First off thanks for your blog. I read it regularly. I do have one question about living within ones means, as I have been doing by default(bad credit).
After many attempts to dig out of debt and be debt free minus the needed bills- car ins., utilities, etc. I have fallen into a somewhat unique scenario. I had an employer file bankruptcy and eliminate any chance of COBRA health ins. shortly after being unemployed, I had an emergency surgery to the tune of $70,000. Since that time I have been accumulating massive , despite currently having health ins. My question is how can I justify continuing to pay a mortgage payment of debt? After all the different payments to different doctors even at modest monthly payment are added up, I cannot manage a $700 monthly payment on my modest salary. Bankruptcy is not a word in my vocabulary, but is it something I should look into? I have been paying some of them regularly, but am only paying the interest at this point.
As far as planning for any emergency, if I get $10 a week set aside, I am having a banner week, but some medical issue comes up my puny savings is wiped out again. I don't know if I am looking for insight or just venting so I do not shoot off all my bullets saved for a different day.
Thanks, DS in NJ
DS, First of all I just want to convey my sympathy for the rough situation you are in. Life can sometimes bring bad things at the time we are least capable of dealing with them. Anyway here are the issues I see. First is ethics as they apply to debt. Maybe it is ridiculously antiquated but I believe when you borrow or are advanced goods or services you are giving your word to honor it and pay under the terms of the agreement. I believe that you should think about these choices and if you can't repay then don't borrow. However as we mentioned things can happen. People can make reasonable (maybe not text book perfect but certainly not bad) decisions and still end up in a rough spot. Particularly when we talk about medical problems or the current climate of seriously long term job loss bad things can happen to good people who made solidly normal choices. I believe that we have bankruptcy laws for a reason. Folks can through bad luck, bad choices or some combination thereon get into a situation where they are not going to be able to repay their debts. Instead of people just not paying debts they can't pay anyway we might as well make it legal and let them, in time, move on with their lives.
Ethically I believe if you can afford to pay back your debts you should do so. [I find the concept of "strategic bankruptcy" and its passive friend jingle mail, provided you can afford the mortgage) completely unethical.] This debt should come after the basics like shelter, food, utilities, fuel, etc. Being homeless and sleeping in national forests with an empty stomach so you can try to pay off debt, while a dramatic choice, is probably a bit extreme. This debt should however come before luxuries like expensive entertainment, electronic gadgets, cool new guns, new cars, travel, etc.
I do not think bankruptcy is something to be proud of. Personally if I had to declare bankruptcy because I made a whole bunch of stupid choices I would be really ashamed of myself. However if I found myself with huge medical bills which got racked up over an inopportune time; or faced for whatever reason a drastic and permanent drop in income I wouldn't feel super happy about my situation but wouldn't look at myself negatively. Sometimes stuff happens to you and you just move on.
Speaking to your situation pragmatically. Without knowing all of your information (savings, debts, income, interest rates, etc) it is hard to say anything specific. I do not have all the information. To be honest I am not a professional financial anything and beyond generic thoughts I can just suggest you consult a professional. I would certainly at least look into bankruptcy. Go see a professional and run the numbers. Take some time and think about the second and third order effects of both scenarios; paying these debts and potentially filing bankruptcy then make a decision.
I wish you the best,