Deep in Debt: Change is Possible

DH = Dear Husband

Frogs and hot water  

“The story goes that if you drop a frog into boiling water, he will sense the pain and immediately jump out.  However, if you put a frog in room-temperature water . . . and . . . gradually turn the water up to boiling, the frog will not sense the change.  The frog is lured to his death by gradual change.” Dave Ramsey uses this story about the oblivious frog in his book, The Total Money Makeover: Classic Edition: A Proven Plan for Financial Fitness, to illustrate a point about debt in our society: Most of us don’t see it as a problem. Everybody has debt. What’s the big deal? I make my payments. It’ll get paid off eventually.

Debt-to-income ratio: the acid test

But will it get paid off eventually? According to Robert Lawless, author of a study in Katherine Porter’s book Broke: How Debt Bankrupts the Middle Class (Studies in Social Inequality), “The acid test for the ability to service debts is the ratio of debt to income.” Your debt-to-income ratio is calculated by dividing your total debt  (student loans, car loans, credit card debt, lines of credit, mortgage …) by your total take-home  (whatever goes into your account after taxes).


total debts/total take-home pay    =    debt-to-income ratio


Growing household debt since the 70s

In Canada, where I live, the average household debt-to-income ratio in 1970 was 70%. So for every take-home dollar of income, the average household owed 70 cents in debt. That average went up. In 1994, it reached 100%, so every dollar brought home was a dollar owed. And it kept going up. By 2009, it reached 148%.  Today, we sit at 163.3% That’s an increase of 93% over 45 years. Is the water getting hot yet?

Personal experience with debt and loss of income

So what’s the problem with our high levels of household debt? I couldn’t have answered that question before my husband lost his job in the high tech bust of the early millennium. We always made our payments. The banks were always willing to lend us more, so in my mind, there was no problem at all. For years, we had carried our debts comfortably. A part-time teacher and a high-tech guy, we figured we were sitting pretty.

The job loss wasn’t a sudden thing – more like a slow-motion train wreck as one company after another went under. From 1999-2003, DH was an unwilling participant in musical jobs. And then he’d had enough. I ramped up to full-time work, but it was still a severe drop in household income as DH went through six years of underemployment. Our debts weren’t so comfortable anymore.

In 2009, things started looking up when DH launched a successful home-based business. Although the promise of higher income was a relief, we now had a business debt added to our other debts. There was a weird combination of business optimism and a sense of financial paralysis. What could we do to get on top of things? Three growing children. A new business. Full-time jobs. It was all we could do to tread water.

Our wake-up moment

I didn’t have the awareness or language for it then, but at our worst point, we were over twice the national average debt-to-income ratio. Not looking so good in terms of the “acid test for the ability to service debts.” No wonder we felt an ongoing angst even with our sunny employment prospects.

In the spring of 2012, a friend brought me the CD book The Total Money Makeover, by Dave Ramsey. In the car on my way to and from work, I listened to that book over a few days, and the lights went on. How had they not before? DH listened to the CD as well, and had the same response. The two of us were psyched. We had to get out of debt. We had to get intentional about it. I had to yank my head out of the financial sand and work with DH to budget, to cut expenses, and to pay back as much as we could each month.

Our journey out of debt

In June of 2012, we started our journey out of debt. At the respective ages of 49 and 53, here is what we were dealing with:

Debt #1 New Car Debt – $8,600

Debt #2 Old Car & Course & Dog Debt – $12,800

Debt #3 Business Debt – $80,800

Debt #4 Mortgage – $155,000

Grand Total: $257,200

Cooling waters

A journey of a thousand miles starts with the first step, and a journey out of debt is much the same.  I wish we could just “hop out”, like the frog dropped suddenly into boiling water. But we soaked in the hot tub of debt for long time, and the exit isn’t that quick. Here’s the thing though: Although there’s a sweat and panic at first, things get easier well before you get out. The water cools down, even for the deep in debt.

After three years, I can’t give you a nice, neat summary of how things have gone. We’ve had stellar months of great communication and effective budgets. We’ve had months of chaos, bickering, and no budget. There have been eight months when high expenses or low business income have made it impossible for us to put anything extra against the debt. There was one month when we were able to put down a whopping $10,000.

If I look past our variable repayments to find steady trends, I do see some:

  • We’ve become better communicators.
  • Our moods are less impacted by the ups and downs of our finances. We take it all more in stride.
  • We feel less “deprived”. We’re not longing for the things that were hard to give up at first.
  • Our children recognize us as more of a unified front when it comes to money. I used to be the “softie” who caved.
  • We have more slow, home-cook meals. They’re cheaper. And they’re delicious.
  • We keep finding more and more ways to be frugal. We didn’t have to know them all to get started.

I’ve heard that when you work to get a handle on your money, you discover it was never about money to begin with. I’m finding that to be true. I’m working on the person I see in the mirror. That’s where the change was needed. But as we focus on communication and expectations and practices, our money IS being impacted. Here is what we’re dealing with now:

Debt #1 New Car Debt – ELIMINATED

Debt #2 Old Car & Course & Dog Debt – ELIMINATED

Debt #3 Business Debt – $15,000

Debt #4 Mortgage – $130,000

Grand Total: $145,200

Are you ready for change?

According to Ramsey, it takes the average household 7 years to get out of debt. 7 years is a hard sell in this era of instant-everything. But at 3 years in, we’re committed.

So many of us have managed our personal finances poorly. So many of us have encountered financial reverses. And then, some of us wake up and capture a vision for change. If that’s you, consider this an invitation. Join the club. Let’s take this journey together.


18 comments on “Deep in Debt: Change is Possible

  1. It never feels like a short time when you’re paying off debt, but after 3 years, it’s great to be able to look back and see how far we’ve come. Thanks for being the very first person to leave a comment, Robin!

  2. Congrats on the new site. I first heard your interview on CBC Ottawa morning. Been checking in since then! Good work on your evolution, your debt repayment and the Fruclassity movement!

  3. Beth, I’m so touched by your comment! Thank you for having followed our progress. That first interview happened two and a half years ago. It’s a long road! (Are you trying to get out of debt too?) I hope that you keep on “checking in” : )

  4. Love the term fruclassity! I think your stories will inspire many people. The overzealous, live like a total pauper until all your debt is gone is also inspirational but not always very realistic.

    1. I’m glad you like Fruclassity! Debt-reduction is a long-term project, and if people burn-out in their “overzealous” efforts, it defeats the purpose. It’s tough to find that long-term mode. What I find is that over time, I’m able to be more zealous with less effort. Sort of like getting in shape physically. Thanks for your comment!

  5. Glad you mentioned “fun” Petrish! Don’t worry, we won’t forget : ) Thanks for your best wishes, and I’m glad you like our new word “Fruclassity”.

  6. When you say “just” three years, I have to remind myself that in the long run, it’s true that a few years adds up to “Just” a short period of time. In a culture of instant gratification, that can be hard to recognize. Thank you for your comment, Tennille!

    1. Kay, this is the first time in over twenty years of marriage that anyone has called us adorable! That’s really funny : ) Notice that embracing the side-benefits of minimalism is one of the commandments. Sounds like someone I know…Thanks you so much for your support!

  7. Congratulations on the new site going live!

    I’d never heard the 7 years stat before. We’re on a mission to get rid of our mortgage and it will probably be about 7 years from when we made the decision to when we’re completely debt free. Interesting.

    1. I’m always struck by how typical our situation is – and most of us feel like we’re taking these things on in isolation. We’ll both see these 7 years through! And we’ll be in good company : ) So glad you’ve decided to “Join The Fruclassity Movement.”

    1. I’m so glad you love the site, Christina! You are welcome here any time. I appreciate the encouragement about our debt repayment – we’ve still a long way to go.

  8. Congratulations on the new site. Moderate frugality with intention – that’s how I see it anyway. We are about just shy of 10 years from debt free (unless something drastic happens) and it is a long tough slog but so worth it. Good luck with the debt mission and of course your new site. It looks great.

    1. Thank you, May! 10 years might seem like a long time, but those years will pass one way or the other. How fabulous if they usher you into debt-freedom! You’ve hit the nail on the head with the word “intention”. It sure doesn’t happen by itself.

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