So, I’m not sure if I need therapy or financial advice. But. Here goes.
I’ve been in a common law relationship for the last 15 years. I’m a stay at home mom and take care of four children.
Recently, our world has been turned upside down. The century-old house we purchased two years ago started to show its true colours – it began with a septic tank replacement, then it needed re-roofing and toxic mould removal. Overall, the repairs would have cost us $75,000.
With a $190,000 mortgage on our house at 90% loan to value, we couldn’t refinance, and we couldn’t take out more because our consumer debt was also out of control. So, we walked away from the repairs, and the house, and declared bankruptcy. It was the most difficult decision of our life. And now we feel even more overwhelmed.
At least my partner’s job is secure. He makes $70,000 a year. With the additional income, the universal childcare benefits give me; we can make ends meet our immediate needs.
How do we rebuild ourselves? How do we establish better trust and transparency (re: consumer debt)? How can I make sure we’ll always be able to provide for our kids when we don’t have access to credit?
– In Hot Water
Dear In Hot Water,
I can understand why you and your partner are feeling overwhelmed – sounds like you’ve been navigating some turbulent waters. Your financial boat was already leaking with out-of-control consumer debt, and the addition of expensive home repairs created the perfect storm with no option but to abandon ship. I applaud you for making that tough decision to send out the SOS flares!
The silver lining here is that by declaring bankruptcy, you’ve found yourselves a life preserver and the opportunity for a fresh start. To rebuild your future, you will need to be actively involved in creating in – which begins with facing some tough questions.
It’s time for self-reflection
Ask yourselves: How did we get here? Why did we get here? What did we do wrong? You must dig deep to get to the cause of the consumer debt you built up. Out-of-control debt is a result of your actions, not your circumstances – and bankruptcy doesn’t change anything regarding your behaviour. So unless you understand what thoughts and feelings that motivated those actions, you’re at risk of sailing into the same stormy territory again.
This kind of self-reflection can be really difficult work, with powerful emotions like shame and embarrassment bubbling to the surface. I encourage you to consider working with a debt counsellor to guide and support you as you work through the emotional and behavioural causes of the bankruptcy.
And remember, you’re in this together. Be kind to each other, encourage each other. Watch each other for signs of difficulty processing your feelings, or slipping back into old patterns of behaviour.
It’s time for action
When it comes to trust and transparency – I’m not sure if you mean with your partner or with banks and lenders. So let’s address both.
With each other, regular and open communication is vital. Don’t wait to deal with issues as they arise, be proactive. Try scheduling weekly money dates with a set agenda. For example, reviewing your spending from the previous week, discussing upcoming big purchases, and addressing any concerns either of you have with your budget.
With banks and lenders, you can begin right away to rebuild your credit with a secured credit card. This path requires you to have some cash savings in the bank, so make building that balance your priority. Review your expenses for opportunities to be more frugal with a fine-tooth comb. Consider finding creative ways to earn extra income to help you build up your savings. Even if you can only save $20 a week, you will develop the habit of spending less than you earn. That habit works like a muscle. The more you exercise it, the stronger it gets.
It’s time for a new plan
As you think about your future, and how you will provide for your kids, remember that savings are the foundation of your financial plan – not credit. If your plan requires access to credit to provide for your kids, you have a fundamental problem to overcome first. Credit is a helpful safety net to bridge income fluctuations and hard times, but it’s not the plan.
Ultimately, your kids need you more than your money. They need parents who provide role modelling of smart spending. Parents who teach the habits that will lead them to their financial success. You don’t need to foot the bill; show them to save, and you will provide them with the most valuable gift of all.
Remember, this is temporary.
Your current reality is paving the way for a different tomorrow. After seven years your bankruptcy will be wiped from your credit report, and this experience will be a memory – a memory of the time you stepped up for yourselves and your family and changed the course of your financial trajectory.
Give things some time to cool off and new habits to set in. Soon enough, you’ll find yourselves smooth sailing into a bright financial future.