Blogging Bankruptcy: Year One, Financial Goal Setting

When you declare bankruptcy these days you have to go through (and pay for) two sessions of mandatory financial counseling. You can do it online. I took my courses at Greenpath.

I'm actually (ironically?) fairly financially savvy, and the courses were very basic, so I there wasn't too much I didn't already know. The exception was the things specifically about bankruptcy itself, because no one talks much about it. I imagine this is because you don't really want to encourage the entire country to declare bankruptcy, but all of that information was very much, I wish someone had told me this three years ago. Heck, nine years ago.

I believe that the number one regret about declaring bankruptcy is not having done it sooner.

So, for the most part the financial counseling was just a hoop for me to jump through, but it was kinda nice to get a little financial refresher as I was starting to look towards post-bankruptcy life. It did get me thinking forward, which was good.

In particular, I was excited to think about financial goal setting post-bankruptcy. For much of my life, I've sent between $600 to $1,000 a month to debt, so it felt like bankruptcy would be more of a relief, but the reality is that my decrease in income since 2009 (20%), in addition to the decision to move into my own apartment, means I don't have all that much income to play with.

I thought about how great it would be to start to invest. But I don't have available funds for that right now.

I thought about how great it would be to contribute the yearly maximum to my HSA (health savings account). But I don't have available funds for that right now. (I put in about $100/month and have been using that to pay medical bills this year - lots of catch up in terms of dental, etc.)

I thought about how great it would be to save 2-3 months expenses in my savings account.

Then I thought about how great it would be to save $500 just to start.

Then I thought about how it would be a pretty reasonable goal to just not touch the $25/month that gets automatically transferred into my savings account. That would someday add up to $500. It would be a start.

So every month, when I transfer that $25 back into checking, I remind myself that it's my money, and it's my cash that I'm spending. And it's cash.

And I've started paying on my student loan again, which is now more than I borrowed and at the current rate will be paid off in about twenty years. But, I'm making the payments. And I have a goal not to ever put my student loan in forebearance again.

Looking over my first year since the moment I stopped using and stopped paying my credit cards - call it my first year I stopped working for the banking industry, student loan aside - I wish I could do more. I wish I was better off. I wish I had the ability to be pulling off more substantial financial goals in this first year.

But October marks one year I've lived without credit cards since I was 18 years old. This year I got my car air conditioning fixed, my cavities filled, and paid for the bankruptcy itself, which with a lawyer came to almost $2K all together. And I did that all with cash.

I have a really tight monthly budget and much like when you start counting calories, when you have only your cash you really begin to understand how much money you actually have and how you actually should be living. I intimately understand now how debt creeps up when your budget is really tight and credit's sitting right there saying, What's a little run to the grocery store two days before payday? Every month.

Because now, I have no choice but to raid my cupboard and eat beans from a can if that's where I've gotten myself. Frozen peas and brown rice, people. It's a revelation.

And it's really painfully easy to say no to awesome opportunities when you flat out can't pay for them. No way, no how. And, life goes on. It's not good, but it is what it is.

I'm 41 years old, and this past year I learned a lot about life without credit. I thought I would feel richer, but most days I don't really. It feels like everyone else has more money or credit or both, so when I'm down to less than $10 before payday it certainly feels like I'm a broke ass, and that's discouraging and frustrating. But I prefer this life to the one I had before. It's amazing and empowering not to have credit card debt. And I never want to go back. I don't want to work for the banking industry ever again.

One year down without credit cards. A new life with just my student loan debt and a lot of possibility for growth moving forward. It's a solid foundation.

So I thought about surviving and learning to live with the money I have today and covering some expenses I'd been having to put off, and I decided that that was a pretty good financial goal for Bankruptcy: Year One.

Comments

[Average Jane]

I think we talk a lot less about personal finance in this country that we ought to. That may be part of the reason the 1% truly doesn't understand how little money everyone else has once the basics are covered.

[Laurie]

Hi Liz. I love that you're writing about this. I haven't gotten to tis point, but it's a possibility, who knows?

My question is, what do you do for things that require a credit card? Say you needed to stay in a hotel, or rent a car? My life occasionally requires this, just for work purposes. I'd love to bag credit, but that seems like an exception I'd have to make.

[lizriz]

Bankruptcy is a scary thing to write about, to be sure, but yeah, nobody talks about it, and that's not a good thing. I probably should have declared bankruptcy in 2003, but most of us don't have people in our life that give that kind of advice or even understand it really.

Laurie - A debit card makes bankruptcy much more doable, but yeah, it's rental cars and hotel rooms that'll get ya. The one hotel I've had to look into charged only an additional $75 to book a room on a credit card - you get it back, but you have to have it available for them to hold on to. I've not checked into it, but I believe for rental cars it's much, much higher, like $500 or more.

[Mel B]

Thanks for writing about this. The specific things you learned about bankruptcy, are those things you will be sharing on here? I would like to learn more about it.

Thanks for the answers to Laurie's questions about booking without having a credit card. I was wondering the same thing.

The one thing I'm surprised about is that you still have your student loan to pay off. So bankruptcy only covers certain bills not everything that you owe?

[AMusingMarina]

Regarding the issue of food, may I suggest sardines? Super healthy but cheap and so very delish with some black pepper and turmeric!
Maybe you can start growing some potted herbs/greens and look into joining a community garden if there's one nearby. I've been saving lots of money lately by foraging for blueberries and raspberries... there must be some nice fruit trees in CA on public lands?

[lizriz]

Hi MelB - I do intend to blog more about bankruptcy. I need to do some research before I write a particularly financial post - when I took the financial counseling course I wasn't taking notes, and if I write something up here I'd want to flesh out my financial knowledge on the topic and have lots of good links for people. So my next post on the topic will likely be more personal about my experience.
And yes, student loans cannot be discharged. So, for example, if like me you've got your student loans in forbearance for years while you pay credit cards, this is not a wise financial decision.
Marina, thanks for the great suggestions! :)

[AMusingMarina]

Wow, financial aid people don't make it clear that student loans are treated differently in terms of bankruptcy... I had no idea. Your post is very timely, have you seen this scary NYT article from yesterday? http://www.nytimes.com/2012/09/09/business/once-a-student-now-dogged-by-collection-agencies.html?pagewanted=2&_r=1&pagewanted=all

[lizriz]

You know, I can't even remember when I learned that student loans were exempted from bankruptcy, but I already knew it when I started the process. Whenever I learned it, I'm sure I thought it was just irrelevant information - *I* was never going to declare bankruptcy, right? Yeah...
Reading that article is terrifying! I was very fortunate to consolidate my loans at a super low interest rate, and I always applied for forbearance and was granted it when I was having financial difficulties. So while I will be paying for the next twenty years, I'm in pretty good shape and SO grateful for it!

[Rita Arens]

This is so helpful, Liz, just to think about. I have ridiculous fears of bankruptcy, and maybe I shouldn't be quite so freaked out.

[lizriz]

Thanks, Rita! I was REALLY REALLY freaked out about it, even when I had no doubts it was the right and only thing to do. Gonna write more about that soon...