About the Author
David Fulton is a Colorado Springs, CO fee-only financial planner providing Hourly and On-Going Financial Planning and Investment Management. While he works with a broad range of clients, David specializes in working with Active and Retired Military, Federal Employees, and Families with Special Needs Children.
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Nothing is as corrosive to a person’s finances and outlook on the future as debt. Debt is sneaky. It usually starts innocently enough. The purchase is noble. It’s a real need after all, and it can be contained and paid off quickly. Except that it doesn’t get paid off. That purchase is soon joined by another equally important need. Together they make room for a third. And it builds…and builds…and builds. We find ourselves looking back, and can hardly remember what led to the spending emergency, or how this massive debt even started. Most people are not spendthrifts, and the root cause of our indebtedness seemed necessary at the time. But it grew, and grew, and grew until it became seemingly unmanageable. Standing at the precipice of the mountain of debt, we can barely see a way down, and hopelessness sets in. Hopelessness and helplessness are the true dangers of debt. Just like corrosion on a battery, debt will slowly drain away your energy, motivation, and outlook on the future.
Special Needs Families are more susceptible to debt than our peers. We discussed the reasons here. The Easter Seals “Living with Autism” study determined 61% of parents of children with Autism Spectrum Disorder (ASD) went into debt; at a rate 15% greater than non-special needs families. Additionally over 50% of these parents were concerned about how the financial drain would affect their retirement plans and 47% worried that the financial drain they currently experience will financially impact their ability to raise other children.
Here is the cold hard truth. There are only two ways to get out of debt; neither are easy. You can either make more money, or you can spend less money. That’s it! Debt exists because you either don’t make enough, or you spend too much. It's a balance sheet problem.
If you want to maintain your current lifestyle, and you know you have expenses that are causing you to drown in debt, then you have to somehow earn more money. You need to find a better paying job, or acquire a new skill that makes you more marketable, or put in the extra work to earn overtime compensation.
But we’re talking about special needs families here. Time is a premium. The whole reason we are in debt is because we have so many demands for our time and can’t make enough to cover the costs. Caring for a special needs loved one, while rewarding, is exhausting and expensive! So you don’t have time for picking up extra hours at work? Then you have to cut the spending. That is your only other option.
Before you can cut your debt you have to take stock of where you are and spend the mental and emotional energy on a budget. Once you’ve committed to a budget, you can develop a plan to pay down your debt by identifying those expenses you can reduce. You should treat your debt pay down as a fixed expense and account for it in your budget before any of your “lifestyle” expenses. Pay yourself first. For those Dave Ramsey aficionados, start a “debt snowball”. Pick either the smallest debt you have and start there. Or choose the one with the highest interest rate. Either way, pick on and take action! Once that debt is paid off, work against the next priority. The more money you can put against your debt, the faster you will get out. But more importantly, the more you will save in the long run.
What's the cost of waiting? We love the power of compound interest. It is an incredible tool for helping save for the future. Money makes money. That's a fact. It is also how banks and lending institutions make money on you. Calculator.com has a nice tool to calculate compound interest. Plug in your debt, add your APR on your credit card (assuming it compounds monthly), and see how quickly it builds. Pay attention to the interest column. Now that is a disheartening figure! You can easily see why before you can take any other measures to right your financial ship…you’ve got to tackle your debt problem first.
Working with a Financial Planner or counselor can help you see the opportunities and risks you may be overlooking, and can help you frame the problem and determine the right way forward. Undoubtedly, left untreated, the debt problem won't go away on its own. Having a solid plan, using the immutable rules of math is what will make that mountain of debt disappear.