Did We Really Just Go Back Into Debt?



If you have followed my story at all, you know that my wife and I started our lives together with $18,000 in debt and struggled to make ends meet. After a brief financial scare, we realized that debt was not our friend and we did everything possible to get rid of it. 14 months later, our hard work paid off. We were completely debt free – vowing never to go into debt again…

And then, it happened. I didn’t even see it coming, but all of the sudden we had a balance on our credit card, and we weren’t able to pay it off. We were $750 in debt and it freaked me out.

How Did We Slide Back Into Debt?

A few months ago, my wife was left without a job. Since we were renovating our house, we did not have a lot of money in reserves, but we still weren’t worried. After all, our budget allowed us to live comfortably on my income alone.

We still continued to tackle our house project (which costs money of course) and we also decided to buy some living room furniture. This was our ultimate downfall. The furniture set cost somewhere around $1,800 and we had the money in our account (just barely), but we figured that we’d better just put the expense on our credit card in case there was an emergency.

A few weeks passed and we received a pleasant surprise. My wife landed a new job! It paid well and had great benefits. It seemed like a dream come true! There was just one problem. We were still operating with one vehicle, and her job was nowhere near mine… It was time to buy another car.

At the time, I think we had $4,000 in our account. That means that to stay out of debt, I would need to find a dependable car for $2,200. I searched and searched for that good deal – just ask my dad-in-law. We drove 75 miles to look at a truck that was painted with rainbow sparkles (those sparkles didn’t show up on the Craigslist photo)… I found my ride for $3,300 – and that credit card did not get paid off.

I was able to find a few bucks from some other ventures, but our card was still left with a $750 balance. I never thought it would happen, but it made me realize just how easy it is to slip back into debt!

Watch Yourself

My mistake was innocent enough. We initially had the money to pay for that furniture, but life happened and our money was needed for other necessities. It wasn’t like we were spending it on a lavish vacation. We needed it to continue to survive!

Be sure to watch your finances a little more closely than I did with ours. Don’t assume that you know what the future will bring. Unexpected events happen all the time! Tomorrow, our water heater might stop working, our basement might flood, or maybe we’ll find out that we have a water leak. Each of these events could do some pretty serious damage to my pocketbook!

Even if you’re renovating your house like me, do your best to keep the proper reserves in place. The experts say that you should have an amount in savings that’s equal to 3-6 months of expenses. It’s a wise thing to do, and I’ll follow the rules of finance much more closely from now on. I hope that you will too!

Have you ever made a bad financial move? What did you learn from it?

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My name is Derek, and I have my Bachelors Degree in Finance from Grand Valley State University. After graduation, I was not able to find a job that fully utilized my degree, but I still had a passion for Finance! So, I decided to focus my passion in the stock market. I studied Cash Flows, Balance Sheets, and Income Statements, put some money into the market and saw a good return on my investment. As satisfying as this was, I still felt that something was missing. I have a passion for Finance, but I also have a passion for people. If you have a willingness to learn, I will continue to teach.


  1. If $750 on a credit card is your biggest financial mistake, then you will be incredibly blessed in life. Keep reading my blog, and you will learn about mistakes as soon as I get the nerve to start writing about them. One will be coming quite soon.
    cashflowmantra recently posted..Getting More Miles Out of the Old Van

    • It’s not terrible I know, and we paid it off the month after, but it reminded me how easy it is to go back into debt!

  2. Noooooooooooooooo! Say it ain’t so!!

    That 3-6 month emergency fund is so important. But it is easy to dip into for non-emergencies. We have a rule in our house that we can’t touch it unless it’s a true emergency, and we’ve defined the type of event that qualifies as an emergency.

    This puts one more vote in the “cut up the credit cards forever” camp. I like to think the best way to avoid credit card debt is to not have credit cards.

    Having said that, I agree with cashflowmantra. $750 isn’t the end of the world, and it freaked you out enough that I bet you won’t let it happen again for a long time ;o)
    Matt @Financial Excellence recently posted..Hidden treasures

    • Yep, the emergency fund is important, but we also needed to watch our budget more closely and anticipate the future a little better. Thanks for the comment Matt!

    • We paid it off the month after, but regardless of the amount of debt, it’s still a wake-up call. We’re starting to beef up our reserves again and we’re getting serious about paying off the house and becoming completely debt free.

    • Yep, it’s paid off and we’re looking forward to our financially bright future! 🙂

  3. We certainly all make mistakes. I think its good to see how easily it is to fall back into debt, and how much we really do need to safeguard ourselves against it. You might want to try calling the credit card company and asking for the interest charges to be waived. if you pay the balance off, I bet they would be willing to do it for you.
    MoneyforCollegePro recently posted..Sleep Deprivation in College Students Impacts Your Brain and Body

    • Boy is it ever easy! I think I forgot how easy it can be. I think the key is to catch the mistakes early.

    • Yeah, if we would have went into debt over a Disney trip, I would have been thoroughly embarassed!

  4. Managing money sounds so easy but the older you get and the more things you have, the more potential “leaks” can pop up. The key is not to panic, understand what happened, and make a plan to fix the problem – sounds like you are on the right track!

    • You’re right – with the increased variables comes increased odds of uncertainty! I guess it’s time to beef up the reserves!

  5. that’s the crazy thing about becoming debt free – it seems like if you’re still on the margin, it’s easy to fall back into debt – though now that you’ve got a new car and your wife landed a job, everything should be fine in a month or 2.
    Jeff @ Sustainable Life Blog recently posted..January 2012 Monthly Review

    • True true. And, now that we’re trying to pay our house off in record time, we’ll have to be careful not to do it again.

  6. $750 isn’t anything to go crazy about unless there is a domino effect and you keep putting things on the card and buying more furniture. Wow really rainbow sprinkles? If your wife got a great job and you needed(key word) the car then its not a bad choice. Plus unlike a lot of people you didnt go out and spend a lot on a car and you dont have car payments.
    Thomas – Ways to Invest Money recently posted..8 Basic facets of business management

    • Yeah…rainbow sprinkles… and the guy couldn’t understand why I didn’t want it….

      We did pay off the debt last month, and now we’re back on track. Definitely a wake-up call though.

  7. I truly believe that about 75% of most people’s financial mistakes are somehow related to automobiles. Your situation isn’t a great example, since you bought a cheap, used vehicle. Well done. But it seems that most people purchase cars well out of their price range. Cars are a necessary evil, I guess. But their use as status symbols annoys me.

    • That’s probably true. Between car insurance, car payments, and unexpected repairs, they can really be the financial disaster of quite a few people!

    • Ha, $0 is much better! We are back out of debt again, but we’ll most likely never make that mistake again!

    • Yep yep. Stinkin unexpected expenses. It’s a good wake-up call to beef up the ol emergency fund!

    • I am considering that. The credit card points don’t really add up to that much anyway….

    • We do need a better Emergency Fund, and I am rebuilding one now. I figure that we should really have at least $10,000 in a liquid account, just in case.

  8. Yeap, you need a bigger EF. $4000 wasn’t enough and now you know. That EF won’t earn a lot of interest, but we need the liquidity.
    retirebyforty recently posted..January 2012 Cash Flow

    • Yep yep. And who knows, one of these vehicles could break and then we’d need to buy yet another car. We’re going to build our Emergency Fund to $10,000 very shortly.

  9. Another unexpected may be that your wife tells you she is expecting! Now you really better start saving up! 😉

  10. That wont be happening anytime soon….

  11. Nice story. Very real. It’s very easy to fall into debt, and then back into debt again, as you explained. I think we’re in difficult times. I think there are many reasons why debt has become such a real part of life, and some would argue an inevitable and even acceptable part of life. But it can get very scary when it gets out of control. I’ve written about this topic as well. Not with the personal details you have, but more conceptually, trying to comes to terms with it.
    TheDailyThinker recently posted..Service Providers – Where’s the love?

    • I’m glad we’re back out once again, but we definitely need to keep our guard up each day. Did you know that the average credit card debt is almost $8,000? That can’t be a very comfortable situation…. It’s time for me to ditch this house loan and be completely debt free!

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