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Author: Adenovir Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 308881  
Subject: Tough Love? Date: 5/31/2003 2:09 PM
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Credit card debt goes against everything that I believe in, but I have a radical proposal that involves acquiring some debt for "tough love" purposes. I'd like some feedback on this plan before I start it, in case there are any major holes in my plan. I'd also like to know if anyone has tried anything like this and how it worked out.

There's been a number of recent posts talking about getting a reluctant spouse on the path to debt-free living. I am in that position too. While I would love to save 20% or more of my income, plan for early retirement, have a 3-6 month emergency fund, and pay cash for cars, my DW would rather live way above our means. The only time debt is a problem to her is when the credit card gets rejected (which gave me the idea!)

We have tried almost everything in our 13 years of marriage including "budget summits", "his and hers" separate accounts and credit cards, an "all cash diet", and just plain old "screamin' and yellin'". Nothing has worked, and like dieting, we're always in worse shape afterwards (I end up moonlighting, working 80-100 hours/week to make up the shortfall).

We have two credit cards, Citibank and Discover. They are paid in full each month. Both are in my name, my DW admitted that she couldn't handle her own cards (paid 'em off and closed the accounts several years ago - we tried lowering the limits on her cards, but they kept raising them). Both current cards have ridiculous credit limits ($15K and $10K).

My crazy idea is to call the CC companies and ask that they reduce the credit limits to around $3000 - $5000 each. Then I will allocate only the money that is budgeted, a budget that we both agreed on last year at our last "budget summit" (*-see note below), to paying towards the cards. The savings and ongoing debt (student loan, car, mortgage) payments are on auto-debit from our checking account so they'll get paid.

I figure it will take about 2-3 months to hit the limit on our cards. When DW is faced with rejection of her (our) credit cards, she may begin to see that we have been way over budget. I'll let this go on for a while and at some point I hope she'll start to question her spending habits. I think that the interest charges and possible over-the-limit fees would be less than the amounts that could be overspent.

If I don't do this now, when our e-fund runs out (it's almost out now), the CC debt will begin to accumulate up to our current limits before she sees any consequences. I don't want this to get to $25K before it becomes a problem.

I think that I've enabled her to not think about money. Every time she overspends, we argue, but I end up paying the debt off anyways. I think that she needs to begin to take responsibility for her spending.

Potential problems/questions:

1. Damage to my credit rating. We'll have to see how this goes, I think not taking action at this time would be worse.
2. Relationship problems. Aside from financial differences we have a good relationship and communicate well. If I just let this go, both of our resentment will just build up and our relationship will suffer more.
3. Why don't I just take away her cards (they're on my account)? I've thought about doing this, but how would she handle emergencies, non-personal spending, groceries etc. Whenever she gets cash (which would be the alternative), it's gone real quick.
4. Maybe we should just go all cash and get rid of the credit cards? I would hate to have to lay out money and wait for reimubrsement from my employer. I also wonder about times where a debit card wouldn't work for large purchases or deposits.
5. This whole thing sounds so dysfunctional! (desparate times call for desparate measures?)

Adenovir

*-We had our last budget discussion when we bought a new house. Our budget included what we both thought were reasonable savings goals and spending limits. We kept aside some money for an e-fund in case there were problems with the house. Fortunately, there haven't been any yet. Unfortunately, most of that money is now gone.


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