Finances, Leadership

Overwhelming debt: Should you keep it from your spouse?

piggy bankAs a “serial entrepreneur,” I’ve started my fair share of businesses. Some of them have been “from scratch,” but most have been as a franchisee or licensee of some sort.

I would piggyback onto a philosophy of business that had already been proven to work, and this time was no exception. As always, my wife and I discussed whether to make this business decision or not, and we arrived at the conclusion that it was in our best interests to move forward.

As always, my wife and I discussed whether to make this business decision or not, and we arrived at the conclusion that it was in our best interests to move forward.

However, it involved some difficult financial decisions, including taking on a large amount of debt to finance the purchase of an existing business. Our initial loan was about $275,000. We bought the business based on what we thought was an average of $50,000 per month in gross revenue.

Unfortunately, I didn’t do my due diligence, and I thought it was going to be an easy business to run based on my familiarity with the business. We generated only $36,000 in our first month and still had to pay wages, salaries and rates were completely off.

The general reputation of the business was poor because of some terrible business decisions made by a previous manager. I left my high-salary position and moved my wife and four children (at the time), away from our hometown to buy and run this business with the hope of not reducing our standard of living.

moneyThis ended up being a gamble that didn’t pay off. I had to halve my salary twice and we ended up over $350,000 in debt before things started to turn around.

But things did start to turn around! I felt like a complete failure. I had moved my family for this great opportunity and here we were more in debt than we started, and making a third of what I had been making.

What I didn’t know at this point was that it was all part of God’s master plan. I needed to get knocked down a peg or two and realize what really matters. It’s not about success, just as Cleve starts to figure out toward the end of Rethink Happy.

I made some immediate changes to help us survive the situation:

  1. I brought my wife into the business to save some money on salaries and became a little more of a Mr. Mom. We learned to live with less and made a concerted effort to pay off the debt. It took about seven years of owning and running this business to get it all paid off, but we did.
  2. I purposefully hid the grave situational details from my wife. I know, I just said I hid it. This is exactly true. She was aware we were in debt, just not to what degree.

I began by telling her about debt and revenue and every time I could see the wind going out of her sails each time. Some people can handle bad news better than others. Some can see lights at the ends of tunnels. Kate has a more difficult time with this.girl_face_water

So I learned- and in a sense, we made an agreement about this– that it was not in her best interests to know just how grim it was.

I believe in not hiding almost anything from a spouse. However, sometimes it is a good thing to agree that certain things are best not to discuss.

  1. Virtually every couple has one who is more risk averse and one who is more of a risk taker. Ideally, they find a balance. By the same token, organizations like EO have been built because it’s very difficult for the risk takers to be able to be completely transparent with most of the people they know because most of the people they know don’t understand what it’s like to be an entrepreneur.
  2. I made some changes to how I manage our money. I could be better at this. Generally, I use Mint to keep track of all my income and expenses and categorize everything so I know where it is all going.

I begin by budgeting the non-negotiables- house payment, insurance, charitable giving, education, etc.

Then I estimate what will be left over. As an entrepreneur, though, I never know with certainty what my income will be from one month to the next. With this book launch, plus investing in another start-up, I am back at the point of taking on a debt vehicle and so technically cash is tight again.

We have pulled back on some of the negotiables. We also have work-aged kids who know if they want something beyond a necessity, they have to earn the money to get it.

  1. We have an unwritten rule that if one of us is going to make a major purchase we need to speak with the other one. But neither of us has a final say. We can both trump the other in a sense if we think it’s the right thing to purchase. I take care of the finances in general because I am more detail-oriented.

I can’t remember the last time we were not on the same page about a significant purchase. I believe if you are open with your spouse and you have regular conversations about money and finances, you will usually be working toward the same goals, and therefore, you won’t have a lot of situations where one makes a financial decision the other does not support.

My assistant and her husband have a pretty simple rule: If a purchase is something out of the norm and it is over $100 (other than groceries), they have to check with the other person before just going for it. So he might need a tool for a repair at the house, but it’s $120.

She is the detail person, so she runs the finances in their home. He will call and tell her what he needs and why, and of course he’s not suggesting anything wild and ridiculous, so as long as the budget is there, it’s a go. However, if they are at a stalemate, she goes with his decision as the leader of the family.

I also fall in line with a lot of Dave Ramsey’s thoughts.

If you’re in a position where you are being swallowed by debt, I highly recommend following his Baby Steps program to get out of debt.

Debt will swallow you alive and the number one thing married couples argue about is finances, so do yourselves a favor and get on the same page about that.

Rethink Happy coverHe also has a tool called everydollar that can really help you budget, and it’s free!

Who is Doug? Doug Kisgen is an author, entrepreneur and personality expert. His primary work? Raising his five kids with his wife of 20+ years in the hill country of Texas. For ways to put these ideas into practice, check out Doug’s book, Rethink Happy: An Entrepreneur’s Journey Toward Authentic Joy, available now as an e-book or in paperback!

Leave a Reply

Your email address will not be published. Required fields are marked *