If you are / have been in debt...

**neatdesign** · 09-16-2006, 09:39 PM

Re: If you are / have been in debt...

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

**Mathew Green** · 09-17-2006, 05:24 AM

Re: If you are / have been in debt...

Originally posted by twinsmommy

The majority of that is credit card debt at low interest rates (0% to 3.99%).

You didn't ask, but.... I'm a great believer in having a good emergency fund, so if I were you I'd put at least half my available cash into the e-fund each month till you feel comfortable, even if it means making only minimum payments on all of your debts. After that, I'd concentrate my efforts on paying off all non-mortgage debts with an interest rate higher than 4%. For the debts charging less than 4% I would make only the minimum required payment each month. When the over-4% debts are paid off, I'd pour all my extra cash into an online savings account (paying 4.4%-5.25%) and continue making only minumum payments on the low interest debt. This is one of those rare cases where you can actually make money by holding onto your savings account instead of paying off debt.

My Story:

I got caught by the bad economy during an ecconomic downcycle and didn't cut my spending enough. It was made worse by the fact I had about $10,000 of CC debt to begin with and CC interest rates at that time were 18%. Throw in some other bad financial decisions and I ended up $32,000 in debt.

That was 1999. Since then I've paid it down as low as $8500, but I haven't been able to hold it there.

Two years ago I added to my debt because of being laid off during the tech bust. Last year I had to pay over $3000 in car repair bills (much cheaper than buying a newer car, and a better bet than buying a $3000 used car.) By April 2006, my debt had climbed back up to $17,500.

Since then, I've gotten it back down to $16,500 and I'm on track to be out of CC debt by December 2010 if things go well (2014 is my pessimistic estimate.) However, I'm 55 with only $1000 in my IRA and $300 in my emergency fund so I've made a radical decision to not reduce my debt at all during the next four months. Instead I'll be pouring every available dollar into my emergency fund so I'll have money available to pay my mimimum expenses if I'm out of work temporarily. Barring any major unexpected expenses, I should be able to build up $2000 in the e-fund by the end of January 2007. I'll then go back to concentrating on debt reduction.

$2000 is a woefully small e-fund and I don't recomend having so little, but it's better than having nothing and relying on the CC to bail me out in emergencies as I was doing. My monthly living expenses are slightly less than $1200. By using the CC for just enough expenses to offset the minimum principle payments (IOW paying only the interest) I could reduce that to $1000/month. Cutting my expenses to the bone would probably bring it down to $900 and make the $2000 e-fund last 9-10 weeks.

The good news is that my credit cards have $4000 available credit at 12% and another $3000 at 13%. (I don't even want to think about the card of last resort. It has a $0 balance and a $6000 credit limit, but they insist 20% is the best interest rate available!

). The bad news is, if a crisis forced me to use that available credit I could find myself with $32,000 debt again in no time!

How do I stay focused? I know that time is running out. I have to pay off my CC debts before I reach retirement age (2012 minimum, 2017 max). I'll also have to sell my current house and move somewhere with a cheaper cost of living when I retire. No regrets about moving though. I only live here because I have a job and a house. I'm hoping this house will sell at a high enough price to leave me with $10-20,000 after buying a replacement, but the real estate market is never a sure thing. So I have no difficulty at all staying focused from month to month. It's only day to day that my resistance wavers.

**meaghanchan** · 09-17-2006, 05:28 AM

Re: If you are / have been in debt...

My debt is due to about 7 months of unemployment that ended recently. I had a 6-month emergency fund- which isn't enough when unemployment stretches out longer than that. Also, once I had cut my emergency fund in half, I panicked and started putting everyday expenses on credit cards rather than cut my emergency fund more. Lesson learned- I need a large emergency fund just to feel safe.

I started out with about $2800 on 1 credit card with a very high interest rate. I don't have a perfect credit score, so I'm hesitant about trying the 0% balance transfer, because I don't think I'd be approved. I am going to call my cc company next month (after 3 months of on-time payments... yeah, I didn't pay on time so much when I was unemployed) and see if they'll lower my rate. Anyway, I just started working in the middle of August and I've got it down to about $2000 now. I'm hoping to have it payed off by December. Fortunately it's not a very long time period, so I don't have to worry too much about staying focused- and everytime I see the interest on my statement, it motivates me more to pay it down as soon as possible.

**LuxLiving** · 09-17-2006, 05:35 AM

Re: If you are / have been in debt...

Sorry, long story ahead...

What caused the majority of your debt?

Like neatdesign, the majority of our debt was caused by poor financial planning and not enough emergency savings to cover us. Who would have thought that dental fillings would deteriote in over 20 years time? Think dental - to the tune of about 8000.00 dollars.

Not predicting the predictable is PRIME for getting you into debt. You are going to have to replace a lawnmower belt from time to time...lawn season may be over for this year, but God willing you're still alive next year, most of us are going to need some cash for lawnmower gas, oil, filters, belts, blades, etc. Figure out a reasonable amount now and start sticking back for it!

Multiply this by the number of predictables you are going to have in the future...vehicles and appliances will need to be replaced at some point, doctor bills will be incurred, the car is going to need a new tire at some point, etc., etc., etc., etc., etc., etc., etc., etc., etc., etc., etc., etc., etc., etc., etc., etc., etc., etc., etc., etc., etc., etc., etc., etc., etc., etc., etc., etc., etc., etc., etc., etc., etc., etc., etc., etc., etc., etc., etc., etc., etc., etc., etc., etc., etc., etc., etc., etc., etc., etc., etc., etc., etc., etc., etc., etc., etc., etc., etc., etc., etc., etc., etc., etc., etc., etc., etc., etc.!!!

Uhhh, did I make my point?

Unexpecteds aren't really unexpected...we've just been ignoring them while we gulp down our steak dinner on a credit card. Start planning for them and you'll dig your way out. Yes, it will seem overwhelming AT FIRST, when you figure out all the things you ought to be 'putting by' for, but worth it as you begin to see the light at the end of the tunnel.

How much do / did you owe?
We have a mortgage (currently $24,800ish left). At the time I started doing the finances about 4 years ago we owed over 45,000 on two vehicles, house and CCs.

After four years of dedicated effort only the mortgage remains to be paid, plus we have over a years pre-tax salary in our emergency fund, two paid in cash vehichles (2005 & 2001 models) bought this year, money put back for this years and next years taxes, and money in CDs for the replacement vehicles for the ones we just bought due to pop in 5 years, other investments going strong - and finally got my spousal IRA started.

Salary constraints - The Hubster a well-satisfied and content man is in the same position a lifetime later that he started at age 19 with the same company...BUT it is not now nor never has been a high paying job. Think low 5 figure - with the last three being all zeros. I junk' on the side with an antique booth - never pulled over 350 a month from it yet in a years time. I homeschooled my kids.

We've gone on four very nice resort week-long vacations during these four years. We couldn't afford to fly to them, but go we did! Yes a family of four can go halfway across the country during a gas crisis, eat out some 6 meals, do an entertainment deally-who or two, drive back home all on 500.00 and still have SOME cash left when it was over! 89.00 left in fact. Yes, brought home & put back for next year's vacation.

I LOVE to travel and it's one of the things I refuse to believe I can't afford to do - I make a way - it's my climb any obstacle kind of thing! Some of this is just to prove to The Hubster that yes, we really can afford to do this...he's a wonderful, lovely man but often a naysayer! Nothing like a naysayer to get my grill up and running to prove that we can!!

(after these long years of marriage do you think he knows that and is just playing me like a fiddle????? Could be!

)

Yes, Virginia there really is a lawncare fund that the monthly spending plan covers, as well as postage, medical, dental, vision, car repair, car replacement, car battery, car tires, house taxes, subscriptions, entertainment, appliance replacement, roof replacement, paint, carpet replacement, household repairs, etc., etc....need I go on????

No....we don't have a lot left to poop off once we take all of these into account. But we FEEL sooooooooo much better about our financial future!

How did you stay focused to get out of debt?

Got a hate on! I have always diskliked debt, but deciding that I'd rather have money than spend money was a real turning point for me.

Knowing that every time we fluffed off a dollar or two here or there was really hurting us in the long run. We were the ones DAMAGING OUR FUTURE! And the accelerating run-up toward retirement was bearing down on us. We just bit the bullet and decided we HAD TO do some bare-bones scarcity years in order to do better later on in retirement. Like eat! So we made a conscious decision to DO AUSTERE for the short term in order to have maybe just enough in the future. Had we done a lifetime of saving we'd be in a far better position today. Americans really need to wake up!

There were times during this dig-out process I was feeding all four of us on $20 a week fresh purchases w/use of pantry. And three of us (2 teen boys) were home for 3 squares a day and The Hubster was packing a lunch - so go to your grocery and figure out how much it costs to buy bread, bologna, chips & snack cakes and see if you could figure out how to feed the rest of us anything at all. God was surely with us during those times. Talk about your never ending oil pot!

And, yes I had other money I could've gone to the grocery and spent, but we wouldn't be in the much better financial place we are today without the discipline to stick to the harder course!

Only once in that four years time did I put anything back on the credit card and it was immediately paid off again before the month was out.

The Hubster's pension disappeared in the midst of these four years (as I had predicted years ago & repeatedly warned about but still he had refused to save) AND he suffered a 6 month layoff, so it was a good thing we had started earlier and that I am pantry stocking kinda gal.

We had enough to eat (but not what we wanted) and only in one month did we have to do an interest only payment on one of the cars during the layoff. Note it took about a month and a half for unemployment benefits to kick in.

We have always had excellent credit so it was never a point of trying to overcome our credit history. And before anyone asks, yes, we did tithe and were blessed enough to give over the tithe to other charitable causes during this dig-out. This is my not-bragging story, but just to prove to folks it can be done. It is difficult to deprive ourselves in today's society when we see mass consumerism all around us. But it is doable. A tough row to how? Can be. Doable? YES! Get a backbone and use it.

Good luck to you twinsmommy. You've come to the right place! If you're a reader, go to your library and check out The Wealthy Barber. Good stuff in there.

**pearlieq** · 09-17-2006, 07:05 AM

Re: If you are / have been in debt...

Luckliy I never got too far into debt. I think I peaked out at about 4k in CC debt in college. I got into debt because I was spending indiscriminantly on things I didn't need (clothes, meals out, entertainment) and because I had a lousy car that I bought without really researching or thinking through the purchase.

Luckily I was able to tread water until things got better. DH and I got engaged and moved in, I finished school and got a "real" job. I think I paid off the last of my balances in late 2001 or early 2002. I know we used our wedding gifts to take out most of one of our CCs--best wedding gift I ever got!

The mess DH had gotten himself into is what inspired me to get serious about managing our money. I began meticulously tracking everything, budgeting, and getting agressive about paying off our debts.

**Ima saver** · 09-17-2006, 09:14 AM

Re: If you are / have been in debt...

My biggest debt is a piece of property we bought last year. It is an acre and a half with the most beautiful 180 degree mountain view of the highest peak in georgia. We borrowed to buy it and took out a mortgage for $64,000. I hated seeing that interest payment each month, so i made an effort to take any extra that I could squeeze out each month and pay in on the land payment.
I have made 20 payments so far and have my balance down to $24,000. They lowered my payment this year, but I still pay the same plus all extra that I can fine. That is what I am doing with my challenge money.
I never let myself get too heavy into credit card debt. Several years ago, I started watching QVC and charging stuff. After letting the credit cards get up to several thousand in debt, I realized I was spending money on lots of stuff I did not NEED!
My new year's resolution was to pay off the cards and never charge more than I could pay off each month. I have kept that resolution.
I paid off my house when I was much younger and don't ever want another mortgage.
I do have a car payment, but that has never bothered me, I guess because I have very low interest (the last one was 0%) and I consider it a necessary expense.
I have long ago come to grips with the fact my husband is a "car" person. He likes sporty cars and so do I! That is his passion and since he wants a nice car bad enough to work 7 days a week, he deserves it!

**PrincessPerky** · 09-17-2006, 10:24 AM

Re: If you are / have been in debt...

When my daughter was born the bill was around 4K, we paid it, then charged life, since we certainly didn't have 4K! still don't....

then DHs job 'restructured' leaving us with less cash at the end of the month..and we were still charging life as medical bills came in....

instead of cutting back drastically we put a few bandaids on and waited for a raise or something..

then as she approached her first birthday and I was still paying of a cc that was 'cause of her birth' but had grown to 8K....I finally got my act together and came here.

I paid the final cc bill spring if this year.
now we still have a car loan at 0%, and a mortgage but no CC...and we are still waiting for that raise....and my newest is approaching his first birthday...I think I need a shot of motivation on that house bill.....

**Kris10Leigh** · 09-17-2006, 11:09 AM

Re: If you are / have been in debt...

I started on this site with about $23,700 in CC debt and am now at $22,200 in debt.
How did we get there? It's rather boring, really. Life circumstances happened. It started when we put our honeymoon on the CC and balooned from there. We needed the CC's for my Master's degree (a need in my profession). THen DH lost his job a couple times and everything had be put on the CC's.

I stay motivated by hanging out here. We are currently aggressively paying down debt. And I mean AGGRESSIVELY! Some months we pay nearly $3000 toward the cards, but an average month is $1300. DH and I have agreed to be completely comitted to this project for one year, which started in July, and we give ourselves permission to re-evaluate when July rolls around again. Having a finish date on the plate really helps. It makes denying ourselves things easier. It doesn't feel like a life sentence.

If my plan works out perfectly, we could potentially be out of debt completely (including the car and house) in six years. That's really hard to believe! But with a little dedication and a working budget, it can be done. The only problem is, life doesn't always work out perfectly. I need to learn to learn to relax a bit.

**JanH** · 09-17-2006, 12:49 PM

Re: If you are / have been in debt...

We had some CC debt--more than we needed to have--but thought we had it figured out. We bought a used car for my then high school daughter with a lot down and very small payments per month. Two months later, my car blew an engine and it was going to cost 5000 to fix it. And the car wasn't very old, but had been trouble. So we bought another used car and adjusted our life. Five months later, college son's car dies. So we sold Hubby's truck and bought a safer car for son (used) and Hubby fixed car to drive to work. Three cars in one year. Then son who is music major changes instruments so he can do what he is really gifted for--jazz. Said instrument costs over 20,000. But he is amazing on it and is now an assistant in the jazz program at college (while in grad school) and makes music on the side with a semi-professional group. So it was worth it, just not at the same time! Then old college car dies for good and now Hubby needs a vehicle for work....Combined with the fact that college costs have doubled between when my son started and now my daughter. ...Sheesh! We used up the college funds early. My kids try to supply some of their own money and son has had scholarships, but sometimes life justs hits all at once with medical bills or something. I feel for each of you.

**JanH** · 09-17-2006, 01:00 PM

Re: If you are / have been in debt...

And oh yeah, start a fund for your child's wedding. There are costs no matter what side you are on!

**veronak** · 09-17-2006, 07:53 PM

Re: If you are / have been in debt...

Originally posted by twinsmommy

What caused the majority of your debt? How did you stay focused to get out of debt? How much do / did you owe?

I got into debt because I was living or pretending to be living like the Jones' all the nice clothes my friends had I wanted I charged nothing but junk. I decided last December that I wanted to be debt free by the end of the year and I have worked really hard at getting my debt down, I'll say I started out with about $10000 in debt and now I am down to about $3000. So I am happy, I have to admit once in a blue moon I backslide: buy something I do not need like a pair of shoes but for the most part I have really stayed focus. I am trying now to have everything paid off by December 1st So we'll see

**Snoopy2645** · 09-17-2006, 08:10 PM

Re: If you are / have been in debt...

Well alot of things contributed to any debt I have which isnt much but I would say living like the jones's even though I was a sahm I was used to having money cause I had always worked before so I wasnt used to being broke so instead of being broke I used CC"S to buy my kids EVERYTHING!!! Now I still love to shop but I shop garage sales mainly!!!

And I took on a pt job so I have more money in my pocket for me & the kids no more charging!!! Oh ya & some poor financial moves I thought I knew it all about money when I was 21 & I didnt know JACK!!! Now I am only investing in cds & my house!!!

I pay down any debt I have with every dime I can now!!!

Oh ya & 3 girls who are eating me out of house & home & one with alot of vision problems but I never think twice about taking care of that we have had to rent a motel for a week a few times when she had surgeries we have made lots of trips out of town for her eyes BTW WELL WORTH EVERY DIME!!!!

**Broken Arrow** · 09-18-2006, 04:58 AM

Re: If you are / have been in debt...

What caused the majority of your debt?
Stupidity.

How did you stay focused to get out of debt?
Fear of even more stupidity er debt.

How much do / did you owe?
-30k.

Started out with -40k.

**shelbylovesmelby** · 09-18-2006, 12:56 PM

Re: If you are / have been in debt...

What caused the majority of your debt?
LOOSING MY JOB & DECIDING TO BE A SAHM + MY DH IS NEVER SATISFIED W/HIS GADGETS ECT

How did you stay focused to get out of debt?
NOT FOCUSED ON GETTING OUT OF DEBT, FOCUSED ON STAYING AFLOAT & GRADUALLY KNOCKING DOWN THE DEBT

How much do / did you owe?
EXCLUDING THE HOUSE ABOUT 40,000 EEK! THAT'S ALOT UNDER ONE INCOME & 2 LIL ONES!
.

If you are / have been in debt...