Debt Free Interview #1 - Vicky from Funny about Money

I reached out to some great PF bloggers and found some who are doing debt-free.
The first interview is from Vicky of  funny-about-money.com - who once approached a million dollars worth of debt. Here is her story:

1.       How did you get into debt?

My former husband and I did not communicate well about money. He let me have no say in our finances and kept me in the dark to the extent he could. He was a corporate lawyer with a six-figure income who refused to budget or to let me budget and who had no qualms about leveraging debt. He would do things like borrowing from the firm to pay our taxes and then borrowing against his 401(k) to pay the firm -- around and around it went. At one point he agreed to give a personal guarantee for a loan the firm took out to buy its building. This was on the eve of the savings and loan fiasco, which may predate most of your readers' time. When the economy went to hell (the late Great Recession was hardly the first time in living memory), the bank called the loan.

Fortunately, one of the other partners' wives was wise to these shenanigans. She refused to sign the paperwork unless the bank specified that all the wives' sole and separate property would be exempt from collection. And fortunately, I happened to come into an inheritance that allowed me to make my escape.

2.       How deeply in debt were you at the worst point? What did it feel like?

One million dollars. How did it make me feel? It made me feel like divorcing my husband. Which I did. 

3.       When did you decide to get out of debt and why?

When I realized we were a million bucks in debt for which we had nothing material to show, that he had kept this from me, and that he had lied by omission in a number of other matters.

4.       How long did it take you to get completely debt free?

The length of time it took to get a judge to dissolve the marriage. The judgment said that my ex- agreed to take on the debt, although of course I knew it was community debt and there was nothing I could do to keep the bank and credit-card lenders from coming after me.

Actually, there was something: I had to keep him out of bankruptcy.

As the creditors were about to sweep down on him, I borrowed on margin against every liquid penny I owned, and so did his mother. Between the two of us, we came up with enough to beat back the Huns, and he was rescued from ruin. He agreed to pay me back at an interest rate somewhat higher than I had to pay on the margin loan, and so, in the end, I came out OK. He did pay it back -- it wasn't that the guy welshed on his debts, but that he managed his money foolishly and that he insisted on little-womaning the wifey. Since he earned a great deal of money, once he was forced to behave more responsibly, he was able to pay off the money he'd borrowed from me.

Meanwhile, after I became free I bought a house. I was to get spousal support until my ex- reached the age of 59 1/2, when supposedly I would have access to my half of the retirement fund (as it develops, this did not come to pass). By this time I had a significant other, who moved in with me and paid half the mortgage as rent. That strategy made the house an investment property, and so all the many repairs and improvements that needed to be done were tax-deductible. Eventually I threw the boyfriend out (he was abusive), doubling my living cost. Realizing the house payment was more than half my net salary, I decided to use the inheritance to pay off the mortgage. Even though my investment advisor strongly objected to this (he felt I was over-invested in real estate, since I also owned some REITs through TIAA-CREF, which were the only instruments TIAA-CREF offered at the time that were earning anything), I have never regretted it. And in fact, having paid off the house kept a roof over my head when I was laid off my job in 2009.

I paid off the first car I bought in my own name by throwing every extra penny that came my way at the loan -- tax refunds, bonuses, rebates, every little refund, and whatever money I had at the end of any month during which I managed to live below my means. It took 18 months to pay off the car's five-year loan. After that, I set aside $300 a month to buy the next car, which, some years later, I was able to purchase in cash.

5.       What advice would you give to someone trying to become debt free?

If you don't have the money in the bank to buy something, don't buy it. I never run up a charge unless the money is sitting in an account to pay for it. Although I do charge all of my living and emergency expenses, I pay off the cards at the end of the month.

If you must get married (which I personally would not advise), always have a fund of money that is your sole and separate property -- be sure it is never mingled with the community. (This assumes you live in a community property state.) In addition, take out some credit cards in your own name -- not in yours and the spouse's name (I believe it's no longer possible for you to take out a joint credit card…but if it is, DON'T). If push comes to shove, you will need credit that is in your name and not encumbered by legal proceedings or credit reports entailed in a divorce. And if your spouse is not forthcoming about the community finances, run (don't walk) away.