What caused the majority of your debt?
The majority of our debt was caused by poor financial planning and periods of time when either my husband and/or I were unemployed with not enough emergency savings to cover us.
How much do / did you owe?
We have a consumer loan (currently $2230 left) and an auto loan (currently $6440 left), but I don't really worry about these as far as debt repayments go because the monthly payments are manageable, the loans are at very low interest rates, and I know exactly when they will both be paid off.
The rest of our debt is from credit cards. Things started to go bad for us just about a year ago, and our credit card balances just ballooned to help us keep up. We went from having only two credit cards to having five. Here's the current breakdown:
USAA – $16,600 ($13,550 @ 5.99F%; $3050 @ 0%; these are NOT intro rates)
MBNA – $1,150 @ 10.99F (just got APR reduced from 13%V)
Citi Simplicity – $4,125 @ 0% (intro rate ends Dec 31st)
TOTAL – $21,875 ($7,125 @ 0%)
I am very, very proud of the fact that in less than a year we have paid off two other credit cards in full, which started out totaling $6,600 in Nov 2005. When I opened up those two cards, I did so with the plan to pay them both off before their 0% intro rates expired -- and I stuck to that plan. This has given a huge boost to my confidence and motivation regarding our finances, because I have a sense of accomplishment that I didn't before. Yay!
How did you stay focused to get out of debt?
When things started going downhill, I knew that we were going to go deeply into debt. It was just inevitable, so I accepted that fact and decided to focus on three things: 1) Keeping our interest rates as low as possible; 2) Avoiding delinquency (even one missed payment) at all costs; and 3) Not ruining our credit.
With this in mind, we went from having two credit cards to having five credit cards. We probably could've gotten credit limit increases on our existing cards, but it made more sense for us to open new accounts and get 0% on purchases and/or balance transfers. None of our cards have annual fees. Doing this brought our credit scores down a little bit, but nothing major. Our credit was excellent to begin with, so we could afford to drop a few points temporarily.
In fact, I'm actually thinking of applying to an offer I received from Discover recently which would give me 0% on balance transfers until next July, and the 0% will be extended for the life of the balance transfers if, starting in June 2007, I make three purchases per billing period on the card. I scoured the fine print to see if there was a minimum amount these purchases have to be ($5 each, for instance), and there's no minimum mentioned. I'm hoping to transfer all or most of the Citi Simplicity balance before it's 0% goes up in January, and the MBNA balance as well, if possible. (In case anyone's wondering, it's been almost 11 months since I applied for any credit.)
One definite move I've made is to get a better-paying job. Not only does it pay more than any other job I've ever had -- and basically doubles my most recent income -- but I actually ENJOY it. I work in the international education office of my alma mater. My colleagues are great, I love going to work each day, which is just the icing on the cake! I've only been there a month but it's already making a difference for us financially. It's also lowered our stress levels, which is ALWAYS a good thing.
Although I handle the finances (if you hadn't picked up on that already!), Mark is doing his part. He's been at his job now almost a year and has already gotten two pay raises since being hired. They've put him on the their shortlist of people to promote to department manager whenever the position opens up in the immediate future. He's also brushing up on his portfolio so he can do some freelance web design on the side for some extra cash. And he's cutting back on some of his little splurges, which in the long run will really help out.
So... We're getting there. It's hard not to look at the total we owe and get discouraged. We're feeling frustrated because we want to own our own place, start a family, etc and the debt is preventing that from happening. But we'll get there, I know we will.
~ Jenney