Unknown callers. 1-800 numbers. Full voicemail.
Collections called, and we’re never going to leave you alone.
When I was in my mid-twenties, I had a commission-only job selling print ads for a newspaper. I actually loved this job. I was on a small team of sales people – we all had wildly different personalities, work experiences, life stages, etc. But we were like a family. It was while I was working here that the 2008 financial crisis took place and I faced some of the (financially speaking) scariest months of my life.
Compound Interest – The Bad Kind
Early into the crisis, I realized I would not be able to make a credit card payment one month because it was about $150 and I only made a few hundred dollars in commission that month. It wasn’t a flippant choice. It was just what I had to do because I had to eat and get gas (and, I didn’t have an emergency savings). But I didn’t fully realize the implications of skipping a month. The next month, I opened the bill from the same provider feeling relieved I’d be able to pay the $150 now, and maybe even the late fee. But it hadn’t occurred to me at all: I’d owe two months minimum payment now, plus the late fee and then interest on what I didn’t pay before. My bill was now $500. A completely impossible amount.
Not being able to make ends meet can cause paralyzing anxiety. And, being close to my older sister, my unstable state was not something I could hide.
I was talking with my sister on the phone and she could sense I was on edge. She pressed and pressed and, with an incredible amount of shame and the feeling of having my heart in my throat, I shared my situation. I wasn’t sure how she would respond – she was always better at managing her money than I was and we could push each other’s buttons pretty well over our differences. But her response was fairly calm and just supportive. I remember we hung up and I crawled into my murphy bed in my studio apartment and called for my dog to join me for comfort. Sharing made it too real to face any more of the day. And yet, a part of me knew it had been the right thing to do.
The next day, my sister called me again.
She and her husband had discussed and they wanted to throw me a life jacket. They would pay off the debt that was haunting me so I would no longer accrue interest. We’d come up with a payment plan – one that worked with my budget – and I’d be responsible for just paying the total amount I currently owed. In other words, I was still on the hook for my debt but would accrue no. more. interest.
I was completely blown away.
I’m close with my sister and brother in law, but even more so, I deeply admire them. If I was going to take them up on this offer, I had to be damn sure I was not going to mess up and miss any payments.
Knowing I would never allow money to come between us, I swallowed my pride and accepted their offer.
Now came the excruciating part.
Sharing the Details
I had told my sister I had about $4k in debt in the initial conversation. But the truth was, this was just ONE of my debts. I hadn’t shared the total amount because a) I didn’t want to say it out loud and b) my anxiety was born out of the monthly payments doubling, not the total amount at that point. I didn’t know at the time I was sharing a number that might actually have an impact on them.
As we got deeper into the discussion, I hesitantly disclosed I had one other (smaller) card that needed to be paid as well.
“Add that in, then,” my sister said with little emotion.
That was enough, I began reasoning with myself. They were helping enough. I would keep on keeping on with the rest and besides, with half of it covered, I was in way better shape than I was before.
“Jane, anything else?” she asked.
Big sisters. They tend to know everything.
“Nope! That’s it!”
Little sisters. So much to hide.
Again, in her big sister way, “Jane, if you have any other debts, now is the time. Let’s get it all on the table. It’s not going to hurt us to help out, but our efforts will be for nothing if you pay any additional interest.”
With even more shame, I shared the rest of it, totaling around $7,811.16. She reacted with some surprise but was steady and strong: all of it gets included.
Covered, But Not Gone
My sister created an excel sheet and sent to me via email with a very non-threatening subject line, “Financial Stuff.”
It included all of my expenses – which I had to fill out and make sure was all-inclusive. This was for my own knowledge. I needed to know how much I had to pay every month in order to know what kind of payment I could afford.
Then, we listed the accounts they were going to pay off in addition to all of the monthly payments I was currently behind on: my student loan payment, a utility bill, a retail credit card, a car payment, and a credit card.
After checking out what the cost would be for 24, 36, 48 and 60-month payment plans – it seemed the best bet would be to go with the 48-month plan. The total monthly payment I would send my sister would be $162.73.
One quick note: they did cover one month for my student loan payment, but did not pay the full amount. The reasoning was that this was good debt that would help my credit, and therefore I should keep it on and just make sure I don’t miss any payments. The real need here was to get the compounding interest situation under control with my high-interest credit cards.
She also had one requirement. One that would have a bigger impact on me than I could ever know: I had to, at the very least, sign up for a Mint account. However, I used it was up to me, but the message was clear: Budget your money. Track your transactions. Keep all of your accounts together so you can have a big picture of your finances. This turned out to be quite fortuitous given I’d eventually work at Mint. What an incredible full circle that turned out to be!
As you can imagine, taking this kind of deep dive into my finances was the worst kind of pain with the most rewards. One of the most immediate differences was the collectors stopped calling. I also recognized my need to be on salary and so I changed jobs, taking a position at a digital marketing company which set my career on a completely new path. And I started sleeping at night. So, that’s a win.
But I still was not perfect at managing my finances, in fact, I continued to be in and out of debt for years following. I never got back in as deep as I had – while I was not fully responsible yet, I was definitely more aware.
And I never missed a payment to my sister. Every month, I’d transfer at least $162.63 to her – paying more as often as I possibly could. At no point did she ever hold the debt over my head, make me feel bad about it or question my spending behavior. I made sure she never had a reason to. And I was able to pay off the debt in full with one final payment of $501.95 and a note on the bank transfer, “That should be it XOXO.”
Seventeen months ahead of schedule.