Running out of Rope

Anyone in a significant amount of debt knows all too well the feeling of running out of rope.  This is a gut-wrenching, sinking feeling you have when you realize how close you are to complete financial chaos.  Now, for those people without any significant debt-load, you may see a situation such as mine as financial chaos in the first place, and you are probably right.  But for those of us in the midst of such a situation, chaos means not knowing how you are going to pay your basic bills, or buy groceries for your family, or simply make the ends that you have meet anymore.

When you have extreme amounts of debt, you become good at finding ways to pay what you need to pay.  When I say "good", I don't mean good in the financially sound sense, but good in the get-it-done-at-all-costs way.  You may do things like withdraw some cash from a credit card, transfer money around between credit cards or lines of credit to make minimum payments, or even withdraw from retirement or other savings.  All of this behaviour is why you are in debt in the first place, but regardless, when you have an expense staring you in the face that you feel must be paid, this is what generally takes place.

But what happens when you start to run out of options?  First, panic.  Your mind frantically starts searching for other possible alternatives.  When you can't think of any, the panic increases, followed by a deep sense of dread.  Could this be the end?  Will I lose everything?  Unfortunately, for someone in extreme debt, this is not just paranoid thinking--it could happen on any given day that brings just too many expenses to handle, despite how many financially questionable tricks you have up your sleeve.

Of course, anyone in this situation knows what the right thing to do is: cut back spending to only what is absolutely necessary, make sure this results in you spending less than you earn, and use the difference to pay down the debt for as long as that takes.  But the problem, of course, is that while this may be so incredible simple in concept, it is very, very difficult to implement when you have so many conflicting habits rooted in your life.

For example, if your mortgage is so large that the payments consume too much of your income, there is no way to reduce these payments other than to sell your house and move to a less expensive one, or a rented property.  According to basic math, there is no doubt that this is the #1 fastest way to fix your financial problems.  But selling your house is a huge emotional endeavour, not to mention a logistical one, and gaining the mental momentum to actually do this, unless you have no other choice, is extremely uncommon. 


This is the case for me: as I have mentioned previously, we bought the most expensive house the bank would allow us to finance, and we absolutely love everything about it.  Giving up the house, the area, the neighbours, and the life here that we expect our children to have would be a huge sacrifice, and not one we feel able to make.  On the other hand, selling this house would immediately wipe out the vast majority of our debt, and would likely leave us free and clear.  We could easily afford to rent a nice enough house in a nice enough area for several years, while we accumulated the cash to buy another house in the same area we are in now.



Doing what you know is the right thing financially is far from easy.  But when you start running out of rope, and are losing your other options, everything is on the table.  That said, I think that until you are forced to make a major change that everything but the dollars and cents says is right, it just will not happen.