Debt and Dieting

You know…reducing debt and dieting are an awful lot alike. First of all, they both stink. They’re both about as much fun as a root canal. They both are things that you’d really rather not do.

And, as much as we don’t like to think about this because after all, nothing is our fault anymore because we are all perfectly OK just the way we are and all…what we’re having to do is deal with the fallout from our own failings.

We don’t generally wake up one morning and find that we were mugged by the Fat Gang – we generally get there one too-big meal at a time. (At least, that was how I got myself there…sure, I used child-making and mommyhood as an excuse, but push come to shove I put on those 70 extra pounds one extra-large slice of pie at a time. The Denizens didn’t do it to me – I did it to me. Which stings and I hate it so let’s move on, shall we?)

Likewise, debt tends to arrive one bad decision at a time. Something happens. You’re in mid-remodel and a contractor says, “Uh…ma’am? Can you come here and look at this with me for a second?” (That’s not something you want to hear.)

$8,500 later, the problem is fixed. But it lives on in our hearts, minds and checking account balance!

Or you suddenly realize your two year old isn’t just a slow bloomer with the talking thing…there’s something wrong. He doesn’t just not-talk, he doesn’t communicate. He doesn’t point, he doesn’t grunt, he doesn’t make any attempt to inform you of his wants and needs…he’s just…well, he’s like a really big newborn, really. He yells when he wants something, and you get to figure it out with no verbal or physical cues to speak of.

That was a nearly $30,000, two year odyssey. Good times! (I’d feel better about it if any of that expensive stuff had actually done anything…the best results have come from simply following the advice of his pediatrician [which seven times out of ten was to NOT take him for the tests, therapies and treatments I insisted on doing anyway], and the school’s speech, behavioral and occupational therapists. Sigh. Oh well. The coffee was really good at the $595-per-session “emotional attunement” therapist’s office, anyway…) (Yeah. $595 cup of coffee, right there…SIGH…)

ANYWAY. There’s something else debt and diets have in common: There are thousands of books, groups, methods, and gurus out there to tell you how to go about it.

Each one will tell you that this, right here, is the One True Way. This way, and no other, is The Way. You will lose the weight if you follow my twelve easy steps. You will be out of debt if you follow my bouncing ball.

Do this. Don’t do that. Eat this. Don’t eat that.

Have you ever noticed that each way has both supporters and detractors? One side eagerly spreading the Gospel According to $GURU, the other side just as eager to explain how $GURU didn’t work for them one little bit, and they actually ended up worse off, and it’s all a big scam?

That’s another thing debt and dieting have in common: Every individual has to find what will work for them, a plan that motivates them and keeps them motivated…because yet another thing they have in common is that they are seldom “quick fix” situations. It took time to get into this mess, it takes time to get out of it; the way in was usually quite easy, but the path out is steep and hard.

So, what got me on this particular rampage? Well. In response to my Monday post, Anonymous mentioned that Dave Ramsey advises people to pay the lowest dollar-value line off first, regardless of interest rate, for the psychological boost and to free up more minimum payment money faster.

I read that comment about three times and then shrieked, “Whaaaaaaaat?! That’s crazy! That’s just stupid! That’s like saying, ‘You should eat the cake first, because then you’ll feel fuller and won’t eat as much dinner!’”

But then I settled down and reminded myself that personal finance is not a one-size-fits-all proposition. The reason there are so many advisors out there proposing that you do this, or that, or the other is that lots of things can, and do, work…and what works for me won’t automatically work for anybody else…no matter how sure I am that my way is THE One True Way. (Accept no substitutes!)

I am very numbers-oriented. I don’t see little individual bits of the puzzle – I look at bottom lines, at total costs and benefits. So when he says “pay off the smallest line first, regardless of interest rate,” it immediately raises hives on my psyche. Whaaaaaaaaaaaat?! Are you NUTS, Dave? That buys you NOTHING, and costs you MUCH!

And then, because I am all numbers-oriented and some junk, I ran some scenarios through my debt reduction planner. I’ve got all our debts in here, regardless of their “good, bad or indifferent” status – we’re sick to death of all of them and don’t care that we get $0.27 of every dollar we spend on mortgage interest kicked back on our taxes. We’d rather keep the other $0.73 in our pockets, thank-you-very-much and hey! Here’s an idea! If we don’t have to pay the mortgage, we don’t have to earn as much money…if we don’t earn as much money, we don’t pay as much in taxes! Problem solved!

Anyway. Right. So. We’ve got a mix of credit cards, home loans, auto loan, medical obligations (oy) and a lovely chunk being paid to the IRS.

Left alone, paying just the minimum / fixed payments, we’re looking at being debt-free around January 2038, at a total cost (interest paid, in other words) of roughly $453,000. (Yes, three zeroes.) (See, this is the stuff people hate to look at, and this is also why Dave’s plan works well for a lot of people – interest is hard to look at, therefore paying less interest isn’t as appealing to most people as simply paying something off is.)

Simply putting them in interest-rate order, fixing the payments as they currently are and snowballing as each is paid off (adding the payment from the paid-off to the highest interest debt), we’re debt free in December 2018 at a total cost of about $156,000. (Dedicating all of my net income [after childcare and commute], we are debt free in August 2013, for only $59,350 in interest. WOOT!)

Using Dave’s method, we hit the same December 2018 debt-free date, and pay $164,000 in interest…so it will cost us an extra $8,000 in interest and not get us out of the morass even one month sooner.

UNLESS, of course, we gave up and went shopping because we got so frustrated by the apparent lack of progress.

In which case, Dave’s method would have kicked butt.

Whiiiiiiiiich brings me (at long last) to my point: There are lots of plans out there. Just about any of them can work – whether or not they will depends on how well they fit in with your personal style.

There has to be a ker-chunk! when the plan comes into your life. If it doesn’t click-n-stick, it doesn’t have a prayer of working.

There’s just one thing I will categorically say to steer clear of if you’re in the market for some help with your debts, or your personal finances in general: People who get paid if they sell you a specific method.

There is nothing wrong with getting a professional to help you. A certified financial planner is not just for the rich and famous, or to deal with extraordinary situations like “my uncle just died and left me a bazillion dollars…and a cat…”, and they can be of tremendous help with such mundane things as figuring out a budget, dealing with debts, planning for college or retirement, and so on and so forth.

But do watch out for the guy who works for MegaLoansAndAnnuitiesRUs.com, OK? Watch out for the online “friend” who directs you to a sure-fire plan which s/he will gladly send you for one low-low payment of $49.95.

Or even $12.95.

Be suspicious. Ask uncomfortable questions. When the “really great guy” who works for the loan company tells you that this home equity line will cure all your ills and make all your “bad” debt go bye-bye…don’t automatically believe him. Don’t look at the payment and say, “Hey! It’s less than we’re paying now! SOLD!”

Ask yourself what s/he’s getting out of this, and whether or not that matters. They’re not automatically bad people because they make a living by selling you a specific loan, and the loan is not automatically a bad loan because it’s being offered to you by someone who only pays their bills if you take it – I’m just saying a little extra caution is in order.

Think the whole thing through. Ask the uncomfortable questions of yourself, too. What does this really fix? Does it solve the problem, or merely delay the inevitable? Moving debts around to make them easier to bear isn’t necessarily the best idea, even for someone like me who likes to pay the absolute least amount of interest humanly possible.

It’s like taking pain pills. You might feel great, but the underlying problem is still there – and might be getting worse. You’re not feeling the pain so much, so you think everything is groovy…but in actuality, you’re getting into more and more trouble every minute.

If you’re staring down the barrels of a debt-cannon, I know this stuff is overwhelming. Right now, more people than ever are teetering on the edge; more people are hitting the wall faster and harder than at any other time in my memory. Between job losses, credit lines being slashed, and the overall mad rush on the part of the creditors to slam us with higher rates, lower lines, increased payments and so forth and so on before Congress makes it illegal – well.

A lot of people are being forced to deal with a credit-free-except-you-gotta-keep-paying-it-off reality literally overnight.

It sucks, but there’s a lot of help out there. If you’re reading this, you are aware of a little thing we have called The Internet, right? Google ‘how to get out of debt.’ Read-read-read. Don’t jump onto the first bandwagon that comes along – think about it. Ask yourself if the plan makes sense to you. Does it feel right to you, does it make you sit up straighter and say, “Yes! I could do that!”

If something promises that The Solution can be yours, just click here and for $129.95 they will send you the five easy steps to financial freedom…please…say, “Pass!”

And if you don’t find the answer on your own and really want somebody to just tell it to you already!, take that money to the office of a financial planner instead (check out Wiser Advisor to get started finding one) (by the way, you shouldn’t pay a dime to interview them and you have every right to do so – again, this is very personal and you want someone you feel is going to work well both with and for you).

It may cost $50 an hour for that person to go over your financial situation with you, and it make indeed take two or three or even four hours – but you should get what you really need, which is a plan tailored to you, that fits not merely your financial situation but your personal style.

A plan you’ll be able to stick to…which is going to be the only plan that will work.

(I lost the weight using old-fashioned calorie, fats and portion-size control, along with thirty minutes of exercise a day [brisk walking plus stretching] whether I technically had time to or not. Nothing fancy, no rules or exchanges or points or anything else. It sucked. I hated every second of it. Still do, sometimes. But, I’ve been within my ideal range for six years now, so I’m OK with “just” one scoop of ice cream or a half-slice of pie. The smaller portion still tastes good, but doesn’t leave extra gifts behind on my hips.) (The hardest part is actually the exercise. Gah. I hate exercise-as-such. But the gardening is really helping with that – it’s not exercise, see, because it has a point. That’s my story and I’m sticking to it.)