Tag Archives: Debt

Darn it! Time to think about an EF (emergency fund)

Quick blog: Over the last couple weekends, I have (once again) increased my bad-debt-to-income ratio. Up 2%.

This is due to a few factors:

  • school tuition due of $795 – so perhaps this is good debt, but I included it in my increase because it was charged on my CC with 12% interest and not charged against a student loan at 3.25% – 6%. So, in my book this fits in the mediocre category.
  • Then, a series of mishaps equalling $595 – which, should have been covered under an emergency fund if I had one larger than $75 in it. We went over budget this week by $115 ish (don’t take the husband grocery shopping because he thinks money is expendable), the pump blew out in the pond, etc…

And then coming up this month I still have school shopping for 2 kids (one is a teenager). But, I have a plan of attack – it will momentarily increase my percentage, but quickly decrease because I am working overtime at work to cover that bill. Overtime, I am hoping will continue a bit more to knock down some of these bills…like the $1390 or 2% increase that I occured.

So, even though I knew this was going to be a bumpy ride…one, I feel guilty for bringing up 2%…it may not be all that bad when the overtime check comes in to clear up and set me back down to 80% (or lower). 80%??? ghastly!

But, the lesson to my family is… it is probably very wise to build an emergency fund of, at least, $2000. Any idea how to do this while trying to snowball the debt down???

Millionaire Next Door? I think Not! (yet)…Long Way to Go…someday.

So, I was pondering while I was at work and it HIT me that I will be turning 36 in just short of 2 months.

Made me think… what should my net worth be at this age? I have no property. A $10K 403(b). Nada. How far am I from being ‘wealthy’? Found a calculator based on the Millionaire’s Next Door algorithm. I am definitely not an Accumulator of Wealth (yet).

In fact I am in the pit of doom. Okay, perhaps a bit melodramatic. But see for yourself. It made me kind of depressed. See:

There is 1 of 3 catagories you will fall in:
UAW: Under Accumulator of Wealth
AAW: Average Accumulator of Wealth
PAW: Prodigious Accumulator of Wealth

I am clearly a UAW to the max!
Actually, if I bought a house, I wouldn’t be so far off. And that is where my financial realizations bum me out. With California’s skyrocketing foreclosure rates, this makes it prime time for me to buy. Decent houses in my neighborhood: during the house buying boom the houses were worth: $400K. But now, they are only worth $159K! If my finances were in order and I had at least $5K saved up – I WOULD BE ABLE TO BUY MYSELF A HOUSE! And I would be $58K short to being a AAW.

But, “to every downfall there is opportunity waiting”. What is my opportunity? My opportunity is now realizing what goals I need to set for myself. Pay off the debt. Save, save, save. And eventually, buy that house.

That is the whole reason I am writing this blog. To prove to myself that I can work with my family to get out of debt; to build a financially stable life; to take a vacation; to retire comfortably; to teach my kids about money and give them the proper tools/knowledge to not make the same money mistakes I made, etc…

I remind myself that I have come a LONG way from my roots: being raised on the Welfare system, raised around drugs, having no financial knowledge, being raised in foster home(s), being victim to abusive relationships, being unstable, being flighty, irresponsible, etc…

I played victim & woke up realizing ‘playing victim’ is not the answer. “Take hold, Christine. You are responsible for your own actions, your own future.” I did. I am taking hold tight with the reigns. If we’re going to do this, lets do it right!

Within these past 5 years I have:

Obtained my Associate Degree in Biology
Obtained a fantastic job in a Research Cancer Hospital
Held down this job for 5 years
Increased my salary from $13K to $65K
My children are stable
1 year until my Bachelor’s Degee is finished

I have done a hell of a lot in 5 years! So, I want to do a hell of alot in the next 5 years.

Bow to the calculator of wisdom. What category do you fall in? And what is your realized goal?

Money Flying Away…

Now that I am actually trying to Wrangle my finances straight… I have this notion that money flies away. Literally grows wings and flies away! Yup, that’s gotta be it.

This Friday is picking up the pieces from a downfall. No one said this be fixed straight up, right? Although, we all wish it could be that way.

Anyhoooowww, even with that nice stress reliever of a bonus…we (my family) spent too much. We kind of regressed over the weekend – went to dinner, bought take out. You know the drill. I had to take out extra money to cover funds. Maybe not a significant amount, but it has caused me the unavailable funds to STOP!

So, as I was writing this blog…I was bummed because I wasn’t going to be able to pay that extra on Kohl’s. But, then… I remembered I said I was going to be adamant about sticking to my guns and using my increase in salary to pay off bills and NOTHING else – not to cover low funds, buy stuff, etc… Just bad debt.

So, I stuck to my guns. Shuffled a bill around (will still be paid before due date) and paid another mininmally less expensive one. Done. Got Kohl’s CC paid w/ the extra payment and normal payment. Now owe $187.00. YEAH! πŸ™‚

And my bills are still intact and on schedule.

Lessons Learned: Your family has to be with you on this project. If they aren’t than your going to have a hard time.
My husband is with me all the way. The kids…well, they will survive. I don’t think they can croak from complaining.

You have to communicate with your partner about what is being paid, how much, and how much is left to spend for the week on gas, groceries, etc… Work as a team.

This is a project worth fighting for. For the benefit of sanity. For the benefit of health. Are you working on your financial project?

Credit Card Interests are a pain in my…

I’m trying to get my Percentage down right?

But you know that $7,711.43 (say it, it hurts more: “seven- thousand seven hundred eleven dollars and fourty-three ceeeeeennnnnnttttsssss” we pay annuallyto have ‘pretty’ things. Bleck!!! I say, Bleck!

Think about what you could do with that much money? I want to travel. That amount of money will let my whole family of 4 travel nicely! Think about all that money that could go into our retirement fund? Or savings account? Or? or? or? You know, it plain sucks. Facing financial pains has it’s rewards, but it also has it’s “blecky” moments. Suck-le-bleu! <--expression of distaste.

So, what I was getting to… that interest my husband and I to pay annually kicked my Percentage up 0.02% today. Hmph!

Have you figured out your bad-debt-to-income-ratio?
What’s your pain?
I’d love to help share misery with someone. And then we can put our wonder-twin-powers (Hanana Barbara ring a bell?) together and work to making it better. : )

Method to the Madness!

So, I was mentioning how there is instant gratification in paying down the small debt first.Well, somebody has already claimed this Method to the Madness! Dave Ramsey has been seen on Oprah and has made quite a career out of this own life experiences. His claim is about “Life and Money”. I stumbled upon all this information above from a forum, I enjoy participating in, called Grow Rich Slowly. Filled with great people in similiar situations and great advice. Enjoy reading the article below.

Debt Snowball – The Truth About How to Get Out of Debt
Dave Ramsey

Myth: I should pay off the debt with the highest interest rate first to get out of debt quickly.
Truth: You should pay off the smallest debt first to create the greatest momentum in your debt snowball.

The math seems to lean more toward paying the highest interest debts first, but what I have learned is that personal finance is 20% head knowledge and 80% behavior. You need some quick wins in order to stay pumped enough to get out of debt completely. When you start knocking off the easier debts, you will start to see results and you will start to win in debt reduction.

Debt Snowball Plan
The principle is to stop everything except minimum payments and focus on one thing at a time. Otherwise, nothing gets accomplished because all your effort is diluted.

First accumulate $1,000 cash as an emergency fund. Then begin intensely getting rid of all debt (except the house) using my debt snowball plan. List your debts in order with the smallest payoff or balance first. Do not be concerned with interest rates or terms unless two debts have similar payoffs, then list the higher interest rate debt first. Paying the little debts off first gives you quick feedback, and you are more likely to stay with the plan.

Build Momentum
Redo this each time you pay off a debt, so you can see how close you are getting to freedom. Keep the old papers to wallpaper the bathroom in your new debt-free house. The “New Payment” is found by adding all the payments on the debts listed above that item to the payment you are working on, so you have compounding payments which will get you out of debt very quickly.

“Payments Remaining” is the number of payments remaining when you get down the snowball to that item. “Cumulative Payments” is the total payments needed, including the snowball, to pay off that item. In other words, this is your running total for “Payments Remaining.”

Debt Free!
You attack the smallest debt first, still maintaining minimum payments on everything else. Do what is necessary to focus your attention. Keep stepping up to the next larger bill. After the credit debt is taken care of, you are ready for the next Baby Step in your Total Money Makeover.

I have been broke. I know how scared I felt, and I know how fast I wanted to get out of debt. I know how you feel, and I have learned that what really works is unbelievably fierce, focused intensity.

Pay Down That Credit Debt

I love Motley Fool – they have great articles, advice, forums, seminars, etc… They are sincere and have nothing to hide. They will advise you how to climb out of the negative and go into the positive. I am not affiliated with the Fool, just lovin’ the fool. So, don’t be surprised if you see the Fool. πŸ™‚

Pay Down that Credit Card Debt

There are millions of Americans out there who have paid off heavy credit card debt, and now it’s your turn to join them. It won’t be enough, however, to just make minimum monthly payments. Here are six bigger steps you can take to get your debt under control:

Stop using your cards. The last thing you want to do with heavy credit card debt is add to it. Take all your credit cards out of your wallet or purse, and leave them at home (though you may want to keep one for emergencies — and, no, a really great sale or a cool new CD player does not qualify as an emergency).

Cut up the cards if that’s what it takes to stop using them. Some people keep their cards out of reach by freezing them in glasses of water. (I have them folded in a piece of paper, bound by tons of packing tape, and filed in a folder at work) ->not in my wallet!

Stop the flood of credit card offers. You can force credit bureaus to stop selling your name and address. Dial 1-888-5-OPTOUT to get the forms. If you’re searching for a low interest card, don’t wait for it to come to you. Visit a site like cardweb.com or bankrate.com to do your own research. this tip is great! i don’t get no-need credit card offers and I help save the planet all in one. pretty good, huh? One less tree. Love the trees. πŸ™‚

Always pay more than the minimum. The credit card companies are not just being nice when they require only a small minimum payment on your total balance. They calculate this minimum to extend your payments for as long as possible, to boost their profits. Scrimp if you need to, and pay as much as you can above the minimum every month. cranky. although, it makes you think about savvy free entertainment that maybe available – pack a picnic, go walking at a park (exercise & enjoyment all in one), hit the beach, ride a bike, hike, read a book, check out movies at the library… What do you do?

Plan your attack. Don’t just throw yourself at a mountain of debt without preparation. How many cards do you have? What interest rates do they charge? Which have the highest balances? Write down your balances for each card, and their interest rates. (There’s space in the workbook for this.)

Generally, you’ll want to start by paying off the card with the highest rate first, and then the next highest, and so on. If you want a quick boost, go ahead and pay off a card with a low balance, just to have one paid-off card under your belt. Paying off the small card, like my Kohl’s card, is offering me that immediate gratification I need since I don’t go shopping anymore.

So, after Kohl’s (which is almost paid off – yeah!)… do I go after the Wells Fargo, JCPenney, or Best Buy? WF is a big one… JCP I do pay interest on…Best Buy, I still have 0% and am on track with those payments to have it paid off before that free finance interest offer expires… Hmmm… I think we are going to have to pay off JCP! $911.00. I still need to think of what my family’s reward is for paying Kohl’s off, too. We are thinking of a decent night out at the beach with dinner. No more than $100 reward.

Reduce the interest rate. Most credit cards charge anywhere from 16% to 20%, which is huge! But you can negotiate with your credit card company for a lower rate. Particularly if you’ve had any of your cards for a while, take advantage of being a faithful customer, and call them up to demand a lower rate. Shoot for 11% or 12%. You’d be surprised at how easy it is. Haven’t done this one yet. Although, I noticed a month ago that my Bank of America interest rate automatically went down. That is was a nice surprise!

Consolidate your debts. OK, so you know what the interest rates and outstanding balances are for each of your cards, and you’ve reduced the rate on at least some of them. Next, consider combining your debts onto one or two of your lowest rate cards, if you’ve got some credit room on them. (If you’re maxed out on those cards, then forget it.) Simply call your lender and ask how to transfer funds.

If you’re making payments well above the minimum, have reduced the interest rates on your cards, and have consolidated your debt, then you’re in good shape with your credit card debt.

Good luck with you CC debt. I thought this was useful advice to post for all to see. Spreading the word.

Question: do you pay your debt from Largest-to-Smallest or Smallest-to-Largest????

Here is my take: if we didn’t take the initiative to pay our debt down in the first place than I would have tons of interest to owe anyway for the rest of my life. So, I may technically be paying more interest starting smallest-to-largest, but I think that continuous gratification will really help to keep me on track.