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Survival Debt – What’s That?


I came across an interesting article by MP Dunleavey at MSN.com about The Worst Kind of Debt: Charging the Groceries.

Since we have done our share of charging groceries in the past, the article grabbed my attention. In a nutshell, there are a few key points made in the article that refer to the “insidious financial burden: survival debt”.

I’ve linked directly to the article above, but here are the 6 key points and my thoughts about them.

“I’ll pay off the card when I get paid”

Sometimes, we have the best of intentions. We think we will have money when our next check comes in so we charge something now just to have it now. In our case, sometimes we forgot about a bill coming due and it turns out we couldn’t pay the credit card with our next paycheck. If that happens a few times, before you know it the finance charges are starting to eat away at your payments and it feels like you are getting no where. It is a viscious cycle once you get into it. After we got into it, it felt like we couldn’t get out of it.

Because we still use our credit cards for certain purchases and are trying to take advantage of cash back bonuses and points programs, we have a new rule that we are doing our best to abide by. If we cannot turn around that day and pay off our purchase in full, it doesn’t go on the card. Thankfully, we’ve broken the cycle and habit of spending our future earnings. We now spend our earnings after we’ve earned them.

“Cards are paying our day-to-day stuff”

Diapers, groceries, shampoo, deodorant…you name it and we’ve put it on our credit cards at one point or another because we didn’t have enough money left over after paying bills. The problem was, we already had a large debt burden from prior spending sprees. When we hit low points in our income, we were able to pay our bills and keep up with debt payments, but we had to use the credit cards to keep afloat and keep food on the table. I can still remember one time that I paid for a small pack of diapers on my credit card and the cashier asked, “You’re putting that on your credit card?” (note: I worked there so I knew this person so that is why they were so frank with me). I just looked at them and said, “Yes.” I wasn’t sure what else to say.

“Remember when debt was fun?”

I don’t exactly understand why that title was used for this section, because the article talks about a few scattered points. Like how people are often swarmed with debt after a life-changing event. I would agree there. Our debt swelled right before my son was born because we moved to the big city to make the “big money” (or so we thought). We were making more than we ever were, but we didn’t have any money due to commuting costs and the high cost of living. It turns out we were making less money when everything was taken into consideration. We’ve since moved away from the big city and back to where we were before my son was born. A small income can go a long way where I live.

“Is survival debt really so terrible?”

In hindsight, survival debt is terrible. There is something wrong when you have to use credit for everyday things. Either some spending needs to be cut or you need to make more income. Of course, if you asked me that question when we were charging groceries and diapers on our credit cards I would have given you a different answer. I never liked the fact we were spending money we didn’t have, but we had to do what we had to do. Our credit cards were the reason we could still keep paying our bills on time. If we didn’t have them, our credit scores right now would be horrible and who knows…we may have had to declare bankruptcy.

“Plastic pushers aren’t helping”

I agree with this one. I can’t remember when it occured, but it didn’t seem to take long before we had a total credit limit that exceeded our yearly income. In fact, our income from last year will be a little over $48,000 and our total credit limit at this moment is $60,450. We haven’t been asking for credit increases lately, but they have been automatically giving them to us. I guess I just don’t understand and I’ve given up trying to understand why they have given us so much credit.

“Hot dog debt: Coming to a fast food restaurant near you”

Now that fast food places take credit cards, it’s so easy to use your credit card to pay. We were quite guilty of this one in our past, but not anymore. It’s sobering to think of how much that pizza really cost when you think about the finance charges that we paid above and beyond the price.

Closing Thoughts

For those wondering how we got out of survival debt mode, we did it by increasing our income. I spent countless hours perfecting my resume and sending it out to many employers and finally I did obtain a good paying job. And now that I have that job, I am working my tail off trying to learn more and perfect my skill, so I can move up in the company and who knows? Perhaps I’ll have my own business someday.

I am glad we are no longer in survival debt mode, but I know we are one financial hardship away from possibly going back into it. Until we can get our debt paid off and establish a very comfy savings, the threat is still there. If anything, this article is a reminder that we should be putting as much money as we can towards our debt and keep working on increasing our income to help speed up the process. Even though I want to be debt-free, I think what I really desire is to feel financially secure. Being in survival debt mode isn’t fun.


  • Reply Anonymous |

    It’s all about what works for you. For most people, there is a discipline imposed by carrying cash and never spending what they don’t have. My problem was that I didn’t keep track of all of the little cash purchases. There would be a drink here, lunch there, a newpaper from the newsstand. And after a few days, I couldn’t say where it all went, but I needed more cash for purchases that were actually important, like the groceries.

    These days, I use credit cards, but I use them the way you describe. If I don’t have the money right now to pay off the debt in full, I don’t charge it. However, now I have a record of exactly what I’m spending, how often and where. I suspect for most people, that’s what a debit card could do for them.

    One of life’s lessons is to not spend money you don’t have or can’t afford to spend. Use the tools that make that work for you.

  • Reply Maria |

    The title “Survival Debt” says it all. You do what you have to survive but when you find yourself not able to buy groceries because you have used your cash on clothes or entertainment, something is definately wrong.
    Once we get back to what is really important, the basic necessities of life, the other stuff is viewed as ‘wants’ and not ‘needs,’ then we are able to stop surviving and start thriving.

  • Reply Anonymous |

    Thanks so much for posting this. I have been living off of my home equity line of credit for several months now due to being laid off. In addition to having to deal with the stress of my job search, I am also dealing with the financial crisis I’m in. I’m scared. Of losing my home and never getting out of debt.

    But reading that you were able to reduce your debt by $13k in one year gives me a bit of hope.

  • Reply Karen |

    There is a difference between spending your grocery money on frivolous purchases and having to charge necessities and finding yourself in a bind because you did not save for emergencies, and well, life happened. Credit card companies know exactly what they are doing by extending more credit than customers can afford. The grocery (or diapers, or other necessity) money is spent on credit card payments and interest, sometimes in the “loan shark” category. Credit card companies are not your friends. No one should be granted credit limits that there is no way they can repay. And preying on college students? Criminal.

  • Reply anon |

    What’s wrong with charging for groceries as long as you keep the spending within budget? My family budgets $120/month for groceries so we try to stick to $30/weekly trip. We pay with credit to get the credit card rewards, then pay the balance off in full at the end of the month. Takes discipline but we manage to stick with it.

  • Reply Tricia |

    anon – I don’t think there is anything wrong with charging groceries if you can turn around and pay it off. I would do that to get rewards if we didn’t have so much debt. The problem is when you have to charge the groceries and you can’t turn around and pay it off. It’s almost as if credit cards have turn into a way to meet budgets when there isn’t enough income.

  • Reply Nancy |

    Your blog rocks, and I’m blown away that you knocked your debt down by almost $14K last year. About 15 years ago I was about where you’re at, and it took me a lot longer … but I got there! Not totally debt free but entirely manageable. One thing that has really helped is focusing on the big picture – ie., net worth. (when I started, that wasn’t so great either!) Even now, when I have a temporary cash-crunch, reminding myself of my overall net worth helps prevent a spending spree in favour of keeping on an overall good course. For the record, when it came to choosing between reducing debt or investing (in Canada, it’s RRSPs – equivalent of… is it KO1s?…) I opted to invest. It may not have technically been the better move, but it just felt better, more inspiring, to see stuff in the Assets column. Kinda put the Liabilities column into perspective.
    Cheers to your 2007!

  • Reply Jack |

    Congrats! I wanted to share my story with you because it is stories like these that have enabled me to reach my 2006 goals. I knocked out $36,000 in non-mtg. debt and put just under $18,000 towards my portfolio with a household net income under $100K. I now have only 5K left in non-mtg. debt which, I am knocking out next month. I will say it was a tough 2006, but worth it. Also, my 2007 goal it to contribute 5K a month towards my portfolio which, I will be on track with that starting March 1st. What works for me is that I plan out my whole years expenses and income in an excel spreadsheet. Just like a successful “corporate business” you ALWAYS know what “household business” income and expenses are coming in and going out…ALWAYS!Talk about taking the stress of money out of your life. I hope someone is inspired by my story. Good Luck!

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