Well, by telling this long tale in parts and over weeks/months, it is easy to get a bit lost. So this post will review some of the high points of the story so far. The next post will review a couple other high points. And then I will get back to finishing this tale. Who knows what I'll talk about after that. But it probably won't be about money, etc. I guess you'll just need to stick around to see what else I have to say :)
Anyway let's review . . .
Credit Card Debt
We got married in 1995. Didn't have much credit card debt when we married. Gradually added to it over the years. We used it unwisely at times, that is certain, but not because we were charging electronics or furniture or the a new Spring wardrobe or anything. It was cash advances because we didn't have enough money to pay the bills. Or it was paying for a medical bill. Or a dental bill. Or it was to a buy a birthday gift for a friend. But we shouldn't have done it anyway. And once you get in deep, and the interest rate is through the roof, it just makes things even worse. We stopped using credit for a whole year and just paid on all of our accounts for a whole year. And then we decided to go through a credit counseling service. They negotiated our interest rates down from wherever it was before to something under 10 %. Some were even negotiate down to an interest rate of 2%. But the balance itself remained the same. However, as part of them being able to negotiate a lower rate, we had to close every single credit card account. Our credit score was shot by that point anyway, and this offered the best shot of ever being able to get rid of our debt. It would make it so that our credit score would still be poor when we were done, just because we would have no existing credit. We couldn't apply for any cards until we were done paying them off either or we would be unable to continue paying with the lower interest rates. We decided that despite all of this, we wanted to get out of debt. We would do all of that so that we pay back the over $20,000 that we had in credit card debt. And so we spent the next four years paying every single month towards those cards. And we paid it off. As of June 2011, we have no credit card debt. As of August 2012, we haven't yet applied for any credit either and we are still living without credit. Which is mostly fine. But without credit, we can't refinance our home. We can't get a new mortgage.
Mortgage
And let's talk about that mortgage. When we moved into our first place - a two bedroom condo - the mortgage payment was low. We were both working. It was fine. Our mortgage payment was about less than 10% of our annual income. It was fine. And we had a baby. And another baby. And we decided that we needed to move into a bigger home. It was 2002. It was before sub prime mortgages. The bank looked at our debt/income rate and determined that we could afford this home. It was a modest home. We moved in. The mortgage was almost double what we paid at the condo. But we were making it. We would continue to make more money and things would get better. It WAS just our first home, so it didn't matter that it wasn't perfect for us. We would move by 2005 anyway, right? And then I lost my job. And I couldn't get another one. And then I was pregnant again with our 3rd child. And THEN, in September 2004, they told us that we owed almost $5000 in escrow. So we did what the bank suggested - an 80/20. The 80 would be at 4%, but the 20 would be at a high interest rate (think almost double digits) It would be o.k. The bank said that we could refinance it back to one loan in 2 years. When we were in a better place. But by 2006, I still hadn't found a full time job. We hadn't started paying down our credit cards. And our mortgage payments were almost triple now what they had been at the condo. So we started to think about selling. After 6 months, we met with a realtor (this would have been mid 2007), and she said that the housing market was taking a downturn. Maybe we should wait a bit. You know, see if things turned around. Yea, still waiting on that one. But we pay our mortgage. Every month. We have every.single.month that we have lived in this house. Every single month for the last 10 years. We have very little to show for it - we have MAYBE $5,000 in equity after we paid closing costs and realtor fees, etc. And that is after we put about $2,000 in the house to make improvements so that we could sell it. Did we make a mistake buying this house? I don't know. It seemed like the right decision in 2002. Should we have tried to sell in 2007? I don't know. Probably, but anytime after that, if we would have tried to sell anytime between 2008 and 2011, we certainly would have lost money on the sale. Assuming that we would have been able to sell at all during that time. Home sales in our city have only very recently started to pick up again. Before that from 2008 through mid 2012, it wasn't uncommon to see a house be up for sale for 9-12 months. So did we make a mistake? Probably, but not because we bought a house well beyond our budget at the top of the housing bubble either. And now, because of our credit issue, we can't even do anything to try and make our mortgage more manageable. We have been dutifully paying for 10 years, but without credit history, we can't even refinance. Much less try and buy a different house.
Health Insurance
OK, let's talk health insurance now. When we got married, I had insurance through my job, and my husband had insurance through the university while he was finishing grad school. Then we both got jobs and had insurance through our jobs. And then eventually, I got my job at the university and I got great health insurance for families, which was good since I was pregnant with our first at the time. By the time I had the baby, my husband had started working for the Fire Department. He got great insurance for free (for himself) through work and so myself and the baby were on my plan. And then I had another baby who went on my plan. When our kids were 3 and 1, I went to part-time and lost my benefits.
Part Time/Job Loss
Going part-time at this point was probably one of my biggest financial mistakes. I lost my benefits, which were very good and had very reasonable premiums, and although my husband could add us to his plan, it would cost us almost $600 a month. I also went to part-time in January 2003, just 6 months after we had moved into our home, and so we hadn't really planned on having the $600 a month expense on top of our big jump in mortgage payments. Going part-time also left me vulnerable to being laid off. I knew that the university was undergoing budget cuts. I knew that I lost certain protections by going to part-time. I knew that my severance, if I was let go, would go from almost a year, to two weeks. But I was naive. Even though I'd seen positions eliminated, I really didn't think that "I" would be let go. And that wasn't what happened. It wasn't that personal. The University decided to take 475 people that were part-time on yearly contracts (that before the budget cuts, had just been almost automatically renewed barring any huge incompetencies, etc.) and lay all of them off. It was unprecedented in the history of the university. And I live in a fairly large community, but I also live in a city that has one very, very large company that is the main employer. And then there is the university. 75% of the people in the community are employed, directly or indirectly, by that large company, the University another 10%. The large employer doesn't hire trainers or writers from the outside. And beyond the university, there aren't many local companies that hire technical writers or trainers. Believe me, 9 years after my lay-off and numerous attempts at getting work in my field in the area, there aren't many.
Oh yea, I was talking about Health Insurance
But back to health insurance. So we went on my husband's insurance when I went part-time. And paid the $600 a month. And then I lost my job 9 months after I went part-time. And we continued to pay the $600 a month, but it was getting VERY difficult to do. In May 2004, someone suggested that we apply for AllKids (the Medicaid program for pregnant women and/or children in Illinois). We applied and we were approved. My kids got well-checks for free. My children's medication was free. Should we have gone on Medicaid? Probably not. But it was getting fairly desperate. I was unsure how much longer we could go with paying for all of our bills (we were still drowning in credit card debt then and I had no job or any prospects at the time) When I went full-time in the Fall of 2004, I was able to get student insurance and so I did. I would put the kids on my health plan, just as soon as I got a full-time job. Surely, I'd be able to get a job after I finished my degree. Well, I graduated in May 2006 and was able to keep my student insurance for the summer, but then, I was unable to keep it. Hopefully, I'd get a job by fall. I didn't. The kids stayed on Medicaid, but I just went without because we couldn't afford the $600 premium for insurance through my husband's work. I started to make a little bit more money, and I was able to pay for an individual policy for awhile, but the deductible was extremely high, and I did it just to cover me in case something catastrophic happened. And since I was making more money, we went from paying nothing for the kids to have AllKids to paying $80 a month for the kids to have AllKids. Not much, but between the $300 I was paying for myself, and the $80 for them, it was a struggle. Eventually, I couldn't afford the individual insurance and went without again. Especially since it wasn't like I was making THAT much. I was doing daycare - not working as a writer or a trainer. So much of the increase in my income was now going towards health premiums. And then, my husband got a different job. And he had good, reasonable health premiums for the family. And I was doing more daycare and making more money. We signed up. And it was great. Right up until he got fired, 18 months later. And so then, our whole family was eligible for Medicaid. I wanted to say no. I probably should have said no. But when one spouse is unemployed and the other spouse is underemployed with no prospects of getting a job that provided any benefits, well, it sounds a good idea. So all told - my children have been on Medicaid for 6 years. They currently are still on Medicaid, but we are hoping to change that soon by acquiring a family policy on our own. About a year of 6 years, I was paying monthly premiums. I've been on Medicaid for a few months during 2004 and then from July 2011 to July 2012 . My husband was on it from July 2011 to July 2012. Was it a mistake to go on Medicaid? Especially since my children have ended up being on it for so long. Or should I have just had my children go without health insurance because we couldn't have afforded it? It probably was a mistake, but on the other hand, what if one of my children had needed surgery or something during this time? We were already struggling to make ends meet. For much of this time, we were drowning in credit card debt and a large mortgage payment. I couldn't get a job, and so I couldn't get insurance through a job. We couldn't afford my husband's insurance. And we couldn't afford an independent policy for the rest of us either. How would we have afforded surgery that cost us $30K or $40K out of pocket if we hadn't had the children on Medicaid when we barely had enough to pay our bills? So don't have the surgery? Pay for the surgery for the rest of our lives? Or take the Medicaid that we qualified for? For us, for better or worse, we went with Medicaid.
