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.
Tuesday, July 15, 2008
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.
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!
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!
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