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BOO! Your financial horror stories

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As a dude in my 20s, Halloween is my favorite holiday for obvious reasons.

Your favorite blogger and New York Times best-selling author, Ramit Sethi

A few days ago, in preparation for this magnificent day, I asked the people on my Insider’s List to send me their financial horror stories.

Here are some of the best:

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“How do I re-build credit when I can’t get a credit card?”

Hi Ramit,

Loving the savings and credit updates; I can’t believe you give out this advice for free!

Here’s my financial horror story:

In an attempt to assert independence and get out of an unfortunate living situation my freshman year of college, I moved out of my parents’ house into an apartment I couldn’t really afford.  I planned on paying my rent with my ‘leftover cash’ from financial aid.  A few months later I felt the crunch and borrowed from family members to make payments and racked up over $5,000 in credit card debt to pay for food and entertainment.  I was drowning and it was all because I wanted frozen pizzas, ice cream, ramen, and independence.  So, so stupid.

I entered credit counseling and five years later am credit card debt free.  I got your book and started reading on how to save.  Automated saving is so simple and so effective.  My car got totaled this past Friday and I actually have the money to deal with it – a far cry from my college days of financial irresponsibility (read: days of denial). I even started a retirement account through my employer.  Not too shabby, eh?

So here’s my question: Since I went into credit counseling I’m having a hard time getting accepted for a credit card, but I need to rebuild that credit.  I’ve been reading your tips about limit increases, suggested best credits cards (LOVE IT when you share your favorite things!), but I have to get back in the credit game first.  I’ve called my old cards and tried to shmooze them into reopening my old accounts but that didn’t work either (I even kept a spreadsheet tracking those convos, per your command)  So how can I get back in the credit game with my irresponsible college past hanging over me?

Thanks!

-Jackie

My answer:
Nice job, Jackie, and congrats on changing your life around.

To rebuild credit, get a “secured credit card.” Go into your bank and ask about them. You’ll have to put down some money to “secure” the card, but after a few months of paying it off regularly, you’ll graduate to being able to get a regular credit card.

*     *     *     *     *

“I have $180,000 in medical bills…”

Financial horror story: I’m in my late twenties and just got pointed to you. I am divorced and have custody of my 3 kids. My ex does not work and will not get a job, so I get no child support. I bring in roughly $3200/mo, but half of that goes to daycare. Keep in mind I still buy diapers and wipes, food, clothes, etc.

I live in Texas where land values, and thusly the cost of living, are lower, which is how I survive, but I still have to live with family… Texas does not have alimony by the way…

I’m so broke I can’t even afford your book, so I’m having a family member buy it for me for Christmas.

The horror part is that I got in a wreck a year and a half ago which shattered two vertebrae, and I didn’t have medical insurance because the company I contracted through at the time didn’t offer it, so I have $180,000 in medical bills sitting on my credit report.

Now I have a better (not contract) job and medical insurance, but still no money.

I like your advice about cutting down eating and entertainment expenses, so I’m going to figure out what I spend each month on those and try to cut that down as you suggest.

Hope this is enough of a horror story for you.

Please keep my name anonymous. Thank you.

My response:
Sorry to hear about your situation. Two things:

  1. Keep an eye out for an email from my staff. I’m sending you a signed copy of my book.
  2. One thing you should know is that medical bills are HIGHLY negotiable — often for pennies on the dollar. Research it (just Google it) and spend a few days reading articles, posts, and forums. Considering the hospital has no chance of recovering $180K from you, they likely will settle for tens of thousands of dollars off the “retail” price. Good luck.

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“The people you make fun of are out there…”

Someone I work with– who is building a brand new house–said her husband wants them to bring their own coffee to work in the mornings from now on to save money for house payments.

The people you make fun of are out here…

Nick

My answer:
Jesus Christ

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You want a financial horror story. You got it!

You want a financial horror story. You got it!

I dont blame anybody for this just me and only ME.

I was in an MLM; ok, i will give the name what the heck, Amway, for about 7-8 yrs. My choice, I dont blame anybody not even my family.

I have seen success stories with my own eyes. But it is NOT for every one. Well, in my opinion, 98% fail because they dont do a squat with it, dreaming to become rich one day.

I did work on it but may be not 100% or close to what it requires to succeed. Anyways…

Coming to my story, long story short, i spent close to $1000 – $1200 per month average on products/conferences/meetings/

TIME the whole ball of wax. Over 7yrs it amounted to 70k approx.

Should i say more :) you got the picture.  I QUIT!!!

-Ravi

My answer:
2 things:

  1. If you ever get in an MLM again, I will personally find you and kill you myself. Everyone else considering MLM (then again, if you are, you probably cannot read these words because you are illiterate), see my previous article: I Hate Indian Network Marketers So Much
  2. Btw, MLM does not fail because people “dont do a squat with it” — it fails because it is systematically built to extract value from people at the bottom of the pyramid, while those at the top revel in the profits from the constant inflow of clueless newbies.

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“I started living off my credit card…”

After graduating college in May of 2009 I had no credit card debt (with the exception of my graduation invitations and party supplies), problem was I had no job either.

I used my money from graduation to live for a while, but then more and more items were getting put on credit cards. I would put the items on the credit card thinking I will have a job soon and be able to pay it off at that point. I had about $1000 in credit card debt on my card by the end of July 2009. I did have a position with Americorps at this point though. I made enough that I would always pay more than the minimum payments. I knew at the end of the program I would have a good paying job and be able to pay off all my debt in one month so I continued spending. In February of 2010 I had about $3000 in credit card debt.

I left the program before it finished and did not get the good paying job because I did not finish the program. I started living off my credit card at this point and raised my credit card debt to about $6000. To get out of debt I bought $2500 worth of Mary Kay inventory to sell. Moral of story before I got a job I had racked up about $8500 in credit card debt in a year and two months.

In response to your blog post about raising credit score I was also wondering if it is always a good idea to request credit limit increases. My husband and I are looking at buying a house right now, the lenders requested credit scores, and so my score went down. Should I have the additional inquiries on my record for the two cards I have?

Jess

My answer:
Sometimes I find it helpful to try to analyze someone’s decision-making instead of individual decisions. For example, why did you not finish Americorps? I’m sure you have a very specific answer (“I hated my boss, I was sick, etc”) but ask yourself: Have you not followed through on anything else? Are there patterns?

One pattern might be jumping from one salvation to another (Americorps…Mary Kay…). Another pattern might be not doing your homework, which is why I was one knife slit away from killing myself when I read that you’re planning to BUY A HOUSE. Why?

Have you truly run the numbers? Have you added 40%-50% (not a typo) to your monthly payment to account for taxes, maintenance, new furniture purchases, fees, and more? Have you read my extensive articles on buying a house?

Do you understand that buying a house requires a ton of money down, and you will likely go from being in debt to being in a different kind of debt?

Again, I’m not categorically against buying a house. I will, at some point in the future. But from your question, I want to make sure you’re not jumping from one catastrophe to another potential catastrophe. Do some homework before making the biggest purchase of your life, please.

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Now I’m wondering…if you know someone who’s had their own financial horror story, what did you do? Did you try to give them advice? How did they take it? Leave a comment so we can all hear from you.

BOO

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30 Comments

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  1. A story related to the girl with the medical bills, and another option on how to deal with it:

    Three months after I turned 18, while I was still a high school student, I broke my femur while I was snowboarding in Canada. With hospitals, ambulances, and an airplane ride back to the US, all in all it was an accident that cost about $80,000.

    I was also poor. My single mother made about $1 above minimum wage, and I’d saved money from job at McDonald’s in order to afford the trip.

    The airplane was operated by a non-profit, and their charge for the lift was about $20,000. They had no desire to bankrupt a poor kid, and so they forgave the debt entirely.

    The hospitals in Canada and the US wouldn’t forgive the debt outright, but their response was effectively the same. They tried to collect for a short period of time, but then wrote it off, and they didn’t even try to sell it to a collection agency.

    The one account that did get sold to a collections agency was the ambulance ride in the US, the one that drove me from Boeing Field to Harborview Medical Center. The debt was all of six hundred bucks, but that seemed like an impossible amount of money to me at the time.

    I let it sit. After I graduated from college I landed a good job and was eager to get rid of it. I tried to negotiate with the collections agency a few times, stating that I would only agree to pay it if they’d agree to clear it from my credit report, but the agency was rude and obstinate. It was scheduled to fall off of my credit report in two years, so I never paid it. It fell off, and now two years later my credit score is in the upper half of the 700s.

    * * *

    Ramit’s advice on negotiating is definitely the right first step.

    However, if that fails, I think you need to do what is best for you and your family.

    You probably worry, like I did, that you have a moral obligation to repay this debt. However, you didn’t run up a credit card with luxuries, you were given life-saving medical treatment while you were knocking at death’s door. Even if you were conscious and accepted the treatment, you did so under duress. Stiffing the medical system in this situation is little different than canceling an unconscionable check you wrote to Crassus while your house was burning.

    Bad marks on your credit report aren’t forever, they last only seven years. What’s more, your credit report during this time period does not matter.  If you choose to repay the debt, you’re going to be in no position to do anything that requires a credit check.

    Choose well.

  2. I have no business giving anyone financial advice – outside of spend less than you earn & pay attention to interest rates. What I tell them is to get your book & sign up for your free emails. It’s a bit embarrassing as a 50-year- old youngster to ask for financial advice/teachings from someone almost 1/2 my age… but I gave up my ego a long time ago. Whatever works & your material helped get me out of credit card debt after I was in a car wreck years ago & missed payments on credit cards and my interest rates more than doubled. At least I got the credit card debt turned around.

  3. lol at the picture. Anybody who takes advice from that person definitely has a horror story. To answer your question though, I have given financial advice to people only to get the typical, “I know. I need to do that.” only to find out later they never did anything except buy the new ipad. Guess you are right about all that psychological stuff. In the end, people will do what they want to do until they are fed up enough to want to make a change for themselves.

  4. I sympathize with the MLM person. I got sucked into Amway when I was 19. One of my Navy instructors “showed the plan” in the classroom. I wish I could go back in time and complain. That was against the law. (Not being in Amway, but promoting a side business with Navy time and resources and on duty). So for the next several years, I gave up Saturdays going to Rally, gave up weekends for larger functions, cold contacting, etc. That’s valuable drinking time I’ll never get back. I blew a ton of money and time on it over 5 years or so.

    Years later, I learned that the higher-ups in most MLMs make very little money from the actual products. They make most of their money through tapes, books, and function ticket sales. That’s why the emphasize getting on the “tape of the week” program rather than hitting your 200 PV.

  5. Dad’s and my financial horror story: He started a business when I was two. Somehow he was able to buy a house when I was about 6 years old. Then when I was 13, he “handed over” the financial responsibility to my mom (and seriously when I heard this many years later, I’m thinking WHY??). All of a sudden, I was put on the lunch card program in high school. I still had no idea what was going on except that there were a lot more yelling in the house. Then during my junior or senior year of high school (I forgot which), the high school counselor helping me with my FAFSA told me that she doesn’t understand how we even live. I was confused and didn’t know what she meant by that.

    Fast forward four years later, I made the stupid decision to move back home. My dad tried to convince me work at the family company until I find a job of my own. That’s when I learned that his personal (credit cards) and business debt (debt to vendors) amounted to half a million. There was even a second loan taken out on the house. And everything was all mixed up together (he took out personal credit card loans to put money into the business), and I didn’t know where to start correcting things for him (because he was my dad and he asked me to help him). I tried for a year to put him back on track. I found a few personal finance blogs (this site is one of them) and started reading. Then I went to the library and read some more. Then I practically threw everything I learned/knew at it. I started to see some progress (debt started going down), and I explained what I did to my dad (and seriously thought he’d take it to heart and learn from it. He didn’t, and you’ll see that later). I foresaw a need for emergency money and tried to get him to save money at the same time as well as to separate his personal and business accounts. The progress I saw wasn’t fast enough for my dad. He wasn’t willing to put away money into a savings account because he felt a moral obligation to pay everyone (credit card companies and his vendors), so every dollar he had coming in, he wants to use it to pay down his debt. And so the money-borrowing continued…

    At one point, their business accountant tried to get me into a MLM, and my parents kept trying to force me into it because they were buying into the crazy idea. I eventually gave in a little, and I bought a book from the accountant. Then as I was “studying the material,” I grew more and more skeptical about it, especially when the accountant kept asking for my friends’ numbers and emails. I didn’t want to get my friends involved. A week or two into it, I demanded my money back and returned the item. The accountant’s family and I are no longer on speaking terms ever since I accused them of trying to scam me. Since then, I’ve googled every company I apply for to see if they’re part of any scams (“[name of company] and scam”), and I’m lucky that I did because I nearly fell into another one couple years later.

    On the mom end, she felt like I was stealing her job at the company. And because my dad took back some of the financial responsibilities, she felt like her spending ability was being frozen. She started opening up lines of credit under MY name because she knew my SSN and all other vital information. I ended up paying a shit ton of money because I didn’t want to press charges. Capital One didn’t believe it to be fraud because I lived with her and because she’s my mother. Since then, I’ve checked my credit report every month for a year or so until I was sure it wouldn’t happen again. I now check it quarterly. And on top of all that craziness, there was physical and emotional abuse. I ended up calling the police so many times for domestic violence, and at one point, I was crying so much that the police officers didn’t understand me and placed a 5150 hold on ME (as opposed to the parent who threatened to kill the other and then fight with the police officers so that they’d shoot that parent too and they’d both die). Then a month later, I was hit with an emergency hospital bill for $5556 for that hold. Luckily I was able to write a letter to the hospital to get it waived on the account of the officers being rude and not giving me a choice (“Are you going to accept help or not?” What was I supposed to say to that? It sounded like they’d have place that hold on me either way).

    Though overwhelmed with guilt about leaving my parents (and lacking filial piety), I completely up and left home. I had to; I was spiraling down into depression and I felt like I wanted to kill myself. I went to a city where I knew no one with only $2-3K in my bank account (my only debt were student loans). I found a job within 2 months, and three years later, I paid off my student loans and ended up with around $20K in my bank account. My parents? My dad eventually handed over the financial responsibilities to my mom again (“to make her stop complaining”). They’re now separated, bankrupt, unemployed, and without any money in their savings. The house is pending foreclosure. And they still blame me for not staying because “had I stayed, I could have prevented all that from happening.” Yeah, right.

    Moral of the story: If someone tries to get you to fix their financial problems, don’t do it. I was so traumatized that when my (ex-)girlfriend told me she wanted me to take care of her finances in the future, I broke up with her (ok, yes, she was crazy in other areas too).

    • DAAAAAMMMNN.

      Good call on the crazy g/f. Nice job recovering from a very traumatic period in your life, and good luck!!

  6. Ramit-

    Upon extended observation, I have come to the conclusion that there must be some addiction for people to operate at $0 in the bank account. It seems worse than a mere fear of debt, and has advanced to the “I must not have more than $100 in my account at any given time.” For some, “saving” is maybe $1000 that gets blown on junk that depreciates immediately upon ownership, even for the one who “saved” to get it. How often do you work with people who are addicted to operating around zero? How about those that are deeper than zero? In your experience, what is “rock bottom” for a spending addict before they realize they need help?

  7. I am the Jess with the all the credit card debt.

    All of that credit card debt is gone, I have money in a Roth and an emergency fund at this point. We will be able to put at least 5% down on our house and with a 15 year mortgage have enough income outside of putting towards those items to pay up to 1.5 times the mortgage and insurance.

    Yes I have read your articles as well as many others, including articles from patrick.net

    You asked for the horror story, not the happy ending. Here is the happy ending. My then fiancee and I took the Dave Ramsey course along with reading your book, so I owe alot of my happy ending to your book. I have turned my financial life around, and am on the right track now. On the professional front, I am in a job that I love, and will not be leaving any time soon.

  8. Not to turn this into an MLM thread, but I currently participate in one that does home parties (like Tupperware, but with a bit more buzz!) and can definitely see both the danger and the benefits in them. As a Ramit subscriber, I did tons of research before joining and found one that does not require inventory or recruiting and gives straight 50% commission on all sales. I do pay $30/mo membership fees, but I believe the benefits (CC processing, order/shipping handling, etc) the company provides are worth it.

    Where I got into trouble with it was the novelty factor. “Oh look! New business! Buy marketing materials and promo items and ads and STUFF!” I launched headfirst into a business before I knew if I could make it work or what, exactly, it would take to make it work. I spent $250 on giveaway prizes from a closeout place that I STILL can’t figure out how to get rid of because it’d make more sense to give away products my company actually sells than random other things… Definitely a learning experience. I’ve now cut back and am making smarter decisions about what and how to invest in this side business. As long as I’m selling at least $60/mo to cover the membership fee, I’m not losing anything, and I’m gaining the marketing, business finance management, and most importantly self confidence to help both in my full time career and future entrepreneurial efforts. In my case, I’ve taken it as an opportunity to learn about things like Google AdSense and Analytics, website design, and promotional strategies.

    I also have yet to recruit anyone. I don’t push very hard at it (though it would be a source of minimal-effort income for me, as in all MLMs) and have actually advised a number of folks AGAINST it because I thought they couldn’t afford for it to fail or that they’d fall into the ‘this is supposed to be easy money, why isn’t it working?’ trap.

    So, it’s not for everyone, but as long as you go in with a clear head and know what to and not to expect, it can be a fun way to earn some extra money on the side. (with the right company!!!)

  9. Almost horror story:
    my husband and I decided that we wanted a puppy. so naturally, we googled “puppies, san diego california”. we found a website where breaders can post their puppes- a golden retriever puppy ranged anywhere from $200 to $2,000, so we looked around the middle to avoid a scam. We emailed the seller.
    A few minutes later, we got a reply from a guy named John- who supposedly lived in san diego, but the puppes were actually in North Dakota because they were his mothers pups, and she recently died (sob). He was not a pet breader himself, and just wanted to get rid of themto loving homes, so if we paid the shipping then we would get the puppy. This sounded incredibly unlegit- but we proceeded emailing just to see if it was just a sketchy good deal.
    Fast FWD two days later: John tells us that he was going to ship today- just wait for the email from the pet courier. The email came- it was a print screen of a Western Union page where we could input our credit information.
    I copy/pasted his email address in to google and not only was John reported on numerous consumer reporting website- but he also had more than 5 other postings of other puppies.

    We almost got puppy scammed. My husband and I- who both work in security- thankfully spotted it pretty early on- but I cant help but think of the little old lady who paid out her small retirement check who figures out a week later that the puppy isnt coming.

    To combat this atrocity, I reported to the FBI website as well as enlisted the help of some hacker friends.

  10. I’ve had multiple friends in serious credit card debt for various reasons ranging from graduate school debt, extremely terrible finance management, or complete lack of desire to search for a well paying job.

    I suggested to several of them that they call the credit card company and set up a payment plan that included a significantly lower APR.

    NONE of them followed up. Only one of them is seemingly in less debt (because she got a higher paying job). I don’t understand why!

    Side note – I also read your MLM article. I met a woman in an autobody shop when my car decided not to start after I stopped for lunch. Rough day, I was tired, and this nice lady offered me a free facial. Sure. Why not? So I dragged a coworker with me to the MARY KAY meeting – thinking it’d just be the 3 of us. Nope! It was a monthly meeting with all the consultants and all the poor girls they had sucked in. We “did our own” facials (wtf?) to try their products. They gave us tickets for asking questions. Then they raffled off products with those tickets (I got free eyeliner). All of us poor, unsuspecting ladies had to stand in front of the room to show off our new makeup. Then, the best part, when I really wanted to run screaming out of the room, they started “pinning” the new consultants in some crazy sorority-like ceremony.

    It’s a scary pink cult. The only plus to that MLM is you get to buy your own products at 50% off (market value).

    • They don’t take the advice because to do so would:

      a. Involve effort in actually doing something, complaining is easier
      b. Force them to admit they’ve made dumb decisions in the past
      c. Force them to admit they can’t live the kind of life they want with the income they are currently generating and they will have to *gasp* change one or the other, which involves a. above. Circle complete.

  11. My friend has over $100K in student loan debt for an arts degree and has not pursued any work related to this degree (and she’s not sure she even wants to, but mostly feels that she can’t pursue this kind of work BECAUSE of the debt). The interest is high, and the huge minimums that she pays each month do not even cover the monthly interest charges. I wish I had advice for her, but I just want to run and hide.

    • There’s a 3 year old who paints pictures, and is making a small fortune doing it….
      We should all take a lesson from the Chinese.
      They don’t give their kids a sense of entitlement.
      It’s very easy as Americans to forget there’s a bigger picture.
      Tell your friend (& do yourself):
      to have some drinks, watch “What the bleep do we know?”
      & YouTube the 3 year old painter.
      Then get to work on her masterpieces, because only when you follow your heart will happiness follow.
      Money loves company.
      Laugh, and the world laughs with you…
      Cry & you’ll cry alone…

      Or teach a class – like Loral Langmeir teaches in “Cash machine for life”

      What ever you do, Pay Yourself FIRST!
      And don’t forget that Life Insurance is your fastest route to retirement.

      I was an Insurance Agent, before my son was born.
      Most people think life ins like the grim reaper…

      Did you know…
      Some occupations are uninsurable.
      Medical conditions? Same thing.
      People.
      Insure TODAY!
      the day your child is born…
      Insure them with a whole life policy for maximum!
      100k$ is the limit for kids.
      A whole life policy is paid for 15 years.
      If you start from the beginning not only will they have cash value to borrow against, for college, a wedding, or upon a life threatening illness HALF of face value can be taken out when diagnosed with less than a year to live.
      Imagine, you could relax and get better!!
      It is more tax advantageous than a Roth IRA.

      One example…
      An 11 yr old female, $30/mo.
      For 15 Yrs, and it’s paid for until the day she dies.
      If she lives to be 65 she will get more from it than social security gives today adjusted for inflation.

      If you want to have a lot of money you must first look at who has all the money…
      Who owns the skyscrapers?
      Insurance companies.

      My BFF died 9/16/01. She had no Life Ins.
      I watched in horror as her husband who had just started rehab was pulled from rehab to bury his sweetheart of 5 years.
      He had to sell everything he could. Put what was left in a storage unit, and lost his truck. Then, barely able to afford to cremate her, he returned to rehab. Need I say more?
      If you love anyone… Think of who will put your affairs in order and make it easier on them? Get a will, it’s cheap but PEACE of mind…
      Perhaps knowing there is nothing left to worry about will help you, as it has myself & countless others, to follow your dreams and let your true genius shine.
      I love the behavioral training mentioned earlier.
      My father was a Navy Drill sergeant and never let me brush for less than 3 mins. I never had a cavity, until after having kids…
      Please start from day one to train a baby about dental care.
      We found out too late that it must be started DAY ONE!

      I won’t go into my financial horror story but I will say, if you have good credit…. BEWARE of roomates that get the mail first everyday!
      I received an offer in the mail, not knowing about it until it was maxed out.
      My info was on my lease and before I knew it I was sitting in 30k debt that wasn’t mine. My roomate drank a lot.
      No more credit cards for me thank you.

      God speed.

  12. My mother is in the middle of her own financial nightmare. After 30+ years of marital bliss, during most of which she was a stay at home mother, my father left for his secretary. Now my mom is in her 50s with outdated skills, no pension contributions since she didn’t work full time for most of her life, no savings or assets, and – since they were married without a prenup – responsible for half the debt of what my father spent on his mistress.
    Luckily she has finally gotten her first full time job in decades and is very responsible with it, but in the grand scheme of things it’s a drop in a very empty bucket.

    I don’t really have any advice for her, just the determination for us kids to make enough both for ourselves and to keep her off the streets in her old age. But this story has definitely prompted serious discussions about long term finances and the possibility of separation with my own partner.

  13. About two years ago, while out having coffee with one my close friends, she admitted to me that she had about $12,000 in credit card debt – in addition to having a car loan and student loans, and struggling to make ends meet with two part-time jobs. I tried to convince her to meet with a financial advisor, but she refused. Instead, she asked if I could help her. Figuring that my help would be better than nothing, we got to work right there. I pulled a pen out of my purse and grabbed a paper napkin from the coffee shop and made her write out a list of all of her debts, bank account values, monthly income, and monthly expenses. By the time we had covered several napkins with scribbled lists and sums, we had a plan.

    The first priority was to develop an emergency savings account to give her some stability and avoid repeating past mistakes: a year or two before, she had been making incredible progress on paying down her credit cards, but then when she moved across the country to change jobs, she quickly racked up more debt ($5k) when she didn’t have funds to pay for everything. She was eager to get out of debt and willing to work hard at it, so I put her on a strict financial “diet” that included an automatic monthly transfer to her emergency savings account, as well as paying more than the minimum on the card with the lowest balance and highest interest rate (I was going to have her just pay the minimum until she had at least a little savings, but we decided to have per pay a little above the minimum on the credit cards because she needed that to feel like she was making progress – and if that was going to make her stick with it, then okay!).

    She has had some ups and jobs with her income/job situation in the past year, but she has paid off all but the lowest interest rate card and is continuing to make progress – even if it’s slower than we’d both like. When I am in town and we can get together, we often end up at a coffee shop scribbling the latest numbers on napkins to check in! I am really proud of her, because she learned from her mistakes, she asked for help, she made changes, and she stuck with them. I also discovered that I love helping people get their finances in order.

  14. Hey Ramit!

    I was curious if you knew of a place where we can report grungy MLM’s that may be illegal. I had a friend get caught up with a company that sold travel (plane tickets, packages, etc.) and their main pitch was that you got paid for every person you signed up. She was also used in a lot of their propaganda since she was good-looking. I told her it sounded like a pyramid but she’s still sinking money into it.

    Is there a place this kind of thing can be reported and shut down?

    Thanks for the article! Good stuff!

  15. Re: the $180K medical bills horror story

    She should not feel bad about negotiating a lot off the full retail price. Having compared the full charged prices to the actual prices paid by my health insurance for many medical bills, the amount actually paid by health insurance for items runs anywhere from 5% to 80% of the full price. For example, at one extreme, a lab test that costs $300 might only get paid $15 from the health insurance company. So if you are uninsured and paying the full price, you are practically subsidizing everyone else including people with health insurance.

    Re: crazy savers

    So does the don’t judge people’s spending habits not apply to judging people’s saving habits? :D I am one of those weirdos who would rather buy a nicer house while bringing lunch to work and buying soda from Costco to put at work. However, I would probably do those things no matter what (as they are also time savers).

  16. Claire, the shocking thing isn’t the “bring their own coffee to work” (I bring my own, too. I’m picky!) part but the reasoning of “…to save money for house payments” part. How much coffee can these people be drinking that this is an important part of their house payment strategy?

    Speaking of bringing coffee to work, a couple of my more clever coworkers would sometimes buy $4 coffees at a cafe across from the office, when our job provided free coffee, simply as an excuse to get out of the office, and because the treat brought enjoyment to their workday. They did their best work outside the office, innovations bringing in millions, and enabling them to ask for $10k raises even during budget crunches. I think that embodies what this blog is about – focusing on big wins, and letting your finances be a joy and not a burden.

    My horror stories – people who try to save pennies on FOOD. My current roommate (who has over a million in savings from many years of accounting work, by the way) is the worst miser I’ve met. Example – bananas have been at 80 cents each the past few months, up from the normal 60 cents each, and he’ll rant for literally a half hour about “wasteful, stupid people” every time he sees someone buying a banana, because “canned fruit is cheaper”. In contrast, I just spend the extra 20 cents anytime I want a banana to take on my morning run. I feel great and full of energy all day when I just eat fresh food when I crave it, and I’m only spending a couple of bucks more a day on food than he does.

    I know other people who eat tons of fast food, or overly processed food because it’s “cheaper than cooking or restaurants”, or even people who eat spoiled food to “not waste it”. And they’re sick, or they’re tired, or they’re overweight and feeling sluggish. I don’t know anyone who chooses food based primarily on (perceived) cost who actually feels healthy.

    The worst part is, most of these people will also do silly things like drop $1800 on a TV that is selling for $1400 on the other side of the mall because they don’t feel like shopping around. UGGH. It’s almost as if saving pennies in exchange for giving up pleasure in life is addictive to some people. It’s the way to asceticism, not financial freedom.

    • J – Re: “How much coffee can these people be drinking that this is an important part of their house payment strategy?”

      If I save an extra $10/day, that would translate to an extra $100,000 in house, assuming 4% interest, ~1% property tax, and tax deductions.

      One person’s crazy is another person’s no brainer. I don’t think skipping coffee is as crazy as Ramit’s suggestion to eat before going out to dinner and just ordering appetizers or skip a dinner invitation entirely.

    • I don’t disagree that saving $10 every single day, assuming you do it consistently for 30 years, adds up to a lot of money. Nor do I think skipping coffee is “crazy”. I just think it’s a bit of a silly focus for a saving strategy for buying a house. Most people will make their neat little plan, then turn around and accidentally spend that $10 elsewhere. Or even go right back to their old habit, if it was something they enjoyed doing. To be fair, we only have one side of the story – maybe the couple already sets aside a percentage of income for discretionary spending, and have reduced it by how much they normally would spend on going out for coffee, and the difference is being put into some saving fund. Maybe they already have plenty of savings for the house and this is just to add some extra cushion, not an attempt to make up for a gap in funds, or worse, buy/build a bigger house than they would otherwise. That’s not how the story reads to me, nor is it how I’ve seen most people behave. I’m all for cutting costs, large and small (assuming they don’t diminish your quality of life, or hinder your ability to *make* money) but I wouldn’t hinge my house payments on such a thin margin per month, and an assumption of follow-through on the good intentions.

    • J – As you allude to, the story is a one liner and we have no idea of the context. I don’t know how most people behave but as someone who would cut coffee (or pearl milk tea) over other things, it’s definitely not “hinging” house payments on a thin margin. I may not be like most people but I might think more similarly to other people who would cut coffee to good effect, and it is being able to afford everything else anyway but wanting the extra savings by cutting something you don’t really care about. Some people love their coffee habit. Those people shouldn’t cut coffee. For some people, coffee is really the easiest and most preferable thing to cut. I wouldn’t want to skip a dinner invitation over money and I’d find it harder and more embarrassing to order only appetizers at a restaurant than to skip coffee so I wouldn’t do that.

      Saving $100/mo. on coffee is the same amount of money as saving $100/mo. by skipping a few dinners, and it’s the same amount of savings whether saving for a house or retirement. Basically, if you are in the position of trying to save X dollars in any form, you are “hinging” whatever you are saving on X margin. I don’t think the fact that this story has to do with coffee and a house is any crazier than substituting anything else for coffee and house.

  17. LOL, that picture of you in costume is excellent

  18. I was dumb enough to accumulate $30K in credit card debt in college somehow with bars, emergencies, and toys. Now my student loans, house, utilities, and etc are 97% of my income. If I took an income hit or don’t develop cash flow, I’m screwed. Tried doing multiple online businesses and made some money doing that but then I always let them die on the vine, whatever that means. This feels like a diary entry, lol.

  19. … i gotta say i don’t really get the costume. that’s not the craigslist penis effect, is it…

  20. Someone in my family won a million dollars in the lottery last December. In Canada you aren’t taxed on lottery winnings. I think they actually found out New Year’s Eve. Her husband quit his job on the spot. He didn’t work for 10 months. They did some smart things and some dumb thing, 10 months later, it’s all gone and they are in debt again.

    It’s true that when you win the lottery you quickly go back to the way you are used to living.

    • I think it really depends on who you are and where you are at in life before you won the lottery with respect to how you are after you win. Saw one of those lottery shows and a separated couple demonstrated it very well. She won $20 million, he sued for half since they were still technically married. She was going to fight him for it, then decided 10 million was more than enough for her, and split it. Two years later he’s broke and she’s doing just fine.

  21. Ramit, a little birdie told me that you were looking for a turban for your costume (Twitter.) Looks like you found one– very nice! Happy (late) Halloween!

  22. LOL at your Halloween costume.