Mid November Update: 1 Credit Card Paid Off!

I really need to write in here more often. Well, several big things happened to my family's finances this month. First of all, the month of October 2008 was our best month yet budget-wise. We pretty much stayed within the budget. We always go a little over budget, but this time it was really minor, about $20 over budget. This meant we had a lot more to put toward debt repayment in November. On November 5th, we paid off our Bank of America Credit Card Debt. I am so happy about that! This was our highest interest rate credit card, at 15% interest not too long ago. They have been lowering our interest rate as we've been paying it down though. It is such a relief to see that card at $0.00 owed. I hope I never need to charge anything on that card again, because I personally don't like Bank of America, and would rather stick to my local credit union for banking. We've had this card for 8 years though, it started off as Fleet or Fleet Boston or something, and it just kept getting sold in mergers and the interest rate kept going up. I am just SO HAPPY to have that card paid off!

My husband received a significant pay raise at work this past month, this will give us even more money to pay off the debt. When I entered all of my remaining debt into my chart, I saw that we've paid off over 50% of the debt we had in September, 2007 when I began this blog! This is amazing. At this rate, I hope all of our debt is gone well before the September, 2010 goal date.

The remaining debt is now on just 1 credit card and 1 student loan (and of course 1 mortgage, but that's not in my chart). We're going to aim at the last credit card for the rest of 2008, and the beginning of 2009. I have to say that I am proud of myself for working to get so much debt paid off. But, I'm even more proud of my husband for really improving his spending habits and working so hard to deserve that raise which will bring us more income. He is an amazing man, and we'd certainly still be drowning in debt if we weren't working together to budget and focus on debt repayment. This was our most successful debt repayment month yet. I know the next couple of months will be a little harder with the holidays, but I think we're on track to really eliminate that next credit card balance soon!

September Review

Well, we did rather well sticking to our budget in September. I think I'm finally getting a handle on how the budget should work. On October 1st, we were able to put a couple thousand dollars toward paying off one credit card, bringing our total debt down to $17989. Not having the daycare expense is really helping, since now all of that money goes to paying off debt. We've paid off over 40% of our debt in 12 months- which makes me think we will reach our goal of having $0 in debt by Sept. 2010.

It is still difficult though, and there probably is more we can be doing to cut back and pay off debt faster. This month, I started clipping coupons vigorously. For the month of September, I kept track of my grocery store receipts- I recorded how much I spent, and how much was saved with rewards card savings and coupons. I saved 33% on groceries just by watching the sales closely and using coupons!

The goal now is to completely pay off our largest interest credit card by the end of 2008. We currently owe $2800 on that card...it will be so exciting when it is down to $0.

Debt Finally Under $20K

I apologize again for the length of time between updates. I hope to get more detailed as I pay further attention to income and debt reduction. We went over-budget during the month of August. A large part of that was due to the purchase of school clothes and supplies, and the purchase of 2 new pairs of eye glasses. We also had most of the family's medical and dental check-ups in August- which ended up costing around $200 just for the co-pays. Despite all of that, we were able to make a hefty payment toward our debt on September 1st.

I am paid once a month, but my husband is paid every other week. It turns out that he had 3 paydays during the month of August. The entire third paycheck, and our other extra money (because we have no more daycare expenses) went to debt repayment. Our debt is now below $20K. $19,999.99 to be exact...I had to throw that extra penny in, and vow never to go above $20K again.

We're steadily working at the Bank of America credit card now...I hope it will be paid off by the end of 2008. We will then focus on the credit union credit card, and then finally the student loan. I graduated college 10 years ago, and hate the fact that I'm still paying for it!

This fall, we have a family wedding coming up, so that will cost us a bit (clothes, gifts, etc). Our daughter entered public school, so the money that was going to daycare will now go toward debt reduction...this will really speed up the process. I have a few items to sell on Craigslist, and we're all working to be as frugal as possible. I'm becoming a coupon clipper and being really careful about the grocery budget- which is one of our bigger expenses.

We were able to put $10K toward debt payoff since last September when I started this blog. I hope we will be able to put a lot more money into our debt reduction, and be debt free (except for the mortgage) in less than a year.

Exactly What are We Paying Back?

If you haven't figured it out yet, I am a very detailed and organized person, I keep good records. So, when looking at that huge number of $18,000 in credit card debt- I asked myself "What are we paying back?" For a long time, when we were charging regularly, we'd pay back whatever we charged that month. If we charged $100 on a hotel room on June 1st, I'd send $100 to the credit card company on June 2nd. That was all well & good, but the debt wasn't going down. With interest and low monthly payments, it was staying the same or getting larger. I'd think I was paying back- hotel visit June 1, 2006....but I was really paying back grocery shopping from May, 2002...or whatever the oldest charge that hadn't been paid was.

So, I took out all my credit card statements for the 2 cards we owe money to. I entered each item- from the most recent onward, until I hit the total amount that we owe. I now know that when I make my next payment to card A- I'll be paying for a car repair on 3/23/2005, and some home improvement supplies on 4/19/05. When I make my next payment to card B- I'll be paying for a doctor visit from 4/21/2006. That's how far back it goes. If we don't charge anymore (and after that lapse, I don't plan to) I am going to use this file to help me see the truth of what I'm paying for. I'll delete the 3/23/05 car payment, etc. each time I pay & the balance gets lower until all items are deleted -ending with the camera & kites and a 0 balance. This isn't even accounting for interest...but now I know what I'm paying for when I send in as much as I can to debt repayment on the credit cards.

It is rather depressing to realize that I'm paying for groceries I ate 2 years ago, or gas my car used 3 years ago...but, that's what happens when you charge something and don't pay it back immediately. So, how did it get up to $18K? Well, I did some more math and about $7000 was charged on car repairs for our 2 cars- which are rather old. The other $11K is a mixture of business purchases setting up my husband's home office- laptop, printer, chair, etc. ; groceries and gas purchases when we had no money left in our checking account, clothing purchases, and just a long list of smaller frivilous purchases like dinners out, hotel rooms, Christmas & birthday gifts, etc. Things we didn't have money saved for and either didn't budget for or went over-budget buying.

It did take me quite a while to get that document together, but I'm glad I did. I need to be more determined to get out of debt, I need to be more focused and stick to the budget...this reality check will definitely help. And once the credit cards are at zero, I'm not charging again. Every purchase will be saved for and paid for in full from cash or our checking account. I don't want to be paying for the past...I want to be saving for the future.

I Finished Reading "Your Money or Your Life"

I finally finished reading "Your Money or Your Life". I got this book for Christmas, but I got severely sidetracked reading George R.R. Martin's A Song of Ice and Fire series...which has nothing to do with finances. Anyhow, I liked "Your Money or Your Life". The way the author discussed using your life energy & finding out what your life energy is really worth- looking at what you're being paid, and expenses that go with having that job. It was all really interesting- and eye-opening. Even though the book was written over 15 years ago, I like the idea of the wall chart and getting to the point where you can live off of your investments and live without working. His views on early retirement and having time to volunteer were interesting, a little preachy, but still great ideas. Some of the anecdotes used seemed far-fetched, but they apparently are true stories. It is motivational to know what these people did with their financial life, and how achieving the concepts in the book are possible...if you do the work and take the necessary steps. I'm still at the digging out of debt step, but I won't forget these ideas for the future. It is worth a read, especially if you already have your debt under control.

Kites & A Camera- A Spending Confession

Well, I wrote that last entry about not using a credit card for 6 months on June 30th. Unfortunately, that's how long our record of no credit card use went. Over the past two weeks, we've used the credit card for non-emergency purchases. I feel like I failed somewhere, and in a moment of weakness and numerous justifications- we made a charge on the card.

Confession #1- For the past 2 years, I've been borrowing a digital camera from work and using it to take photos on holidays & vacations. I found out that the digital camera is needed for work use during my vacation week, so I would not be able to borrow it this year. I really have used it A LOT, and after a long conversation with my husband and lots of research- we decided to purchase a digital SLR camera. At least we found the best price and the best camera for our purposes, and we probably won't buy another one for 5 to 10 years. The camera cost about $900, and was charged on our credit card. This was the largest purchase I'd made since I bought my car 5 years ago. The next few days, both my husband and I felt guilty, I felt depression too- for coming so far- 6 months without using the card, and then giving in. The camera has arrived- it is wonderful, and we're already using it daily- at least it will get a lot of use. After paying back over $5k in debt, we know we can pay this back quickly. If we'd had more time, we could have saved up for this purchase- but with our vacation approaching, we wanted it sooner.

Confession #2- we used the credit card again a few days later. This was frivilous, and unexpected. My husband does stunt kiting, and he pre-ordered 2 custom made kites. We did not know when they'd be ready, I think we assumed in the fall or winter. We were going to start saving up for these purchases in August, after the expenses of daycare, our vacation, and our daughter's birthday had passed. To our surprise, the kite designer had them ready much earlier than expected- the beginning of July. So, we ended up charging another $500 on the credit card to pay for those. My husband has spent about $2k on stunt kites & parts since he began the hobby in March. After last week's purchase, he has agreed to not buy another kite until our credit card debt is at zero. (it is at $18k right now). The kites arrived yesterday, he loves them, and will certainly fly them a lot- he flies 1 or 2 hours a day now. He tried listing a kite he no longer uses on eBay, but it didn't sell. I think that having a "kite at the end of the tunnel" when we get out of debt is a great motivator for him.

I think we both feel as though we failed in the no credit card use arena, and we definitely didn't need to buy the camera or kites...that's $1400 added to our debt. But, we're already back on track, and back on budget. I had to confess here to explain why my debt has gone up...and holding myself accountable is one of the reasons I started this blog.

Thrift is the New Standard

I just had to comment on how interesting I'm finding the reactions to the increase in gas prices and grocery prices. My family is deeply in debt- mostly because of the end of 2003 and most of 2004 when we had a baby, moved to another state, and were both jobless for many months. As soon as we got jobs, we bought a house, had to replace a car, and had to begin paying for daycare.

Anyhow, since November, 2004- I've been on the "debt reduction kick". Our debt has been reduced- and once daycare is done (next month!) it will be reduced even faster! So, I've been reading personal finance blogs, and books by Dave Ramsey and Larry Winget to motivate me and learn more techniques on digging out of the hole.

We're on a strict budget "on a very fixed income" to quote a "Seinfeld" episode- but by now my husband and I are used to it, we know a lot of tricks, and it is pretty much second nature- except for the occasional frivolous purchase. Even my daughter has picked up on my frugality, picking out only items that are on sale at the grocery store, and clearly stating to my husband that "Mama hates to spend money!" I'm pretty sure that being the daughter of a gullible mega-consumerist and a compulsive gambler have resulted in my hatred of frivolous spending and my extreme views on thriftiness.

In the past few months- being thrifty has suddenly become the "in" thing...because of the gas and grocery prices- many families are in the financial position that we were in late 2004. It has become so mainstream, that Money Magazine did an article about eliminating credit card use. I found the article interesting, and even recognized some of the families because they are prominent bloggers in personal finance. Yesterday, marked 6 months since my husband and I used a credit card. We've relied solely on our debit card and cash for all purchases. This has really helped us not take on more debt.

In the past 6 months, my attitude toward money has become more rigid. The consumerist lifestyle sickens me, and at many points I will groan at a commercial or simply change the channel (radio or tv) when the commercials come on. I'm not falling for these marketing ploys...and I don't care to keep up with the Joneses. Once we're comfortable (which we pretty much are already) and out of debt...money will go toward saving for important things, and hopefully never having to borrow again!

If you're at all interested in my no-debt anti-consumerism views, you should read "You're Broke Because You Want to Be" by Larry Winget and "The Total Money Makeover" by Dave Ramsey. Don't even get me started on how awesome I think Larry Winget's views on money are!

So, after 4 years of dealing with this budgeting stuff and being in the minority- it is becoming mainstream!

May Recap- Using Economic Stimulus to Pay Debt

Well, we are slowly making progress at paying the debt. We went over budget during the month of May, but not by much- only about $150 over budget. This was due to 2 major things- going out to eat too much, and the rising cost of gas. Dinner out, grocery shopping, and gas were the only budget categories where we went into the red. Hopefully, we can stay under-budget for June.

This month, we were able to pay $2700 toward our credit card with the largest debt...$1500 of that was from the economic stimulus check- which I'll admit took a lot of will power to not spend on something "fun". We'll have a lot of fun when we don't have credit card bills to pay though!

Since September, we've paid back 19 % of our debt and that is just amazing to think about. We've also gone 5 months without using a credit card whatsoever- which obviously helps in seeing our debt decrease rather than remain the same or increase.

We only have 2 more months of daycare tuition to pay for, and once that is done, we'll have an extra $800 a month to put toward the debt. During the month of July, we do have our daughter's birthday and a vacation week coming up- so that will give us less to throw towards the debt in the summer. I have a feeling that we will make a lot of progress this fall. I'll be getting a small raise in July, but every little bit of extra money helps.

Our biggest challenge right now is to stay within the budget and plan and budget for future expenses- like gifts and travel money for July.

I have to say that I'm very proud of my family for working so hard at spending less and paying back the debt. This is the first time our debt is under $25K in years!

Victoria's Secret- Attracting Pre-school Customers!

I had an interesting visit to Victoria's Secret a couple of weeks ago. I have been avoiding the mall for months, but I did buy something there the other day. I was with my 4-year-old daughter, and the clerk asked "Do you ladies have a Victoria's Secret Angels card?" I just said "No, and I'm not interested in applying for one."

When I got home, I thought about it some more. The clerk said "ladies"...she was actually asking if my 4-year-old had a store charge card...a lingerie store mind you, a place where she won't be shopping for years! Now that I've been following personal finance blogs, I am so much more aware of marketing techniques. Even at 4 years old, they are trying to get my daughter to become a customer. In fact, she already has that cute Pink brand puppy with the polka dots that they gave me for free with a purchase a few years ago! I don't know how I'm going to be able to help my daughter understand marketing ploys, so that she doesn't get sucked into these schemes when she's an adult (or even now).

March Review- Turning Down a "Discount"

Sorry for the late update. March was a tough month. We went yet another month without using a credit card! We did however go over-budget. But, we had the emergency fund to bail us out. We went on a small vacation the first weekend in March, which ended up costing a lot more than expected. Then, we got more medical bills for our daughter's ear surgery. We also needed to have the landscapers do some much needed work that ended up costing over $1000. If not for those expenses, we would have been within the budget.

We did manage to pay down some debt this month. One of my credit cards (the one with the highest balance owed and highest interest) sent me a special "discount" bill in the mail. It said that this month the minimum due is only $15...but it will go back up to the normal amount (around $250) next month. I just laughed! They are charging me over $150 in interest every month, so it is worth it to them to have me pay less, so they can keep charging interest. So, what did I do? I paid $750 to them for this month, because that's how much extra I had to go toward the debt after refilling my emergency fund! If we can stay within budget in April, I plan to throw a whole lot more at that credit card debt, and all of our Economic Stimulus money will go toward that card too. I want that card paid off, I won't fall for their discount bill!

February Review- Car Loan Paid Off!

The month of February included the following financial highlights:
Almost staying under budget (we spent $1203)
NOT using a credit card all month
Putting more money toward paying off debt
Dealing with a medical expense without resorting to credit cards
and Paying off the car loan (we now own both cars!)

Yesterday, the loan note on my husband's car read $0.00 Such a great feeling! Granted, the car is 13 years old and cannot pass an annual inspection without more repairs that cost more than the car is worth, but we own it...and we paid off the loan 7 months early! :)

This past month was really tough, we stayed within the budget until February 29th, when I realized I forgot to put something in the checkbook and went $3 over our budget of spending money outside of the bills. Oh well, that's the closest we've gotten to being within the budget in months!

I also made about $175 in extra income selling things on Craigslist and Half.com and that went toward paying off the car loan. I am just about out of items to sell, but I should see another $40 or so from Half.com in March. My husband also made extra money for a programming job he did through his home business.

My daughter had a minor operation (tubes put in her ears) at the beginning of February. The doctor's bills have started to pour in- fees for the surgeon, the surgery center, the anesthesiologist, the follow up visit, etc. The total without insurance would have been $6000. Because we have health insurance, it cost us about $700 out of pocket, but for once we had the cash to pay for it, and didn't have to use a credit card! It is still amazing that a 9 minute minor day surgery could end up costing so much.

The debt is starting to go down a little- we now only have 3 major debts outside of the mortgage: the student loan and 2 credit cards...and now it is time to work at the credit card with the largest balance ($11K) and the highest interest rate (13.5%). It will take a while to get rid of that card...but we're moving full speed ahead.

I'm not sure if we'll do as well in March because we have some much needed landscaping expenses to deal with. We'll see how it goes.

Jan. 2008 Review- No Credit Card Use & Emergency Fund in Savings!

Well, January didn't go as planned. We went overbudget again, largely in part to a water heater leak that cost over $200 to fix. However, I am proud to say that we did not use a credit card one time in January. Actually, we have not charged anything in 2008 to date! That is a huge victory for us, although it should be how everyone normally pays for things. We also saved up the entire $1000 for our emergency fund. No Credit Card use and an Emergency Fund in 1 month! That's just awesome. My husband's higher salary definitely helped with that one, it is also helping with some unexpected medical expenses this month.

We've paid back about $500 of our debt, and have not made any more debt this year. We're still trying to look at ways to save more money and pay back the debt faster. We only owe about $300 on the car, and it would be wonderful to own that 13-year-old car. Although, it does need at least $500 in repairs to make it road-worthy again. We're thinking about donating it after we own it, if we can get by with just one car. Now that my husband works from home, we may be able to do just that- and save on auto insurance too!

I will update again next month, or sooner if we can pay off that car loan.

December & Plans for 2008

Happy 2008! This past year flew by! I don’t want to look at my spending in December. It was way over-budget. Of course most of that was on computer supplies for my husband’s home office- which can be written off as a business expense. The rest was for holiday gifts, medical expenses, and too many dinners out. The holiday gift cost wasn’t as high as previous years because we won a gift certificate to Amazon.com because my husband filled out a survey there…that really helped us out. We “got by” for most of the month, and then had to resort to credit cards to pay for groceries and gas for the last week, when we ran out of money. I’m not proud of how December went, but I plan to put away $500 for holiday savings next year.

2008 looks to be a much better year financially. My husband just started a new job where he’ll be making a much larger salary- a 36% increase in pay from his previous job! And, he will be working from home, saving us a lot of gas and car maintenance money. We don’t plan to change our spending habits because of this increase. We’ll try to stick to a budget…and it may be more attainable now, since we’ll be able to put money in savings in addition to paying off debt.

On December 31st, we paid all of the January bills we had, and were able to set aside money for the bills that haven’t arrived yet. We’re still sticking with the $1200 in other monthly expenses budget…which gave us a little left over (about $100) to put in savings. We haven’t made much progress on debt reduction, but I am determined to not go any higher than before. Our current non-mortgage debt is $30,000 as of January 1st. The plan is to chop away at that credit card/car loan/student loan debt all year long and just see how low we can get it.

My husband and I are also going to stop using credit cards. We’re going to see if we can make it through the month of January without credit cards, and I hope we can make it even longer than that. Once we fill up our emergency savings fund, it will be easier to avoid adding more debt to our charge accounts.

I have high hopes for debt reduction this year- with a larger income and daycare expenses disappearing in September when our child starts kindergarten, using less gas, and sticking to a budget, and NOT CHARGING...we should be able to make some wonderful progress.