Archive for the ‘Paying Down Debt’ Category

Well — it can fell insurmountable, that’s for sure. But a recent post at No Credit Needed provides an alternative view of how the little things in debt reduction add up.

Debt reduction requires the same patient, day after day, commitment. Drip by drip, drop by drop, payment by payment, we work ourselves out of debt, one account at a time. A consistent flow of water, over time, can accomplish amazing things. (Think, Grand Canyon!) Waiting for a “flood” of money? Stop. Focus on creating a consistent flow of money. Think of each dollar that you send to your creditors as a single drop, working with hundreds or thousands of other drops, to eat away at your debt.

Just yesterday, as I was idling in my car at a stoplight on my way back to work from eating leftovers at home for lunch, I thought to myself “how much extra can I put towards the next few month’s credit card payments if I brown bag it every day for the next three months?”

Some weeks I don’t eat out at all, others I might buy 2-3 lunches at an average of, say $7 a pop. Also, I often spend about $4 a few times a week getting McDonald’s breakfast sandwiches in the morning. I quickly did a bit of rudimentary math and I estimated that I could save $15-20 a week on average by consistently eating breakfast and lunch at home.

As NCN points out:

$1 per day = $365 per year

$5 per day = $1825 per year

$10 per day = $3650 per year

$25 per day = $9125 per year

Drip by drip, drop by drop.

Today’s drip — I found some crackers in my purse to hold me over until lunch, saving $1 for a snack from the vending machine. It’s a start.

Sigh.

Something I forgot about when adding up my credit card debt — I spent the first week of March on vacation visiting family and friends in California and used one of my credit cards for some purchases while I was out there. I had not budgeted well for the trip and did not have enough cash.

The bad news — when I looked at my card balances today, overall I’m up to $18,640.

The good news — I have not charged a thing on any card since March 15.

I’m going to reset initial debt total to the right of the blog to accurately reflect my highest starting point. I’ve already made some good payments today and closed out one account (Pier One) that had a balance of $134 — so we should see some progress May 1.

Wow.

Calculations are in.

I’m just going to post the numbers and hit the sack. It is what it is.

Credit card debt: $18,375* (this number is current for March 1, before payments I’m making this month)

Savings: $46 (this number is current as of today)

I’ll post a bit tomorrow about how I got into this much (pretty typical, most likely), about some of the things I’ve done to reduce my expenses in the last two months, and set some goals.

*note: this does not include my student loans, credit union car loan, small credit union personal loan, or mortgage — all which have halfway decent interest rates. So I don’t curl up in the fetal position and sob — I’m only focusing on the credit card debt, now, while continuing to budget and pay down these debts as well.

As I compile a list of my credit cards and accounts, I am happy to note that one card from Household Bank has a balance of zero. Conventional wisdom tells us to cut up the card, don’t take replacements, but keep the account open to keep your credit score high. However, I’ve decided to take the advice here at 360 Degrees of Financial Literacy and called this morning to close that account. This is a psychological decision to remove temptation and begin to whittle the number of open accounts down.

And yeah, it felt good!

Here is the advice from 360:

  • If credit is easily available, you may be tempted to use it. Any impulsive purchases could quickly mount up and result in serious debt problems. (Me: heh, yeah, that’s already what has happened. Out, out damn temptation!)
  • Open accounts may be used fraudulently if your account numbers are stolen or your cards are lost.
  • You may have to pay annual fees for the cards even if you don’t use them.  (Apparently I had paid an annual fee last October. This is one of the things the account manager, desperately trying to keep me as a customer, pointed out.)
  • Whether used or not, open accounts may create trouble when you apply for other credit such as mortgages or loans. Lenders commonly review your credit history and may see you as a credit risk if you have multiple open accounts with a large amount of available credit. Potentially, you could still use them and build up unacceptable levels of debt.  (Not really an issue — I’m halfway through a current car loan from my credit union and I bought my house a year ago.)

The account manager to whom I was transferred offered me upgrades to my card, which I assume would include lower interest rates, a premium account, appealed to my length as a customer (this account was opened in 1999) and did her best to convince me to stay. I simpled repeated, in a friendly tone, “no thanks, I would just like to close the account” and it was accomplished in about 2 minutes.

Another piece of advice — get a confirmation letter. I asked for one and it should be on its way.

Over the last few months, I’ve spent a portion of each day reading blogs about personal — with an emphasis on the personal aspect. Blogs about being frugal and becoming a smarter consumer, blogs about how to save money, and most recently blogs about paying down personal debt.

Tricia, in Blogging Away Debt, is the first I’ve come across (though looking at her blogroll I have many more to discover soon) to lay out her debt, income, struggles and successes. A few days ago she wrote about what is keeping her motivated to pay off her debt — and for her it came back to her family. She also goes on to say that writing her blog keeps her focused daily on reducing her spending and paying off debt.

I hope this blog will do the same for me.

In days to come, I will post exactly how much credit card debt I’m facing (on top of some “good” debt like my mortgage), what I’ve done in the last couple of months to reduce some expenses, how I’m going about getting extra income, and share a few insights I’ve gleaned from others lately.

But now it’s time to drink some of my coffee — brewed at home so I don’t spend $$ stopping to get some on the way to work — and start the day.