We purchased our first home in 1997. We were not sure at the time if we could afford it. I mean we were paying $790.00 for a two bedroom apartment and we would be paying $1200.00 for a mortgage. Now we laugh at how scared and nervous we were considering the debt we would start piling on in the next few years after the purchase.

My husband had gone back to school to finish up his degree and was still working full time. I had a full time job and both of us were making good money. Life was still great at this point.

Being the smart people we were (dripping with sarcasm) we decided to take a second mortgage to pay down credit card debt and pay off his school loan. Our thought process has nothing to do with interest rates but more having one bill. We swore up and down we would NEVER use the credit cards again or the line of credit that we had.

Well guess what? NEVER is not a very long time.

Pretty soon, we HAD to have that new car and the new TV. Our baby needed only the best and we wanted it all NOW.

Credit debt began to climb again. Yet, we were STILL making it.

I became pregnant and as a couple looking out for the best for our children, decided that I would quit my nice paying job and stay home with my new son and daughter. Things would be tight we said but we could do it if we managed the money. (NOW I AM ROLLING ON THE FLOOR LAUGHING)

Long gone were those early days of budgets.

Several years go by, and we are still managing everything. My husband finds a dream house in the same town we live in. (I am now pregnant with our third child) and I say “ok, let’s go for it”.

Now for the math. We had originally purchased our first house for $126,000. Going rate for 1997 housing in the town we lived in. It was a beautiful three story three bedroom Victorian. We updated it and modernized it to our standards.

By the time we sold our house and between the first and second mortgages we owed $385,000 on the house. (Is this sounding like any of you at this point?)

Our “new” home was going to cost us $325,000…..Still making a profit you say? Let’s do some more math. Our “new” home had been vacant for over 10 years. Roof was so damaged that it rained into the third floor. The whole house needed repair so by the time we were done, we needed to update all electrical, put in new kitchen, replace roof, fix landscaping, replace 36 Windows and 32 light fixtures. Converted from oil to Natural Gas and have asbestos removed from the basement. (I can see all you contractors doing the math in your head right now with dollar signs in your eyes) None of these calculations included the realtor fees.

Trust me when I say that there was less than no money left. We are now over $500,000 in debt.

Believe it or not, with juggling the money and bills, we were still doing pretty well. In 2003 I started a gift basket business out of the house. I did pretty well for a small time business. In 2004 I decided I wanted to open a retail store. I spent a year researching, completing a business plan, scouting locations and looking for vendors. With my husbands support I opened Kelly and the Angel Gift Shoppe in February 2005. The first year was pretty successful for a new business. I had great feedback and press from the local community. Even the Mayor’s office supported me. “My store was what the town needed” they said.

On the lean months I “borrowed” from our personal account and on the good months I played catch up. During this time, my husband decides that he is going to start a “hobby” of buying houses and flipping them for profit in another state. He supported me so I gave him all of the support I had. (After all he allowed me my dream, right?)

Fast forward to 2006. Gas and Electricity Soar began to soar. We are still at war with Iraq and the economy is in the beginning stages of collapse. Consumers are not spending money at “frivolous” shops such as mine. I am unable to get a loan, use all my credit cards to stay a float. I am no longer able to keep up with the bills and the creditors start calling BIG TIME.

We are now approximately $650,000 in debt. There is no such thing as a budget anymore. One month we would pay one bill to keep it off our back, and let the other bills “wait”.

Fear, panic, sleepless nights were the norm……

I did not see any end in sight of this crisis.

Peace be with you.

Kelly

Coming next:   How to keep your Sanity and sense of humor during Debt Crisis.