The end of another quarter

The end of another quarter is here which means it's time to tally up my efforts and see how well I did for the past three months.  I know a lot of other debt reduction bloggers that I follow seem to update their numbers more frequently but for me every three months is already a lot to handle.  Even though I am tackling the debt and am always happy to see the amounts I have paid off, I still don't like to look at my bloated account balances.  I'm hoping the residual dread will wear off the longer I keep at this and the lower my balances get.  

Plus, when I totaled my debts this quarter, I realized that I am super close to having paid off $10k since last October!  A year ago I would have thought that kind of debt pay-off was impossible and I'm still a little dazed that I've come this far already.  I can't wait to post that I've hit the $10k mark which should be very soon!  Here's looking forward to the next three months!

And the grand total is:
 

Student Loan: $37,172

Car Loan: $9,942

Credit Card 1: $3,908

Credit Card 2: $4,693

Credit Card 3: $0

Parents: $0

Total: $55,715

Here’s my starting point back in October 2011:

Student Loan: $38,339

Car Loan: $11,684

Credit Card 1: $10,577

Credit Card 2: $3,635

Credit Card 3: $0

Parents: $600

Total: $64,835

Paid off to date:

4th Q 2011: $5,051 + $0 in savings

1st Q 2012: $1,298 + $150 in savings

2nd Q 2012: $2,771 + $506 in savings

My net worth

Something that I’ve been doing along with tracking my debt and debt reduction progress, is tracking my net worth.  What prompted me to do it in the first place was this desire to prove that my huge amount of debt had actually bought me something.  What I ended up proving to myself was that I had wasted a ton of money on nothing.  I’m young in my career so I don’t have much set aside in retirement and my personal savings was at $0.  I owe as much on my car as it is worth and my personal items don’t amount to much when compared to my huge debt.  My net worth was 10’s of thousands of dollars in the negative.  I was worthless…. actually I was worse than worthless.   

When I started this process I was so ashamed of where I was that I never shared with any friends or family my financial situation.  That included not telling anyone that I had started a real plan of debt pay-off and a blog to record my progress.  The biggest reason I didn’t want to share this information was not because I was worried they would judge me based on the amount of debt I had racked up, it was because I was worried what they would think if I completely failed to keep whittling away at my debt… I have a history of jumping gung-ho into a project, be it tangible or self-improvement and then giving up when things get tough or just losing interest altogether when something new comes along.

But given that I have been sticking to this goal and gaining steam every step of the way, I decided it was time to start sharing my efforts with those closest to me.  It felt great to admit to people that I had been struggling and was not proud of my past debt-ing ways but was overcoming my debt and really accomplishing something.  I didn’t really give too much detail about the actual numbers and the only person I gave the blog address to was my middle sister who is similarly trying to dig her way out of debt but it still felt great to get it out there. 

When I was talking to my mom about it I told her that I was looking forward to the day that my net worth would break even, that I would officially be worth nothing financially speaking and we got a good laugh at that.  She, of course, assured me that I would never be “worthless” but it was just so freeing to be able to talk openly about my debt problems and my attempt to overcome the debt with someone so close to me.  And now that I’m out in the open to my friends and family it gives me the added push to stay on track!  

Contemplating my faults

When I started this blog I thought it would be a good way to document my progress at tackling my debt including the methods I was using to get there.  I envisioned myself writing about things like switching to cold water washing or using less electricity.  You know, easy things to change.  Buy bulk, on sale, with coupons, etc…  What I didn’t realize is that through this process I would start to confront a lot of uncomfortable behavioral issues with myself.  That part of the process has been a lot more painful than I would have expected.

I guess no one really likes to look deeply into their own faults but I should have known going into this that just making surface changes wasn’t really going to work in the end.  And it’s not that I’m surprised that my debt issues stem from something quite a bit deeper than just forgetting my coupon wallet or not switching my light bulbs to compact fluorescents sooner.   It’s just so dang uncomfortable to be honest on here when I’ve spent so much of the last ten years lying to myself about my habits.

Really what I’m saying is that my goals through this process have kind of evolved.  Obviously Goal #1 is still to pay off my debt but I’ve realized that in order to achieve Goal #1 I’m going to have to confront some really personal issues about the way I deal with stress, anxiety, and depression.   I feel like by making the decision to tackle my debt I was also unwittingly making the decision to face some qualities about myself that I’m not quite sure how to deal with.  Not sure where this is leading me but I have a feeling that the outcome could change my entire life not just my credit score.

The little things add up

The last time I wrote, I set out a plan complete with goals and a to-do list for accomplishing my goals.  One of the items on the to-do list was to give up or reduce non-essential things I regularly spend money on.  Deep down I knew I was spending a small fortune dollar by dollar on things like my beloved Mountain Dew addiction, “forgetting” to make a breakfast or lunch and being “forced” to eat out, going out for a drink after work, etc.  It’s so easy to ignore how much these little things add up when I’m only spending a couple bucks at a time but since I am determined to kick these habits, I took a few minutes and calculated how much money the little, non-essential things are costing me.

Here’s what I came up with as an estimate of my spending each week:

$12 for Mountain Dew, as much as I resist the urge I still usually end up getting one 20 oz bottle a day

$5 for a forgotten breakfast

$10 for a forgotten lunch

$25 for drinks or dinner out

$1 for a snack at work

That equals $53 a week or $230 a month or $2,756 a year!  And that’s just for the stuff I regularly waste my money on, I don’t even want to know what the annual total would be if I add in all the bigger non-essential stuff I buy each year!  I’m sure I could do a more accurate estimate by looking through my debit card statement but considering I am giving the bulk of the non-essentials up, a ball park figure will do. 

It’s pretty unrealistic to think I’ll be able to give up ALL non-essentials but even if I reduce the spending by 50% that still equals an extra $115 each month I can use to pay off my debt.  Next time I get the urge to reach for the Dew or rush out the door for work without food in hand I’ll remind myself that an extra $2,756 would be better spent on something I truly want… to be debt free!

Setting a game plan

Although I haven’t been diligently writing about my efforts this week, I have been working hard on figuring out how to tackle my debt.  I would really love to be debt free in five years but that seems like a pretty high bar to set since it equates to paying off over $1000 a month in debt!  I figure if I shoot for that and don’t succeed I will still end up in a better than I am today.  I always find it easier to take on a big challenge if I set clear goals and objectives so that’s what I’ve been working on this past week:

Goal One: By the end of 2012 pay off all credit card debt (~$14,000) and maintain a $1000 emergency fund so I don’t have to reach for the cards every time something goes wrong.

Goal Two: Pay off the car (should be around $8500 left of the loan by then) and increase savings to $2000 by end of 2013.

Goal Three: By the end of 2016 pay off my student loan (should be around 35k left at beginning of 2014) and become debt free for the first time in my adult life!!

I’ve come up with a financial to-do list to increase the amount of money I can use to pay down debt each month:

1.       Thoroughly examine my monthly budget for any reductions which includes the grocery budget, pet care, utilities, cell phone, etc.

2.       Give up (or at least substantially reduce) some of the non-essential things that I regularly waste money on which will include my Mountain Dew addiction, eating out, beer *sob, and anything else I uncover along the way!  I have a feeling once I really calculate the cost per month that I spend on non-essential stuff it’ll be easier to say no to these things but I know myself well enough to know that this is going to be the hardest change to stick with!

3.       Spend less on the things that I do need like clothes, shoes, haircuts, car maintenance, etc.  I’m sure if I work at it I can be a lot thriftier than I am now.

4.       Sell any junk I have lying around… I don’t know if this will really make an impact on my debt but it will definitely reduce some of the clutter around the house!

5.       Make more money!  The most preferable would be to do a really great job at work, impress my new boss, and get a ridiculously huge raise but obviously I can’t count on that so I’ll be looking into part time work and side jobs that can add a little to the pot each month. 

It’s strange but for the first time in years I’m feeling kind of empowered when it comes to my finances.  Even though I’m way down in a debt hole, I feel better having finally acknowledged it and setting a game plan for getting back out of debt.  I know I’ve got a loooong way to go and some seriously bad habits to overcome but for now I’m going to let myself feel good about taking the first tiny step towards becoming debt free!

Funny how ingrained spending is

The thing about this decision to pay off my debt and blog about the experience is that I have no idea what I am doing.   I’m new to blogging, both writing one and reading other peoples’ blogs, and I’m obviously incompetent at money management so I’m not really sure what I need to do to get the ball rolling in the right direction.  I’ve been searching the web for tips and came across some great blogs like: http://www.bloggingawaydebt.com/ and http://www.debtreduction101.com/ but what I think I really need is a step by step guide to starting the process.

A memory of a past co-worker of mine came to mind as inspiration.  He and his wife had some 165k in debt and following some kind of program, I think by Dave Ramsey, were able to cut their spending and pay off all their debt in the matter of a few years.  This may be a little bit of an exaggeration but I do clearly remember him eating mac and cheese for lunch almost every day for a year and thinking “if that’s what it takes to pay off debt, count me out”.  Anyways, back to the point… I have a lead to follow.  So what do I do?  I fire up Amazon and start piling financial help books, particularly the ones by Dave Ramsey, into my cart.  I even find “The Complete Idiot’s Guide to Getting out of Debt”.  The irony of my actions don’t hit me until I go to check-out utilizing one touch purchasing linked to my high interest credit card.  Do I really need to go further into debt to learn how to get out of debt?  I quickly cleared my basket and will be hitting up the local library on my way home from work…

Owning up to what I owe

To be truly honest, it wasn't until I finished graduate school in 2006 that I even took a real look at the debt I had accumulated through my seven years of higher education.  At that time, I was carrying $55k in student loans and credit card debt but I brushed it off... of course I had debt, everyone had debt, who could get through college and grad school without it!  When I graduated it was the height of the market and I had landed a fantastic job so I felt confident that my debt would pretty much take care of itself.  Fast forward to today: $65k debt in school loans, credit cards, a car loan and, most recently and most shamefully, a loan from the Bank of Mom and Dad. 

Coming to realize that in the five years since graduation I have actually increased my debt load is a painful pill to swallow.  I would love to sit here and blame this on the economy or any number of other things that have occurred over the past five years but the economy didn’t take out a car loan or whip out the credit card every time the going gets tough.  It’s time to own up to what I owe and the habits that keep me in debt.

 I guess with that said it’s time to lay out what I owe for the world to see *gulp*:

Student Loan: $38,339 @ 2.5%

Car Loan: $11,684 @ 3.9%

Credit Card 1: $10,577 @ 0% until January when my balance transfer reverts to 16.99%

Credit Card 2: $3,635 @ 15.4%

Parents: $600

Total: $64,835

I have a confession to make…

I am hopelessly, shamefully, desperately in debt.  There, I said it.  There’s no taking it back and there’s no hiding from the fact anymore.  I've had this growing uneasy feeling for the last several years about the mountain of debt I’ve buried myself under.  What started as a small, nagging concern that was easily pacified (mostly through retail therapy) or ignored altogether has manifested into continuous guilt, shame, anxiety, and depression as well as the physical ailments that go hand in hand with stress and tension.  I am struggling to pay my bills, ashamed when my friends and family members find out any of the facts about my personal finances, and guilt stricken over every dollar I spend on something “non-essential”. 

Something has got to give and I can guarantee that it won’t be my creditors.  So that leaves it up to me to figure out how I got here and how I can get back out.  That’s where this blog comes in.  My hopes are that through this forum I can keep myself honest and accountable as well as document what will hopefully be a journey to becoming debt free.  Let the road to recovery begin…