Too small to fail

Here is a two-part series (Part 1 and Part 2) on SurvivalBlog about one couple’s personal financial “SHTF” experience. It was brutally honest and blunt and highlighted the circumstances they put themselves in.

The “bleep” hit the fan when the husband found his wife had a gambling addiction. In the words of the writer, “My wife had accumulated a debt amount equal to 50% of our yearly earnings in a few short months. She had used her credit cards primarily, as well as our savings. I immediately looked over our finances and discovered a myriad of problems. We had two car loans, a student loan, two mortgages, her gambling credit card debt, a fair amount of other credit card debt, and a small loan against my 401K. Our savings was enough to buy a used Pinto. I also had a child support obligation to fulfill. The timing of all of this couldn’t have been worse. The housing market had crashed and we were upside down, though the previous year we owned 35% of our home. Now we were 35% underwater. We basically were renters in our own home. At this point I realized this was a SHTF situation.”

The remainder of the two-part essay outlined the strategy this couple followed to climb out of their abyss.

I found these essays fascinating for three reasons. One, it illustrated how a married couple stuck it out despite one partner violating the financial trust of the other to an extreme amount. But they took their vows seriously, mapped out a plan, and climbed out of the pit together. I find that wonderful.

Two, the strategy they mapped and then implemented was hard to do, but sensible. In my opinion, one of the best slogans even invented was the old Nike slogan “Just Do It.” Sometimes that’s what you have to do — just grit your teeth and DO IT. That’s what this couple did to get totally and completely out of debt. Kudos to them.

And three, it illustrates the importance of being debt-free as a preparedness strategy. Two relevant lines from the essays jumped out at me:

• At the beginning of their journey: “At that point we realized we were at war with banks. If they were too big to fail, we would become too small to fail. We decided our goal was to become debt free.”

• At the end of their ordeal: “On the day we made the last payment, I told the wife that this is the first day I haven’t owed a bank any money since I was 21 years old, which was more than 30 years ago. We are now too small to fail.“

I’d never thought of the term “too small to fail” before, but it makes perfect sense. These people are now in a far better position to weather whatever kind of financial storm might someday await America (i.e. economic collapse, hyperinflation, whatever) than they were before. In other words, being entirely without debt — including their mortgage — puts them in a less risky or vulnerable position. Debt is indeed a form of slavery, as Dave Ramsey is fond of pointing out. A lack of debt means freedom.

A very encouraging read indeed.