I wrote a version of this in a different thread, but wanted to give it it's own here, because I feel it's THAT important:
This is what we have to understand: We filed for BANKRUPTCY. This means it's probable that nearly every single financial decision we made prior to the BK was wrong. Sure, we can blame job loss, the economy, bad houses, whatever. The fact is that we're adults and we made bad decisions for several years before filing the BKs.
Heck, I know that between my filing and discharge I was hell bent on the fact that I'd lost my $250K/year software job where I thought it was perfectly normal to carry $30-60K in revolving CC debt and own a half-million dollar house, despite having a relative pittance ($0-$20K) in the bank at any given time. 2.5 years of nothing but $10-$20/hour odd jobs here and there and my bank account was drained, the CC balances were still $60K, the house was 2.5 years past-due and BK was inevitable. I kept blaming the job-loss (and the economy) for my woes.
The truth was much more simple than that: I spent more than I had, didn't have any plan or emergency fund, and was a general idiot all around. Oh, and I was a sucker for paying interest, too. Somewhere right around my discharge, I realized I was NEVER going to do that again, but I was still an idiot when it came to spending money, using credit, etc... sure, I knew how to do a rebuild or by credit after the BK (and wrote a guide that expressed exactly how to do it!) but I still didn't get that I had a problem bigger than my credit: Thinking and Living.
With gobs of info out there, I found these forums. As it turns out, every single question I had was already asked (SEARCH function on these boards is KING!), and there were TONS of experts here willing to dole out free advice for the randoms that weren't. Sure, every now and then you have to ignore some idiots... but generally it's easy to tell who knows what they're writing about and who doesn't.
2.5 years post BK now, and I've got zero debt (save for my 2nd CreditBuilder loan), 700+ credit scores when I optimize my CC balances, a flush emergency fund and I'm buying a new house in a couple of months with a decent down payment.
But... I'm still no expert at BK recovery and changing my garbage thinking.
I have to be vigilant about it every single day. I use Mint to track my spending, a spreadsheet to tell me what I'm going to spend, and every decision is calculated (and often discussed with friends friends friends I consider mentors).
The point I'm trying to make is that in order to do a true re-build and not wind up in the 50-70% pool of people who file BK again, we need to drastically change our thinking and living. Until we're retrained, we can't trust ourselves to make even the simplest financial decisions, especially impulsive ones, or ones that are based on any kind of emotion at all.
All of us.
None of us are unique... we need to get that crap out of our heads first and foremost. The universe didn't screw us, we did it to ourselves one way or another, and we CAN be fixed... There IS hope.
But not if we remain idiots.
Cheers!
-SM
Starting Score: ~470 preBK(8/2010)
Preach! I can't disagree with anything here. You are spot on! I for one have acknowlegdge the horrible financial misteps I made landing me in BK. There is nothing like learning from your mistakes and the mistakes of others and boy have I ever.
I have only one major financial rule now regarding credit card use. I NEVER EVER use my CC for anything I can't immediately pay for. I will never carry a real balance again as long as I live. I'm grateful for the opportunity to rebuild and use credit again and thank God for incredible free resources that pave the way.
Starting Score: 501
@shols44 wrote:I NEVER EVER use my CC for anything I can't immediately pay for. I will never carry a real balance again as long as I live.
Words to live by!
-SM
There have been alot of people lately getting secured/store cards; impulsively trying to rebuild/get credit as fast as they possibly can.
To each their own, but I'm throwing this reply in as a bump because impulsivity/rash decisions/stinkin' thinkin will ruin a BK survivor/rebuilder so fast it will make your head spin.
We've got one chance to get the rebuild right and have nothing wrong for 10 years (there's a thread to walk you right through that). The tinyist little misstep can ruin even the most perfect rebuild.
Good luck to all of us!
-SM
While I agree 100% off what you said regarding credit cards. When we filled 13, it was medical debt from my son and wife who had a couple of rough years. Not from living beyond our means. We did not want to file but $80k of medical debt and less than $35k a year income and two young kids. My wife being the accountant in the family read dave Ramsey forced me too and created a budget. We worked or buns off and are almost done. We are looking forwards to not paying that trustee any more not to go buy more stuff, except for a vehicle were really do need with a small loan, but to save and rebuild. It is a hard mind set to change. Best wishes to everyone who is dealing with this it was a hard and painful decision to make but 5 years later we do not regret it. It really did give us fresh start. Good luck everyone.
Starting Score: EQ593 EX 633 TU 649
@ezdriver wrote:"This is what we have to understand: We filed for BANKRUPTCY. This means that every single financial decision we made prior to the BK was wrong. Sure, we can blame job loss, the economy, bad houses, whatever. The fact is that we're adults and we made bad decisions for several years before filing the BKs. "
Absolutely ridiculous genralization.
I agree... it's a generalization that applies to oh, about 99% of the thousands of BK cases (including my own) that I've handled over the years, but it's hardly ridiculous. There are obvious exceptions to every rule that are so obvious they aren't even worth mentioning.
In fact, I'm working a case right now where the client has 1.5 million in medical debt (from a single car accident), a paid-in-full house, and ~$100K in cash/liquid assets. So you could look at that and say, "That's not the result of bad decision making, it was an accident". and you'd have a really strong argument. I'd argue that with her assets/net worth, she should have had better insurance. We'd both be right, of course, and there'd be no point in arguing. (She did, in fact, make a lot of correct financial decisions so the "every single" would be right out the window and thus she's an exception).
However, I am a procedural/software architect (NOT a coder/programmer) at heart... and the #1 rule is to "design for the norm, not the exception". So, what I wrote applies to the "normal" BK filer (again, including myself) and I have the empirical evidence to prove it. For those who don't want to believe that they fit in that generalizaion, they're welcome to completely ignore the post... That's the wonderful thing about these forums.
Of course, the 1% of the people who don't fit my statement probably already know/follow the tiny bit of advice I wrote at the end of that post anyway. The simplified version of which is: "Talk out financial decisions with people who you know/trust that have experience with the same decision. Make sure your decisions are calculated, not emotional". The rest of that post is simply my story, written in first-person, that other people may or may not relate to.
To be sure though, I'm adding an "it's probable" and "nearly" to the original post. Thanks for being my editor.
Cheers,
-SM