought that could not be done?? She is now scrambling to make sure that thinks like cell phone accounts and utilities will be functioning. It’s sad really, but we all have to cover our butts, no matter what kind of relationship we are in.
January 7, 2010 at 5:38 am
—that should be *things like cell** methinks!!
January 7, 2010 at 8:00 am
Well I don’t fit into any of those categories. With regards to the divorced one I hope I never end up there.
This is a nice series
regards,
Jason
January 7, 2010 at 8:20 am
Divorce for me was an expensive option – but at least it was over relatively quickly! My ex was a person who required instant gratification and therefore had a high credit card balance compared to our level of income. Because I was a silly weakling I also charged items to my credit card to make him happy or to make sure that my family did not realize the situation I was in (charging trips home for a family wedding for example). At least we kept separate credit cards and I had my own bank account (from which RRSP deductions were made monthly) so I thought I was safe. My name was on the mortgage, the line of credit and “his” bank account. The day after I left I went to the bank and froze the line of credit (which could be done by one individual so that no further charges could be done) and removed my name from his account. I was more than fair with the division of physical items but there were still hours of wrangling over how much an item was “worth”.
However in the settlement of our financial matters it was decided that all debts and assets (no matter whose name they were in) were considered to be “family” debt and would thereby be split equally. I was beyond frustrated to accept his credit card debt in order to keep my RRSPs. My laywer agreed that it was not fair, but considering the amounts involved it would be cheaper in the long run to accept it rather than fight it and pay legal fees. It may not have seemed like much to my lawyer but when suddenly out on my own for the first time it seemed insurmountable to have any extra payments. I also ended up continuing to make mortgage payments on a house I did not live in until the house sold – my ex refused to make the payments and I did not want to wreck my credit rating (I was able to recover these monies upon the sale of the house at least).
Anyone who is facing a separation should make sure that when they leave they take any financial records that they will need to support their case with them, try to protect yourself and look forward – this too will make you stronger.
January 7, 2010 at 8:51 am
Still not able to vote in the poll.
January 7, 2010 at 9:13 am
You really can’t be careful enough with knowing where you stand…After 23 years of what I thought was a very happy marriage I discovered that my husband was involved with a married co-worker. Fortunately he made great money (150k+), I had been a stay at home Mum for 20 years, thankfully we had no mortgage but little did I know that the line of credit he talked me into signing for was at a whopping 60k ! (he had convinced me that we needed to build our dream retirement home and this loc would enable us to build it before selling our home, it was not to be used for anything else)…well he sure had been using it, I guess I believed that after 23 years of buying everything cash and never ever carrying a cc balance that there was no reason to not trust him. Just 3 days befor the @#$% hit the fan he was going on about how great our retirement years would be…3 days later he came home and said he didn’t love me, had never loved me and it was over (I soon discovered that his girlfriend had finally agreed to leave her hubby so he was ditching me)…anyway I got the house, the RRSP’s and all the debt…but its better than living with someone so decietful…its been 3 years and that debt will be gone this April (hooray)…the moral of this story…no matter how long you are together or how much you think all is well…keep tabs on everything..its sad to say but sometimes people are not who we think and keeping tabs never hurt anyone…Happy New Year to all and best of finacial health as well!
January 7, 2010 at 9:18 am
Divorce is what caused my hubby to fall behind on his finances back in 1996. It’s like he lost 10 years of progress – he was 30 years old, no money, no home, and lawyers bills in the 10’s of thousands. RRSP’s went to his ex, DEBT went to hubby. Not sure how that came about but what’s done is done. It took years to re-build, and we feel like we’re still 10 years behind the average 43 year olds in terms of assets and money saved for our future. But we’re happy and doing okay and we finally have a financial plan.
January 7, 2010 at 9:43 am
Thankfully I don’t fall into any of the categories above. That said my partner hasn’t always been thrifty, but together we are making postive changes to that. He’s starting to get excited when he finds extra money to be able to pay off debt! He has also felt the sting of living on disability. Something I really need to figure out is if our work insurance/covereage is ‘enough’ or if we need something else.
January 7, 2010 at 9:46 am
@Kim
Your story is one of dozens why you can’t see inside someones head.
Its amazing the number of people who figure they are clairvoyant
Thats why any insurance proceeds of a settlement to you and bequeaths from wills to you, money given to you by YOUR parents you never share it with a spouse.
January 7, 2010 at 10:04 am
Still can’t vote – but my answer is 6 months
January 7, 2010 at 10:10 am
Well you know what they say….
Why is divorce so expensive?
Cause it’s worth it.
January 7, 2010 at 10:22 am
Geoff – exactly! My one bit of wisdom to anyone going through a separation or divorce is to try to get an agreement BEFORE you get lawyers involved…I have heard of couples who blew all their money on lawyers or even went further into debt due to this…my total lawyers fee $1400, you also avoid the emotional toll of repeated trips to court…a friend of mine spent $10,000 fighting her ex for a piano worth about $1500…crazy but emotions and anger can be very expensive…the court system is a very expensive arena for revenge/vengence…cut your losses as quickly as possible and get on with making a new life!
January 7, 2010 at 10:23 am
@Kim- Your story is a sad one, but reminds us all to be careful. Still, I just can’t believe someone would do something like that. It sounds like you’re doing fine and you’re well rid of him. Good for you!
January 7, 2010 at 10:58 am
Great series Gail! Can I also add another “question” to your list? “Do you place the responsibility of monitoring your finances on an institution?”.
It always amazes me when people say “I got into credit card debt because the bank increased my credit card/line of credit limit and didn’t tell me…”. If there’s a profit to be made a bank will go after it – and the millions of people who own bank stocks wouldn’t have it any other way.
For dual working married couples: a lawyer friend once gave me great advice – take out a life insurance policy on your partner that YOU yourself pay for. That way, in the event of a separation they can’t change the beneficiary. If they should pass away and their estate goes to a new spouse, at least you’ll still have the insurance proceeds.
January 7, 2010 at 11:11 am
Poll still not working for me. I run a Mac so maybe that has something to do with it.
January 7, 2010 at 11:29 am
I literally just had this conversation with a friend with two small children who is seperating from her husband.. she chose to move out of the house and he is paying for everything because she has been a stay at home Mom for the last 3 years. She isn’t “ready” to get a job yet because she doesn’t want to put the kids in daycare..her rationale is that he “has” to support her and she will just take him to court if he doesn’t.. I was floored… I told her flat out that she needs to get her butt to work and make some money to provide for her and her kids. I told her divorces can turn ugly in a heartbeat and taking her ex to court can take a long time. It amazes me how she was completely unwilling to see that her reality and her kids reality has changed. That’s called the effect of divorce. You made a choice and with it come consequences, one of which is that you probably won’t be able to be a stay at home mom. Your relationship with this person has detoriated to the point that you can’t live in the same house with him anymore, why would you blindly place all your trust in him doing the right thing?? I mean seriously…
January 7, 2010 at 12:55 pm
I passed 2/3 today. Though if my husband is a spendthrift so am I at times. He spends money on Slurpees and chips and then wonders why if he makes a good salary that there seems to be no money. Well, even 5 bucks a day 5 days a week is $100 a month. I decided last January that I was going to stop giving coffee shops my money all the time. I am proud to say I bought around a handful or less “Starbucks” or gas station type coffees in 2009. I actually made coffee at home and put it in a mug for my drive if I cared enough. But we as a couple make decisions to buy expensive things when we know it will end on credit. Over the last few months we have actually be talking about limits and have started talking about “Can we afford that?”. We have allowances now and he knows that he chooses whether it’s going out for beers money or Slurpees and chips money.
January 7, 2010 at 12:59 pm
I am lucky to have a wife who has the same financial goals I do. We got into debt together and now we’re getting out of debt together.
January 7, 2010 at 1:27 pm
I am quite lucky that me and my spouse talk about EVERYTHING together. We have been together for 17.5 yrs (Married for 8.5) and we discuss our budget every year-end as well as every month to keep ourselves on the up and up. We are facing a condo assessment in Spring of about 25K to keep the building from falling apart…it is only 8yrs old but shoddy workmanship has turned into rotted beams and moldy walls in 2/3rds of the suites in the building…The board is still figuring out what course to take so all we can do is come up with different possible scenarios of paying this off. Luckily we are, as usuall, on the same page as to what scenario we would like to pursue, now we wait to find out if we can do it. Anyhoo, communication is KEY!!
Thanks Gail for all your fantastic advice!! I can’t wait until your new series come out. And everyone else, it is helpful reading your posts as well.
January 7, 2010 at 1:37 pm
The one thing I’ll be eternally grateful to my parents for is that when they divorced, they sat down with a lawyer friend and the prenups, made all the arrangements as they thought best, had a judge sign it and never whined or complained about the results. Still led to debt: the CPS would have caused trouble if we had second-hand furniture or no washing machine, but it could have been so much worse…
January 7, 2010 at 1:39 pm
Does it count if we were both pretty spend thrifty, and I adapted a bit faster than he did to our new low income situation? We’re on the same page now, because he knows how much stress I build up over our debts. We’ve managed to stick to our allowances.
I don’t see divorce in our future, because we’ll never get married. Thankfully disability has not happened yet, but my boyfriend has a condition that could lead to disability and death if not properly monitored, so That’s been on our minds.
January 7, 2010 at 1:57 pm
I was married to a spendthrift, but his spending was on drugs and alcohol (he’s now in recovery)…to the point that we had no money and we were behind on our rent by 2 months and in danger of being evicted. I borrowed the 2 months rent from a generous friend, paid the back rent and left (I paid back this friend completely). We had no assests, but we had no debt due to declaring bankruptcy in 2002. It was terrible. We have an separation agreement written, but he refuses to sign it because it’s “heavily weighted in my favour” (I have custody of the kids) and doesn’t provide any support for him (he isn’t working and hasn’t had a steady job in 4.5 years). He went on welfare and the government came after me for support…something they have to do, but I was not pleased! Thankfully, they took one look at my financials and the fact that one of our children is disabled (autistic), and said I couldn’t afford to support him. He has not given me an ounce of financial support for the kids since I left 2.5 years ago. I have shown the agreement to some of the divorced dads I know and they cannot believe he won’t sign it, that it is more than fair and wished that their ex-wives were as generous as I am! I haven’t asked for the moon, and his visitation with the kids is decent. I could be a lot nastier, but I won’t…my kids love their dad, faults and all. I am not prepared to go into debt fighting him, so I am saving for the divorce slowly, while trying to get him to sign the separation agreement!
Thankfully, I am not ill or disabled, but I know it could happen anytime and I am working on a bigger emergency fund.
January 7, 2010 at 3:08 pm
Thankfully I can not say Yes to any of the above. But I do know crap happens …. its happens in relationships, its happens to your health, etc so I try my best to plan and ahead and be careful.
I am very thankful that my fiance is on the exact same page as me financially. I was in a relationship with a person prior and they couldn’t hold on to money for the life of them. Money was no object and debt was just a factor of life. It wore me down and stressed me out to the max.
January 7, 2010 at 3:14 pm
We learned our lesson last year about having disability insurance and a solid emergency savings account.
I am now buying MORE insurance on my own head, just in case, and we’ve saved 9000$ so far also “just in case” because when you’re sick, the last thing you want to worry about is your mortgage…. right?
Hopefully 2010 will be bright…
January 7, 2010 at 4:33 pm
Luckily my husband and I have always kept our incomes and debts separate. He pays mortgage and taxes, I pay the rest. Everyone’s happy, nobody’s complaining about how much the other spends on things since the bills are paid, and so far (almost 15 years…WTH!) everything’s working. We did split up before for a couple of years, had the kids 50/50 and were equal in income, so again, nobody paid the other for anything. And I think that if ever we hit the separation road again, we’d manage to figure it out amicably and still be intact with our own finances and sanity.
Maybe my vision of marriage is jaded (ie. never say you won’t ever separate, as it happens even to people married a gazillion years, just read January’s Chatelaine for proof of that), but I like to think that we’re both protecting ourselves by keeping things from getting too intermingled. I know, may be it’s a morbid way of looking at building a future as a couple if you’re always aware that things can dissolve, but I’d rather that than be totally unprepared IF it did happen and pleasantly surprised when it doesn’t!
January 7, 2010 at 8:07 pm
My partner and I too keep our incomes separate. The only joint debt we have is a small mortgage, which he pays in full as he makes 3x what I do, other than that all the household expenses are split exactly 50/50. We each maintain our own credit, vehicles, insurance, investments etc. Having been divorced more than once and burned badly each time I too am very jaded on the money aspect of relationships. Although we carry no debt except the mortgage and credit cards are paid in full bi-weekly, we have healthy savings and are on the same page financially it just makes more sense to keep things separate. But we do have good insurance on each other just in case one of us should pass away.
After living a life of always being in debt and pay cheque to pay cheque it is such a relief to be debt free and have savings. I have a plan now and a great weight is lifted off my shoulders. My vehicle is paid for and I will drive her till she dies lol. I have never been a shopper nor have expensive labels been my downfall. It was always simply more outflow than inflow and I was a single mom. But life is good now and I plan to continue living the Gail-way and be debt free forever.
January 7, 2010 at 8:43 pm
@Chad: ditto, thank goodness. I know where every penny goes and so does he (now).
However, I have a friend with two under the age of 5 whose (who’s?) wife asked him to move out on New Year’s Day. My first impulse was to tell him to talk to a lawyer and find out his rights before he even leaves the house, no matter how bad it is. Right now they are taking turns staying there but she has asked him to move out. He doesn’t have alot of family or friends in this town and one of her best friends is a lawyer. He is just surviving day to day and talking to a counselor for his emotional problems but I worry that he’s going to get blindsided by her financially/legally. Poor guy. Any suggestions, everyone?
January 7, 2010 at 8:55 pm
I’m newly married to a wise spender/banker and healthy right now, but several years ago I was extremely ill for several months and required several surgeries. My sick leave benefits covered most of my expenses but what I hadn’t planned for was arranging for someone to actually go pay the bills and keep everything up to date. (this was before online banking) My recovery was overwhelming emotionally and physically but I was back to normal months earlier than expected. However it took longer to repair the damage to my credit. I can’t believe that I seriously never even thought about it once. Oh how young and ignorant I was!!! (The only bill that stayed current was my cell phone since I had it on automatic payments with my CC.)
Anyhow I learned a great lesson from the experience and that helps me plan better now: its called my “What If? Plan” Its not just a financial plan but a “life” plan. So if I get sick again, the payments will continue automatically, my lawyer will provide my husband with a POA to take care of my affairs, I know which accounts carry insurance coverage for disabilities, expenses that won’t be neccesary will be eliminated, I have a document that lists important info my husband will need kept in a secure place. I got the idea from my parents who used to give me a notebook with important info in it, whenever they went on a vacation without us kids back in the day. It was for “the just in case” situations. Maybe its a bit pessimistic, maybe its just a testament to my need to be organized, but it helps me sleep better at night.
January 7, 2010 at 9:07 pm
to tigerlily:
I would recommend seeking legal counsel ASAP. Leaving the matrimonial home means different things in different provinces. Some people live under the same roof during separation if finances does not allow them to do otherwise. If there is no physical threat, I would not move out too early but I would put money aside for legal fees. If she NEEDS him out of there, set a precendent and get her to pay for the extra loging until things are sorted out (gets people thinking). Some law schools offer inexpensive help. Search the provincial legal wesbite.
January 7, 2010 at 10:35 pm
Tigerlily,
If your friend is considering joint custody or sole custody tell him that if he moves out without the children and a long custody battle ensues, a judge may lean towards maintaining the “status quo”, which will likely be the mother having physical custody of the young children. If he wants to increase his chances of getting custody or joint custody, he should not move out of the home the children live in. I agree that getting lawyers involved sometimes complicates things beyond necessary, but with his wife having a lawyer for a close friend, it’s clear that she is receiving legal counsel, and I’d advise him to do so as well. I wish him lots of luck! These separations can get mighty ugly.
January 7, 2010 at 11:13 pm
Manisha I couldn’t agree with you more. Getting your financial house in order also means getting the wills and POAs in order. As Gail often says, crap happens. What if you’re in an accident and in hospital for months? Who will pay your bills, who will pay your mortgage, who will make those decisions about your care, who will file the paperwork for your sick benefits or disability insurance etc.
Update your will and POA anytime you have a life change. We’re just going through changing our wills and POA documents now because we are deemed common-law and my will is from when I was carefree and single…
If your spouse is your executor or POA, make sure you have a second person named. You and your spouse could be together when something disastrous happens.
Go through your life insurance, your investments, your work pension fund and make sure you have the proper beneficiaries if you’ve remarried, or divorced. If you have children, make sure that you have legal guardians in case anything happens to you and your spouse. Think hard about naming your parents as legal guardians. If they’re in their 60s or 70s do you really think it’s fair to them to have them raising young children if something should happen to you?
Crap does happen. A tidy financial life should also extend to a tidy “what if” life which means spending time (and sometimes money for the wills and POAs) to get the paperwork in order.
January 7, 2010 at 11:17 pm
Even when you’re dating…there are danger signs…like they allow you to pay for everything. All of your stuff is in the open, and yet you know nothing about theirs. Thank goodness it didn’t work out for other reasons…or I’m sure he would continue to allow me to pay for everything…my bad. Oh that’s right I just paid for the everyday things…he paid the twice a year we went out for dinner…because he wanted to keep up the “show”.
The biggest problem in this area…was that we NEVER talked about money. I am so relieved that I am out! And no matter how uncomfortable, if a relationship ever gets that serious again…this will be discussed.
January 8, 2010 at 12:56 am
Thanks Marie and Mrs T, I will make sure he knows because I don’t think he is thinking this way yet and he is a great guy and a great dad.
January 8, 2010 at 4:34 am
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