Finance and Fat » Debt

Credit Card Debt Update, June 2009

Eden — Wed, 15 Jul 2009 12:55:41 +0000

It’s been a while since I updated my credit card debt payoff progress. That’s probably because I haven’t been focusing on paying them off very much lately. Of course, I’m not using the cards, so even just paying the minimum payments is reducing the balance. However, I’m not paying much extra so the progress has slowed quite a bit lately.

My starting balance was $25,559.82 when I started this blog in September, 2007. Through the end of June, 2009, the balance is now $7,876.90. The total paid off so far is $17,682.92. That’s about 22 months, for an average monthly reduction of $803. I was doing much better with that, but over the last few months I’ve only paid a couple hundred dollars toward the debt.

I started 2009 with the goal of paying off the credit cards completely. I’m no longer on pace to make that happen, but I’m still hopeful that it can be done. If I can cut out some more spending and find some extra sources of income it might still happen. At the very least, I want to finish paying off the smaller of the two cards, which has a balance of $2,905.70. Getting at least that much done shouldn’t be a problem.

Credit Card Debt Update, June 2009

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Credit Card Debt Update, February 2009

Eden — Mon, 02 Mar 2009 23:21:35 +0000

As of the end of February 2009, my total credit card debt is down to $8,969.87. This means I have paid a total of $16,589.95 from the time I started this blog with $25,559.82 in credit card debt.

My pay-off pace has slowed a bit lately, but I expect to be making a rather large payment in the next month or two and possibly eliminating the third credit card of the four that I started with.

It won’t be long until I’m done with credit cards for good!

Credit Card Debt Update, February 2009

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Going Back to School, Adding More Debt, Hoping I Made the Right Choice

Eden — Thu, 08 Jan 2009 13:33:54 +0000

I haven’t brought this up here on the blog yet, but one of my big plans for 2009 is going back to school and getting a Master’s Degree. I’m going to school online for the following (terribly long named) degree: Master of Business Administration with an
Emphasis in Management of Information Systems.

This is a good choice for me because I like business and entrepreneurship and I currently make my living in the IT field as a Web and database developer. I see much greater career potential if I move into management and this degree program is part of my plan to get there.

The good:

It wouldn’t be hard to double or triple my current salary with a good management position. I see this as the next step for my career.
A salary increase like the above would pay for the degree in about one year or less.
It never hurts to have a Master’s Degree on your resume.
As long as I am an employee this should help me to earn more money.

The bad:

I’ll be adding $25K – $30K of debt.
If I don’t get a big salary increase I’ll be paying off this debt for a long time.
This is a big time commitment for the next 18 months in my already very busy life.
Ultimately, I want to work for myself and I don’t really need another degree to do that.

I’ve never felt fully comfortable that I made the right decision to go back to school. However, I didn’t want to continue procrastinating so I decided it was better to jump in and get it done rather than continue to sit on the sidelines and not make a decision. I’ve only started this week, and so far so good, but we’ll see how my opinion forms as time goes on.

The debt versus education argument is a classic in the personal finance world. What do you think? Did I make a good decision?

Going Back to School, Adding More Debt, Hoping I Made the Right Choice

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Credit Card Debt Finally Under 5 Figures

Eden — Fri, 02 Jan 2009 13:33:00 +0000

This is a great way to start off the New Year! As of the end of December our total credit card debt is finally under $10,000 ($9,776.07 as I write this). The balance has been just over $10,000 for about 2 months now, but I have slowed down payments recently as we may be facing some uncertainty with jobs and other things.

One of my goals for 2008 was to pay off all the credit card debt. We didn’t accomplish that, but I knew it was a rather lofty goal and not hitting it isn’t so bad. The good news is that we paid off $8,728 and eliminated two of the four original credit cards—including the highest interest rate card (was about 11%). Our remaining two cards are both locked in at under 5% interest.

One of my goals again for this year will be to eliminate the credit cards entirely. We’ll have to come up with a little more money than we did last year, but with more hard work and a more intense focus on frugality I know we can do it.

Credit Card Debt Finally Under 5 Figures

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The Secret to Getting Out of Debt

Eden — Sat, 08 Nov 2008 14:00:23 +0000

No, I’m not talking about some metaphysical foolishness, sold by the truckload thanks to the Oprah. I’m also not going to suggest crazy, get-rich-quick infomercial trash.

The secret to getting out of debt, or doing anything else meaningful for that matter, is quite simple and you already know what it is.

HARD WORK!

I know that isn’t always the answer we want to hear, but it’s true. No matter how many times I’ve tried to avoid it, I always do my best in life when I just forget everything else and put in some hard work (but I’m careful to work smart as well).

That’s it. Go work hard and you’ll be on your way to financial freedom.

Okay, there is a little more to it than that. You could go do hard work breaking rocks or digging ditches but if you are breaking the wrong rocks or digging a ditch in the wrong place all that hard work has gone to waste. You need to work smart too and you need a plan. But the plan is the easy part compared to the hard work that it’s going to take to execute that plan. Whatever plan you end up with, just make sure it includes some hard work somewhere or it’s just going to fail.

Now quit reading blogs and get to work!

The Secret to Getting Out of Debt

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Update on the Credit Card Debt Battle

Eden — Fri, 07 Nov 2008 14:00:03 +0000

I wish losing weight was as easy as paying off credit card debt. Of course, for the person buried in credit card debt without enough money to eat or enough time to sit around and get fat, I’m sure the opposite would be true.

I guess we all have our strengths and weaknesses. My weakness is clearly food. I wouldn’t quite say budgeting and reducing debt is my strength, but I have found that except for a few things that I really enjoy doing I have found it pretty easy to cut expenses. In fact, as time has gone by, I’m continuing to cut my expenses and October 2008 marked my lowest spending month since starting this get-out-of-debt project over a year ago.

As an example, I just made the ’sacrifice’ of cutting cable TV. I did this while my wife and I are earning more money than we ever have in our lives. I’m absolutely not trying to brag about that, we aren’t rich by any means, though we would probably fall into the above-average category for income. My point is that we could easily continue to spend the money on cable TV, but our priorities are changing. The more I work for other people, the more I realize that is not what I want to be doing and the fastest way I can see that situation changing is to continue to cut expenses, pay off debt, and save up cash. I’m getting off topic though. The point of this post is a long overdue update of my credit card debt progress.

When I last wrote about my credit card debt (as of the end of August 2008), I owed $14,338.45. As of the end of October, I owe $10,271.09. Not only did I pay off about $4,000 in two months, but I also bought a brand new MacBook Pro during that time!

So how the heck is this possible? We didn’t win the lottery or find a few thousand dollars of change in our couch. It’s simply been a matter of hard work and cutting spending more and more every month. I’m fortunate that my career easily translates to freelance work. I basically sit on my couch at home and build websites on my laptop. And I make pretty decent money for my efforts. It can be a drag sometimes, but it’s hard to say no to the extra money. I don’t make a lot at my day job, but the money I earn on the side is a nice supplement to my regular salary.

If you are working at getting out of debt I strongly encourage you to find something you’re good at doing and then find a way to get people to pay you to do that for them. It may be related to what you do for your day job or maybe not, but if you can find a way to make some money on the side for something you don’t mind doing it can really accelerate your plan to get out of debt.

At the start of the year, I had hopes of paying off all my credit card debt in 2008. It’s not likely at this point, but I’m not going to rule it out either. At the very least, I’ll be close and it’s starting to feel really good. I was able to pay off two different accounts and that makes life a little more simple too. Just two more cards and $10,000 to go!

Update on the Credit Card Debt Battle

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Monthly Update: Credit Card Debt Payoff

Eden — Mon, 08 Sep 2008 22:00:25 +0000

Update: Looks like the Flash chart didn’t load properly at first- should be corrected now.

Now that I’m 1 year into the blog, I’d like to get back to tracking my credit card debt payoff progress monthly. Included below is a chart of the progress I have made.

The good news is that I have paid off $11,221 of credit card debt over the past year. The bad news is that my progress slowed down greatly over the past 6 months and my average paid off per month is only $863. Toward the end of 2007 and early 2008 I was typically paying off between one and two thousand per month.

Basically, my spending has crept back up over the past 6 months and I just haven’t been as tight with the budget as I was at the beginning. I’m working to get my spending back in line now and hoping to get closer to the $2,000 per month of extra payments range going forward.

Credit Card Debt

Oops! Something went wrong and the chart could not be displayed. You may need to upgrade your Flash Player or enable JavaScript.

Credit card debt progress since August 2007

Monthly Update: Credit Card Debt Payoff

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Getting Out of Debt is Boring, or…

Eden — Sat, 06 Sep 2008 18:56:30 +0000

What I’ve learned in one year of my debt reduction plan

September 2008 marks one year since I started this blog and made my ‘official’ commitment to getting out of debt. I remember one year ago making a budget and seeing that my spending exceeded my income. I had large piles of debt and very little confidence that I would ever get out of the mess. Once I figured out how to live below my means I began the slow process of chipping away at the mountain of debt.

It’s easy to make a budget at the start of the month and make a plan to pay off X dollars worth of debt. However, once you make that plan, you have to sit and wait. You have to wait for paychecks to arrive, statements to come in, money to be transferred, payments to be reconciled and finally the new statement the next month that validates your progress. This is all very boring!

Not only is it dull to wait for everything to progress from month to month, but what if you need to repeat the process for 24 more months? It can become very difficult to see the light at the end of the tunnel and it is very easy to doubt that you will really get there. I speak from experience as I have doubted my efforts just about every month.

How to overcome the boredom and keep working your plan:

Track your progress regularly
Be Patient and Expect mistakes

Track your progress regularly:

This can be as simple or sophisticated as you want. Anything from pen and paper to spreadsheets and graphs will get the job done. Use what is most comfortable for you and what you are most likely to update regularly.

I keep a budget and track my debt monthly on a computer, mostly using Quicken and Excel. I also update a whiteboard on my refrigerator each month with my new debt total and how much I have paid off so far. The whiteboard is something I see every day and that is the most effective way to stay motivated to stick with my plan. I highly recommend putting your debt progress somewhere you will see every day.

Be Patient and Expect mistakes:

Patience is great, but no matter how patient you are, you still need to prepare for set-backs. You will make mistakes as you work your plan. You will slip up and buy something that breaks your budget that you know you shouldn’t have bought. You will have emergencies come up that drain your emergency fund and maybe more and stop you from making as much progress as you had hoped that month. Know ahead of time that these mistakes will happen and don’t let them destroy your plan.

Acknowledge your mistakes, but move on to the next month and do your best to get back on track. Believe me, I’ve made plenty of mistakes along the way, but none of them have been as devastating as quitting would be. You’ll never look back and wish that you had quit, but if you do quit now you know you will look back and wish you had not.

In Summary:

Make a plan
Track your progress
Be patient and expect mistakes

It’s not easy, but you have to keep working at it. I don’t like the fact that I could be looking at another year until my credit cards are paid off, but I have no other choice. Giving up isn’t an option. I have a plan, I know it works, I just need to keep going and do my best to speed up the pace every opportunity I get.

There are no secrets and there is no quick fix, but if you follow my advice you will be better prepared to stay the course and survive the long journey to debt freedom.

Getting Out of Debt is Boring, or…

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Reflecting on Stupidity – Desperate for Credit

Eden — Fri, 30 Nov 2007 13:01:46 +0000

I spent some time recently cleaning out old financial documents and I found a credit card statement that made me laugh. I guess I must have been really desperate for credit and the opportunity to spend money that I didn’t have because this credit card was just awful.

I had to pay a $70 set-up fee and $69 annual fee and the interest rate was about 23%. The limit was $600 and there were no rewards or anything else that could even remotely begin to justify those huge fees. All I can say when I look at that is I can’t believe how stupid I was. I can’t believe how much money I threw away in an effort to spend more money than I had anyway. It’s disgusting really.

Fortunately, I got at least a little bit smart even before starting my official financial turnaround because I paid off that card last year and closed the account. If you have a credit card like that or if those sound like good terms to you, cancel the account immediately! Believe me, you will regret it later if you don’t.

Reflecting on Stupidity – Desperate for Credit

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Get Out of Debt in 9 Steps # 1- Stop Borrowing Money

Eden — Mon, 19 Nov 2007 11:01:07 +0000

It may sound obvious that you need to stop borrowing money to get out of debt, but it isn’t always easy. If it was easy, why would people be in debt in the first place? If you want to get out of debt, your journey must start somewhere, and that starting place is where you stop accumulating any more debt as soon as possible.

The most common debt problem is credit cards. If you are serious about getting out of debt you need to stop using credit cards and that probably means you need to cut them up too. If cutting the credit cards isn’t enough to stop you from using them, then close the accounts. This decision comes down to personal responsibility and how well you can resist the temptation to use your credit cards- you need to be honest here or you will only hurt yourself more and make your road to debt freedom even longer than it is now. *Important- don’t destroy or close all of your credit cards until you have an emergency fund! Lets be real here, most Americans have no savings- what would you do if your car broke down tomorrow or you lost your job? Cash is the ideal way to handle these emergencies, but most of us can’t just snap our fingers and have an extra $1,000 in the bank.

If you have accounts that are behind, make getting current your top priority. Late fees or over the limit fees are only going to bury you further. Call the banks and try to negotiate. It costs you nothing but a few minutes of time and aggravation to ask for help. They are likely to at least cut some of the fees and give you a chance to get current. You will have more luck here if you can also promise to send an immediate payment when making the phone call (just don’t give them direct access to your checking account).

Once you have stopped using the credit cards and everything is current, you will have gone a long way toward slowing the growth of your debt balance. However, you are likely still being charged monthly interest on your credit cards. Make a list of your cards and order them by interest rate. Start calling the high rate cards to ask for a lower rate or look at transferring balances from high rate cards to low rate cards that you already have (consider the balance transfer fee first) . You can even go out and apply for new credit cards if you can get a better rate- a 0% introductory rate would be wonderful if the terms are decent. Just be aware of fees for balance transfers and how long these lower rates will last. Do a little math to see if you will really be saving money when all is said and done.

Putting an end to your borrowing is the most important step toward getting out of debt. Look at every dollar you are paying in interest as your enemy. Compound interest is a wonderful thing when it is working for you, but against you it is devastating. If you haven’t already, take the time to total up all of the money you spent in interest over the past month. On a personal note, I was really sickened when I did this. I had no idea how much interest was really costing me. Think about the number of hours you have to work in a month just to pay interest if you need some extra motivation to stop borrowing.

This step is where you ’stop the bleeding’ and figure out how badly interest is hurting you. Without doing this, all other efforts would just be covering up the real problem, possibly making the symptoms look less menacing yet not treating the source of the pain. The next step, making a budget, is where you can start to take control of your money and treat the debt problem at its source.

9 Steps to Get Out of Debt

Get Out of Debt in 9 Steps # 1- Stop Borrowing Money

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