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.