A2 - Our Debt Story: What Went Wrong and What We're Doing Now

Ok, so this is our first "real" post. And it's short but not so sweet...

Defining Debt: What Type Are We Talking About?

Let us begin by defining debt - specifically, in the context of this website (Debt2Wealth), what type of debt are we focused on paying off?

In our case, our debt is a combination of credit cards, bank overdrafts, and a short-term bank loan (revolving credit). In other words, bad debt. Below is a brief definition of bad debt vs. good debt, courtesy of https://www.britannica.com/money/good-debt-vs-bad-debt:

Good debt—mortgages, student loans, and business loans, steer you toward your goals.

Bad debt—credit cards, predatory loans, and any loan used for a depreciating asset—steers you away from your goals.

With debt, moderation is key; even good debt, when overused, can turn bad.

Our Debt Story: 25 Years in the Making

Our debt didn’t appear overnight - it crept in slowly over 20 to 25 years. It started with a small bank overdraft. As our creditworthiness grew, so did the overdraft limit. Eventually, a credit card was offered. We accepted. Sound familiar?

And, over the years, life happened:

• Marriage (cha-ching!)

• Kids

• Medical bills - not covered my medical aid

• Retrenchment

• COVID-19

• etcetera, etcetera

  
  

Each event added layers to our debt burden.

A Buffet of Bad Decisions (and Emergencies)

Of course, getting into debt is like trying to lose weight while standing in front of a buffet – it’s a slippery slope! It goes further than just overspending; it’s also about those unexpected expenses that pop up like surprise guests at a party you didn’t want to throw. For example, last year we had a medical emergency that cost us close to R100k. And no, we’re not hoarding gold bars in the backyard; we just happen to be part of the “we don’t currently belong to a medical aid” club.

At the time of the emergency, we did have a hospital plan. But let me tell you, that plan was about as helpful as a chocolate teapot. You probably already know that a hospital plan can be quite misleading? It’s like thinking you’re buying a ticket to a concert and ending up at a mime show instead. This is another subject I’ll be posting about later, so stay tuned for my upcoming saga: "The Hospital Plan Chronicles - When Coverage Dreams Falter!"

Budgeting: The Rise and Fall

Picture this: one fine day, you throw your hands in the air and declare 'I've had it!'. You whip up a fancy personal budget and vow to abide by it. Maybe you strike gold with an unexpected work bonus or cash in a policy, gleefully chucking a hefty sum at your debt and watching it shrink like magic. Life's peachy for a bit. But alas, just when you think you've got it all figured out, bam! Something totally unexpected swoops in (cue dramatic music: another medical emergency, perhaps) and before you know it, your debt is back to haunting you like a clingy ghost. And that, my friend, is the rollercoaster we've been riding. Buckle up, because chances are, you've taken a spin on this wild ride too!

What's the Plan?

So, what are we going to do differently this time? What will be our strategy for getting out of debt? I mean, besides selling a kidney on the black market?

Check out our next post: D1 - The Plan We're Using to Crush Our Debt for Good

NB: MAKE SURE TO HEAD OVER TO OUR DISCLAIMER AND DISCLOSURES SECTION.