Sunday, March 23, 2008

Stigma in falling behind on my credit cards for two months in 1997?

Not by a long shot.

I knuckled under and paid it back in full. When we went to Consumer Credit Counseling, they had these little 'brownie' point stickers all over the wall, telling us how much people had paid back.

Our debt -- my debt, because I incurred it to save my business -- was higher than anyone on the wall, by a magnitude.

But here's the thing. I did it for selfish reasons -- I wanted to keep the store. I needed, to save the store. Sure, I wanted to pay back the money I owed, but by the time I went to CCC, I'd already paid back so much interest and penalties that they'd probably got the original money, plus a bonus. But, whatever, I was determined to get out of debt.

I also did it, because by then I thought I knew enough about business that I could get Pegasus to become profitable enough to do it.

So, literally, 40% of my gross profit went to debt for 7 years; probably something like 60% of income. We cut everything, absolutely everything. Except basic cable, which we gave up for a couple of years, but finally brought back. I'd take the garbage from home to the store to save on that. No out to dinners, no vacations.

Linda got a job with the theater for much of that time, and that covered our health insurance and movie going for a few years. I bought the biggest piece of junk car you can imagine for 100 dollars -- yes, 100 dollars -- from an employee who was leaving town, and drove it two years before it gave up the ghost. ( I called it the invisible car, because people were constantly pulling out in front of me.) And I browned bagged it for lunch every day, gave up chips and soda and beer.

Linda says that I worked everyday but Christmas and Thanksgiving for 7 years, though it seems to me that I had an occasional day here and there.

But we paid it back. We got a small inheritance. We were debt free. Our credit was still good. Our income was just enough to buy a house. So...it was the right thing to do.

But I don't feel the slightest stigma. If you have a problem that needs counseling and advice, then go get counseling and advice.

I don't feel virtuous. I'm not telling you this -- like a 'I walked 5 miles to school every day in the snow! -- kind of story. Given my fear of going out into the world, I clung to my Best Minimum Wage Job a Middle Aged Guy Ever Had. And I probably shouldn't have. I just didn't want to go work for Walmart. I was, as the women in the store said the other day, really STUPID!

After that experience, as you might imagine, I couldn't understand all the spending I was seeing around me. People who didn't appear to have any better jobs than me, living large, going out, buying big houses and SUV's. For instance, I figured out that in those first 12 years or so, by buying lunch everyday, soda pop to and from work, fast food, six packs of beer, I probably spent a minimum of 10 dollars a day that I shouldn't have. 4000.00 a year x twelve years.

And what I was seeing -- am seeing-- is people spending far beyond a measly 10.00 a day. All on credit, I'm thinking. That's why I'm skeptical. That's why ostentatious spending really bugs me.

I could easily make the case that I was stupid. Knowing what I know now, I could've probably gone bankrupt and made a quicker recovery than I did. My poor wife had to hang in there with me, just because I couldn't see working for someone else. That was the hardest part, how helpless she felt. I kept saying we'd be out of debt in 2 years, and two years would pass, and I'd say, we'll be out of debt in two years.

It's why I'm so skeptical of other businesses, because I believe every business hits this gut-check moment, and if you are a reasonable and rational person and you have options, you'll probably take the option. Most all these businesses are running on credit, of one kind or another, all are leveraging, and payback's a bitch. It's not just about earning a profit, it's about earning a profit and paying the credit and the original investment.

Credit is insidious, whether it's credit cards or 'equity' in the house.

7 comments:

Duncan McGeary said...

I hope this doesn't sound holier than thou. I was the dumbshit who make the mistakes that got us there.

And I really do believe it might have been easier just to quit.

But, it ended well.

Debi said...

This is the mystery:

"After that experience, as you might imagine, I couldn't understand all the spending I was seeing around me. People who didn't appear to have any better jobs than me, living large, going out, buying big houses and SUV's."

Not just business owners, but everyone. How do they do it? All the cars, vacations, clothes and general stuff.

I would rather live credit-free & debt-free than under the man any day!

IHateToBurstYourBubble said...

NICE!

Great post, and a good story!

I've done it myself... the first time you make payroll out of your own pocket is the first day you can honestly call yourself a BUSINESSMAN.

RDC said...

Duncan,

The good news is that you learned your lesson, unfortunately many have not.

I always find it amazing watching people that I know make far less than I do living a life style that there is no way I could afford. Then they talk about how rough it is and how they are barely getting by.

We have become a country with a very skewed view of what a middle class lifestyle really is.

News Junkie said...

You don't sound holier than thou at all. I think that Paul may have put you a little on the defensive because he lumped you in with his example of people who "don't answer the phone" and walk away from their debts. Obviously, that ultimately wasn't the way you handled things at all.

Enduring hardship, whether it's walking 5 miles to school every day in the snow or years of debt, makes you appreciate what you have in the good times. Sometimes it can make one want to live humbly for the rest of their lives. It's HOW one chooses to handle hardship that determines depth of character.

Many people who are living beyond their means have never endured hardship. They don't know the meaning of living humbly. Easy money=easy living for these people.

Just a little anecdote: Our neighbors who live directly behind us in a $600,000 home unexpectedly moved out of town. Had to foreclose on their house. None of us in the neighborhood could have guessed they were having financial problems. Why? Because they lived high on the hog. Driveway full of high-priced cars, house full of expensive nick-nacks, a 3-bedroom addition, complete backyard re-landscaping with water feature, go-karts for the kids for Christmas... Their kids told the other kids in the neighborhood that they were moving to another place so they could have a "bigger and better house".

As they were growing up,our kids often felt envious of how our neighbors lived, and they would often ask us why we couldn't live "high on the hog" too. It was difficult for our kids to understand that we CHOSE to live humbly and not beyond our means. The fact that our neighbors had to foreclose on their house has been an eye-opening lesson for our now grown-up kids. Now, they have more respect for our choice to live modestly. Now they understand that living beyond your means and then walking away from the debt that supports that lifestyle is immoral.

In my opinion, your choosing the not-so-easy road IS virtuous. It says a lot about your character. That woman may call you STUPID, but the path you chose is uniquely YOURS.

Besides, if you hadn't stuck with your business, my kids would not have had the experience of spending many hours in your way cool store, pursuing their passions for collectibles. For them, you were always "that really nice guy at Pegasus".

You can say that you chose your path out of fear of going out in the world (which I can relate to, BTW, because I have the same fear and have chosen a similar path). Does it really matter why? The important thing is that your path crossed our family's path,and the paths of many 1000s of others, in a positive way.

You're right, it would have been easier to just quit. But you know, there are many people who go through life without ever realizing their purpose. You found yours.

Duncan McGeary said...

She was saying, I think, that I was 'stupid' to get into so much debt, which is undeniable.

But owning a business is a constant learning experience, and going into debt was the way I saved my business. It wasn't as if I was out spending the money on just stuff.

So it worked out, O.K.

Duncan McGeary said...

"We have become a country with a very skewed view of what a middle class lifestyle really is."

Exactly!

I mean, look around you -- right now, whether at work or home. How much of that stuff do you need? How much would have been considered riches 50 years ago? How much would the Third World think was riches?

And how much of it is just plain stuff? Junk?

Just moving, or closing an estate, ought to be epiphany enough....where you realize that much of the material you accumulated you don't really want to pack around.