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How I came back from being a money disaster

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Millions of Americans live paycheck to paycheck, with very little room to survive missed paychecks or sudden financial hardship. In fact, 4 in 10 Americans say they would not be able to cover a $400 unplanned expense without racking up credit card debt, according to a 2018 report by the Federal Reserve. According to Nerd Wallet, about half of households reportedly carry credit card balances of nearly $7,000 from month to month; across the U.S., that amounts to about $944 billion in outstanding credit card debt. When that’s combined with things like home, car, and student loans, the the total personal debt for Americans comes to an astonishing $13.5 trillion.

So when you find yourself financially adrift or deep in the red, how do you begin to pull yourself out?

We talked to three people about how they did it, whether it meant becoming more financially responsible or making drastic lifestyle changes.

When Ashley Davidson separated from her husband in 2016, she was suddenly saddled with maintaining a lifestyle that had been affordable with two salaries but was exorbitant with just one, especially living in Washington, D.C. “I never moved into a place thinking, if he leaves, or if I leave, can I afford this place by myself?” she says. “Divorce was never, ever, in a million years, on my mind.”

It wasn’t just rent. Davidson had to start footing her own health insurance and replace many shared household items when her husband moved out. He had always earned more than Davidson did, to the tune of an additional $15,000-$20,000.

While married, the couple didn’t live paycheck to paycheck, but they never prioritized building up a robust savings account; Davidson says she usually had no more than a few thousand dollars saved at any given point. And since money had been tight for Davidson in college and immediately after–which was compounded by high student loans–she wanted to spend more freely on things like travel when she came into more money. “We were living that young, twentysomething life,” she says. “We were starting to make a little bit more money in our later 20s, and we were having fun. We weren’t afraid to go out and eat because we could afford it.” But by the time they got divorced, Davidson had virtually no savings–more or less the situation she had been in before getting married at 24.

After their separation, Davidson found herself with about $12,000 of credit card debt, between paying thousands for a divorce lawyer and spending money she didn’t have on social activities and seeing friends. “When you’re going through a divorce and your friends say, ‘Hey, come out, you need to get out of your house and stop sitting around watching Netflix,’ you say sure,”........

© Fast Company