The Five-Minute Approval that Took Seven Months
Suddenly — Not — We Were Solvent Again
I was on the phone with the roofing company, giving them the humiliating details of my life (as one does), awaiting credit approval, when, just like that, Katy-who-was-helping-me came back on the line.
“You’re approved for $19,000,” she said brightly.
“Um. Okay, like…just like that?”
“Yep, you’re all set. The roofers will come out on Wednesday.”
The approval took less than five minutes. Getting to it took seven months.
The Leak that Launched a Budget
Some of you will recall that it was a roof leak last September that started us on a path of WTF — Wicked Tight Financing — that, in turn, led us to put our credit cards away cold turkey, swear off even the smallest unplanned purchases, and save like crazy until we could get back on our feet.
Here’s how we restructured our debt and boosted our lousy credit rating by hundreds of points in just a few months:
- Through sweat and tears, we cut costs and hustled some side gigs for a few hundred extra dollars a month (grading papers for my husband; Amazon Mechanical Turk, UserTesting, and some tutoring and small editing jobs for me). We saved a tiny cushion, and kept paying down our credit cards, even in the face of some setbacks.
- At the same time, we used the equity in our home to qualify for a HELOC with a credit union that waived all our closing costs (as long as we keep it open for three years). Yes, that’s right: Our first step away from debt was to go into more debt. Risky.
- We then shifted our more than $25,000 in remaining credit card debt over to the new line of credit, locking in a 5.75% finance rate on that old debt and virtually cleaning the clock on our credit rates. Lookie here:
- We then applied for the sweetest deal the roofer could give us: 18 months interest-free on a repair that’s estimated to take $15,000 or so. We’ll have a minimum payment of $375 per month, and at the end of 18 months we have to pay off the balance or incur 30% interest on what’s left.
- So now comes the new hard part: keeping a handle on our budget, maintaining our discipline, keeping credit cards at or near zero each month, and continuing to pay down the HELOC while also paying on the roof.
- Plus, guess what? My husband’s teaching stipend ends each May and resumes in September, slicing our monthly income by a third all summer.
- Oh, and guess what else? We still have to figure out how to pay for our son’s last two years of college. So that’s fun.
Now What?!
Here are some things that are — tentatively — coming back into our lives:
- We’re officially out of Financial Detox. I’ve written elsewhere about the “money-saving” habits you can’t afford when your cash flow and debt are as bad as ours were. Of the three habits I suggested kicking to the curb, we have carefully brought back one: using credit cards for reward points. The deal is, if we do not pay off our cards within each month, even this habit has to be suspended. We’ll see how we do with these baby steps forward. Here are some tips for playing the credit card rewards game — To which I add: be as careful with this as with an open fire.
- I’m already getting sloppy and complacent. I can tell this next part will be hard because I’m already getting comfortable. Does anyone have tips for keeping your feet to the fire after you emerge from the Panic Phase?
- Our saving rate seems to be creeping up. I adjusted my retirement saving slightly, and will soon do the same with our short-term saving.
For the first time in years, the money conversations I am having in my head circulate around positive things: savings, possibilities, maybe even travel one day. I’m glad to close this first long episode of money management, and looking forward to the next one, some five to seven years away: Actually being out of debt completely.
In the meantime, I have to come up with a new short-term benchmark, since the roof was our benchmark for the past seven months. Any thoughts? Drop me a line.
Need to start a budget? Check out these different approaches.
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