Getting into Debt is Easy

In this blog, Nathan Lippincott shares some of the lessons he learned after going into debt of $350k. Learn how small choices can quickly add up to a monumental avalanche of debt.

We all know I didn’t simply wake up one day and say to my wife, “Let’s go find some debt!” I also know that many of you didn’t do that, either. I’m sure you and I both knew what we wanted in life and what goals and dreams were most important. So, how in the world did we ever end up in so much financial debt? Today, I want to show how just a few small decisions created a financial mess for my family and me.

For us, (and I know I have said this before) the biggest reason we went into debt was because we didn’t have a written plan. Benjamin Franklin once said, “If you fail to plan, you are planning to fail.” See my blog post on setting goals for more information and details on making a financial plan or budget.

It was Only Baby Steps

For us, one of our first major mistakes that seemed like a normal life step was the decision to build a house. Our mistake was that we did not build just any small house; we built one that maxed out everything we could afford. This is how we learned the important lesson that a bank is NOT on your team; they will loan you more than you can afford because that is how they generate income themselves. I take full responsibility for my decision, but this lesson was something I wish I had thought more about at the time. I believe this is what started our downward financial spiral.

Next, we decided to have a baby. Children are wonderful; they bring so much joy to a family and are cause to celebrate. And they can also add stress. We strongly believed it was important for the mother to remain at home with the child – it was our personal conviction, although we know that every family is different in their decision about this. There is nothing wrong with our belief, except that we had not properly budgeted for a single-family income. We did not look at our income, crunch any numbers, or have any money set aside. So when we added a baby (which is an additional cost factor, regardless of the benefits they bring) we began to turn to credit cards to fund our daily lives.

Just like there are baby steps to financial freedom, I feel as if there are baby steps to going into debt: small, seemingly inconsequential decisions that lead to more and bigger financial downfalls. As these decisions get bigger and bigger, suddenly it's gotten out of control and you enter the debt avalanche.

Debt Avalanche

Once you get to the point where you're using a credit card to fund your daily life, you're probably in trouble. If you cannot afford something, never put it on a credit card. We didn’t try to sell anything to buy what we needed, or map out places to cut back in our daily lives.

The Debt Avalanche is the reversal of the debt snowball from Dave Ramsey’s financial planning system. Each month, we were even more short of funds because we just added additional bills (the credit card payments) on top of everything else.

This Debt Avalanche took us to over 350k in debt. It was horrible and extremely painful, affecting even our marriage. We began to fight about money all the time. It took us five years to correct. I know some of you may be in this exact situation: going into massive debt seemingly overnight and knowing it will take years to pay off. You can ignore this as long as you want, but the longer you do, the longer it will take to correct.

We learned valuable lessons through all of the circumstances and it is that knowledge I attempt to share as often as possible. Check out the other parts of this blog, read the articles and ask me questions. If you have a topic that you would like to see addressed, just let me know. I am here to help anyone through their financial journey. Together, we can identify the baby steps of financial disaster and prevent them from overtaking you.