Sunday, November 23, 2014

Too small to fail

Here is a two-part series (Part 1 and Part 2) on SurvivalBlog about one couple's personal financial "SHTF" experience. It was brutally honest and blunt and highlighted the circumstances they put themselves in.

The "bleep" hit the fan when the husband found his wife had a gambling addiction. In the words of the writer, "My wife had accumulated a debt amount equal to 50% of our yearly earnings in a few short months. She had used her credit cards primarily, as well as our savings. I immediately looked over our finances and discovered a myriad of problems. We had two car loans, a student loan, two mortgages, her gambling credit card debt, a fair amount of other credit card debt, and a small loan against my 401K. Our savings was enough to buy a used Pinto. I also had a child support obligation to fulfill. The timing of all of this couldn’t have been worse. The housing market had crashed and we were upside down, though the previous year we owned 35% of our home. Now we were 35% underwater. We basically were renters in our own home. At this point I realized this was a SHTF situation."

The remainder of the two-part essay outlined the strategy this couple followed to climb out of their abyss.

I found these essays fascinating for three reasons. One, it illustrated how a married couple stuck it out despite one partner violating the financial trust of the other to an extreme amount. But they took their vows seriously, mapped out a plan, and climbed out of the pit together. I find that wonderful.

Two, the strategy they mapped and then implemented was hard to do, but sensible. In my opinion, one of the best slogans even invented was the old Nike slogan "Just Do It." Sometimes that's what you have to do -- just grit your teeth and DO IT. That's what this couple did to get totally and completely out of debt. Kudos to them.

And three, it illustrates the importance of being debt-free as a preparedness strategy. Two relevant lines from the essays jumped out at me:

• At the beginning of their journey: "At that point we realized we were at war with banks. If they were too big to fail, we would become too small to fail. We decided our goal was to become debt free."

• At the end of their ordeal: "On the day we made the last payment, I told the wife that this is the first day I haven’t owed a bank any money since I was 21 years old, which was more than 30 years ago. We are now too small to fail."

I'd never thought of the term "too small to fail" before, but it makes perfect sense. These people are now in a far better position to weather whatever kind of financial storm might someday await America (i.e. economic collapse, hyperinflation, whatever) than they were before. In other words, being entirely without debt -- including their mortgage -- puts them in a less risky or vulnerable position. Debt is indeed a form of slavery, as Dave Ramsey is fond of pointing out. A lack of debt means freedom.

A very encouraging read indeed.


  1. I like that, too "To small to fail." :) Setting up our little homestead last year we accumulated some debt. Not lots, but more than we're comfortable with. We're on track to have it completely paid off by Christmas.

  2. I read the posts on survival blog and immediately thought of Dave Ramsey. I've not read his books but thoroughly enjoy his radio show. To my recollection, I've never heard him counsel a couple to have one person be in charge of financial matters, it's usually "you and your wife sit down and make a budget". Both. The task is easier when both are harnessed to it and accountable to the other.
    We have counseled our children that having no debt is the best gift you can give your children. Your parenting is more relaxed, you have more time, you sleep better which only leads to better interactions during the day. It follows then that the other "best" gift for a parent to give littles is time; this is far easier when one is not strapped with debt and also implies that the parent not need to buy anything on a credit card as a gift. I can remember board game days and nights, family fun but remember only a few gifts that I received as a child (my basic microscope is an exception!).
    Have a lovely day in north Idaho, Patrice.

  3. I have heard many claim that when it goes down their debt won't matter because they will be in the same boat as everyone else. Makes one wonder what that boat is going to be exactly. If we have mass debt forgiveness or things fall to the point that no one can ever collect perhaps they are right. Being out of debt feels wonderful but you take your licks staying that way. No flashy cars, no McMansions, no weekend boat or long trips to exotic places, reduced social esteem with friends and neighbors. Something makes me wonder when and what form the true debt payoff will look like for the nation of debt slaves we have.

  4. My husband and I had our very own crisis on January 1, 2005 when he had an auto accident while on duty as a deputy sheriff. I wrote a two part post titled Before President Obama. We learned that government and its response could not help us, the little guy, and I shared what we did.


  5. I read the article and felt pretty much like you do. But one difference for me. He seemed to think the banks were the problem. He fell into the convenient excuse of blaming faceless and nameless "banksters". I have owned numerous homes and borrowed money but I have never had, seen or heard of the banks taking advantage of anyone. It is common, maybe even necessary that people blame someone especially when they themselves are to blame for their problems.
    It wasn't banks that caused the housing bubble that crashed down on us in 2009. It WAS government, Dood and Frank in particular who forced rules upon banks and also created the biggest subsidy for people who couldn't afford homes. The banks didn't do it. Now at a much higher level, the world bank and the FED these people have caused us problems but they are NOT a bank they are a political entity.

    1. I believe your assessment is 100%. No one begs people to buy a house or take on too much debt. Sure tv and peer pressure can be applied but each of us has a choice to say no.

    2. I had a problem with the way he portrayed that as well. One big sticking point for me, and maybe it's just a lack of comprehension on my part, was it seemed like they negotiated with the credit card companies to not pay back all of the gambling debt. This is one of my big problems with the way a lot of people think today. I can run up debt and then tell them I can't repay it and they'll just be happy to get what they get. If you want to know why credit card companies charge 25% interest this is it. When I was in college and got my first credit card the interest rate was 12%, I had zero credit rating because my bank was a small town bank that kept everything in house and didn't report anything to the credit bureaus unless absolutely necessary, or you requested them to. The CC companies have taken such a beating on people basically grifting money off them that they've had to jack the interest rate up on everyone to make up for it, which makes it harder for people who get a little behind to catch up and the downward spiral begins. This is the same spiral you see in health insurance, retirements, govt programs, etc.

  6. There were friends we knew where the husband would give the wife money to pay the bills (rent, phone, electricity and such) but she would spend the money on other things. This went on for a long time. The husband got a call from all of the companies threatening to shut off the phone and other things. He had no idea what was going on. He paid all the bills and his wife came clean on what she was doing with the money. He asked my husband if he should divorce her. My husband told him that they should work it out and not trust her with the money for a while. They are still together and the trust is back in their marriage. Would have been sad for a family with two boys to be wrecked.

  7. My wife and I are on the Dave Ramsey plan ourselves. It is tough, but we are making huge headway. We constantly talk about and dream about the day that we make our last payment. That should be in just over a year.

  8. We went on the Dave Ramsey 'diet' several years ago and became debt free (including the mortgage) two years before hubby retired at age 58. Two high school graduates (no college degrees or debt) raising four children .. one special needs ... all on one income. It can be done.

  9. hey while I do all the financies in the house, I am also the
    scrooge. I hate to spend money. I would be happy if Christmas
    presents did not even happen in our house. Now with that being
    said, I think that I have cut back on the credit card is because of
    inflation. I don't buy as much because it doesn't go as far.And I
    mean things that we need.
    but the house payment and other bills get paid first. And we didn't
    go over our heads with the house either when we bought it. I said
    no to a nicer house because I was not happy with the payments.
    But there are very few people like me and both people then should do all the money

  10. Banks are Evil and he and his wife are the Victims.He "paid average out to 60% of what was owed." Where does he expect the other 40% to come from that he legally owes the bank? The government bailout that he grumbles about is what was needed to rebalance the books from the people that filed bankruptcy and only repaid 60% of what they owe on their debts! We are becoming a nation of Victims in every aspect of the word. He used the words "war" and "battle" against the banks. The banks gave him the credit cards he asked for, the banks loaned him the money he asked for, they held up their end of the bargain. When it's time to repay, now he is crying foul!! No!! We are a nations of victims because we don't want to take responsibility for our mistakes and make them right! Instead of going to "war" they both should have gotten 2nd jobs! Don't hail people like this the hero's Patrice! You just encourage others to become victims too!!

  11. Agreed. I wouldn't feel a sense of accomplishment over making everyone else pay for my stupidity.

    1. People do not get into financial trouble for being "stupid." They get into financial trouble because of "ego." They want instant gratification rather than delayed gratification. They hooked into the lie that you are nothing unless you have, buy, vacation...(fill in the blank).

      We are also bombarded with "threats" to how bad things will be when our money collapses. While it will be much worse for those who are in debt over those who are "prepared," it will not be a walk in the park for anyone. It is designed that way.

    2. People are not stupid, but sometimes their decisions are.