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Stephannie’s Debt Introduction

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Note: Stephannie has taken the time to provided the following post to show why she thinks she would be a good blogger for BAD. Take the time to read her story, then ask any relevant questions that you might have. This is part of our attempt to find the newest blogger for BAD. You can find more information about it here

My name is Stephannie, I am 33 years old and my husband and I suffer from debt regret. I can’t say that it’s always been this way. I had no problems with debt when I first started to accumulate it but, more on that later. Let’s do background first. When I was growing up finances were not something of which my parents spoke. I don’t ever remember hearing about a household budget. It was absolutely taboo to mention how much you made and you never, I mean NEVER asked someone questions about their income or their financial situation. My mom was always very frugal but my dad had no problem spending money, especially if what you were spending the money on was fun. I don’t remember them ever discussing finances within earshot of my brother and I. What we heard was ” We can’t afford that” from my mother and “You only live once, right?” from my father. Needless to say, by the time I got to college I wasn’t exactly prepared.

My debt story truly began when I started college. Luckily, my parents paid my tuition so that I wouldn’t have to take out any student loans. I worked part time to pay for books and other necessary things that I needed for school. The problem with this arrangement was that if all of my money went to gas, books, and supplies then how on earth could I pay for important things like clothes and going out? It did not take long to find a solution to that problem. One glorious day as I walked through the campus courtyard I saw a table set up that was giving away t shirts. Who doesn’t love a free t shirt, right? Well, there was a catch of course. In order to get the shirt you had to fill out an application for a credit card. I swear bells rang and angels sang. Not only could I get a free shirt but, I could also get a magical card that would buy clothes that weren’t even close to being free. Let’s just say it didn’t take long for that card to start smoking from overuse.

Once I was introduced to the fabulous world of credit cards I basically lost my mind. The first one was so easy to get that it was closely followed by a second and then a third. It was completely doable to only pay the minimums and I was living a fantastic, carefree, well dressed life. A couple of years into college I met a wonderful young man. Three months later we were married. It’s pretty safe to say that we were not financially prepared. We did not even talk about our personal finances until a few months after we were married. It then became clear that while we were both sharp dressers and excellent accumulators of fabulous “stuff” we were not exactly money managing geniuses.

The early years of our marriage were not exactly spent living large. Between the two of us we made about $22,000 a year. I had a monthly car note of $250 and we rented an apartment from my parents for $250 per month. Our combined credit card debt was about $6,000. With all of this information in mind I’m sure you can see that for us, the next logical thing to do was to have a baby. It’s really amazing to me how two relatively intelligent young people can make such terrible decisions. Ah, youth. Anyway, our first daughter was born in 2002 and in our infinite wisdom we decided that I would quit my job and stay home with the baby. This lasted for exactly one year.

Through the next couple of years my husband and I worked, paid bills, raised our daughter, and paid some more bills. It’s funny, I can distinctly remember thinking that if either of us were to ever make at least $20 per hour then we would be free of our money worries. Doesn’t sound like marriage and a baby made me much smarter, does it? In 2005 my mom and dad sold us a rental property that they had owned for many years (it was actually their first home and we lived in it until I was about 10). They were generous enough to sell it to us at a price well below market value and also allowed us to live with them for a year while we put every penny we had into renovating it. Because it was such a great deal my husband and I thought it was a good idea to take a loan out for more than the price of the house so that we could pay off our other debts which, of course, had just gotten higher. Woohoo, debt free!!! Nope. We were debt free for all of about 2 months before we took out a couple of loans, put some more purchases on credit cards and bought a more expensive vehicle. I swear we are smarter than we sound.

In 2005 my husband interviewed for a great company and if hired would be paid about $15,000 more a year than he currently earned. We got the phone call in July with the job offer and in November I was pregnant with our second daughter. We carried on for about two years with little changes in our debt. Our lifestyle “improved” significantly but, we felt like having debt was just the way things were done so we made no efforts to get rid of it.

I feel like this is getting terribly long so, I’ll cut to the chase here, and if chosen I’ll go into more detail at a later date. After a few years of living in the house we bought from my parents a house came up for sale in their neighborhood. We bought it and turned our first house into a rental. Our debt currently consists of two mortgages, 4 credit cards, one vehicle loan, one furniture loan, and one signature loan at our credit union. We also have a decent amount of medical bills due to some health problems my husband has had over the last year.

A little over a year ago I started to feel like getting out of debt was the best, and more importantly, the right thing to do. When I first started to feel this way I started to look up any blogs I could find that were written by people dealing with the daily struggles of paying off their debt and becoming debt free. That is when I found Blogging Away Debt. When Claire decided to stop blogging I really wanted to put my name in the running but, I was hesitant because I felt like we have made so many mistakes when it comes to our finances. Now that another opportunity has come up I don’t want to let it pass me by. There is still a lot I don’t know about how to reduce our debt in a smart way but with all of my research I’m learning new things all the time. I think it would be so good for me to share what we are dealing with and to get feedback from others who may see things in a way that we have not thought of.

Oh, and just one more important piece of the puzzle. We live in the south and my husband works full time and makes well over that magical number of $20 an hour. I ran my own business for 3 years but, 6 months ago I went back to work full time so that we could try to really put a dent in this debt. Needless to say, my younger self’s thoughts about money worries not existing if we were to make at least $20 an hour turned out to not be true. I’m sure you are totally shocked.

I would rather not get into hard numbers until after a decision about the new recruit has been made but, I will say that our total debt is around the $200,000 mark. This does include both mortgages, we feel like they were both good purchases from an investment stand point and about a year ago we refinanced them both for 15 years at much better interest rates. We also have a home which we have recently (2 months ago) inherited. While we do not owe anything on it, it is costing us a bit in upkeep and we have yet to decide what to do with it.

I’m so glad I got a chance to do this and if I’m chosen, Yay! If not I’ll be so excited to see what the next person has to say but until then, please feel free to ask any questions you may have!


November

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I have updated my debt balances and now I provide a rundown of my basic monthly expenses.  I’m sure there will be places I can still cut but I have to say that looking at where I came from just 9 months ago, I’m pretty proud of what I’ve cut out on the homefront. 

 Today’s post will tell you what I pay to keep my household running and meet consistent monthly obligations.  This does not include groceries or the incidental spending money I carry (which I have reduced as well). 

I currently bring home $3282 per paycheck, every other Friday.  Please bear in mind this will reduce after January 1 because of new withholdings for insurance and taxes and such.

Rent:  $1795

Utilities: $150 (budgeted amount but it is running around $80-$100 right now, peaks near $300 in the summer.  I have been rolling over the extra.)

Water:  $50

Cell:  $70

Internet:  $32

Life Insurance:  $32 ($500,000 policy)

Insurance (Renters and Auto):  $75

After School Care:  $195

Piano Lessons:  $90

Gym: $25

TOTAL:  $2,514.00

I will explain my automobile situation when my divorce is final. 

My minimum credit card payments on the three outstanding debts totals $1070.  I paid an additional $1,100 this month.  I had way too much debit card bleed in the month of November (like $500 worth of bleed  🙁 )  It all comes from not planning, not being prepared and then just plain ol’ frivilous spending.  I hope to do better in December. That’s going to be a challenge and not b/c I go crazy buying gifts but b/c things get SO busy with the kids, family AND at work (everyone wants settlement $ for the holidays) that I do not have time to plan well.  That is the KEY and in these final days of November, as I’ve dissected my spending, I have to focus on planning for December!

So, taking the $2,514 and adding the $1,070 in minimum payments we have a total of $3,584.  I have about $2,000 in my checking account right now and tomorrow is payday.  I am currently hesitant to sink that into debt b/c of the divorce situation.  That checking account money is separate from my emergency fund.  I just moved it to an account that I do not have a debit card for b/c I am NOT doing well on the debit card front!!!

Now, talk amongst yourselves.  😉


Budget Talks.

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The talk went well.  There was good news and bad news.  The good news is we are going to put the “found” money in savings…so our emergency fund should increase by $400 by the end of April.  That keeps us on track for the goals I set forth back in early March. We decided on $1600 as our emergency fund goal.  It’s a long story how we got to that number but we are both happy with that goal. 

And now the bad news…as to our debt payoff approach, it’s a “snowball hybrid” of sorts. We have decided that we will pay off the second line of credit of $145 this week.  That’s just to motivate us to scratch one more off the list.  Then we are going to work to knock out the debt with higher payments–not the highest, but not the small $25 minimum payment accounts either.  More specifically, we are going to snowball the minimums from the two we’ve paid off (the $60 something first one and the first line of credit= $45 freed up) to the Dad debt.  That will pay him off in June.  That will then free up $145 in minimums to go to that heinous 24.9% store credit card with the approximate $2000 balance.  That card has a $105 minimum payment.  By increasing the payment to $250 in June we estimate that one will be paid off in 10 months.  Let me take a moment to express just how much that sucks!  I was sure those calculations were wrong but that is the beast called “denial” creeping in again. Hello.  It’s a 25% interest rate!  What would I expect?!  Totally stinks. 

Next, we discussed tackling the Discover card that sits right around $7,000 @ 18% and with a $140 minimum payment.  Using the snowball we’d be paying $390 per month toward that and using a very basic calculation that would result in a 1 year, 10 month payoff timeframe.  That’s looking pretty far down the road but that is good to keep all of this very, very real.

On the upside now–digging deep to find an upside–these numbers do not reflect any additional income we can put toward this mess.  We aren’t considering an income increase,we aren’t consider any additional money we free up by cutting monthly expenditures and we haven’t taken into consideration the $400 extra per month that we will be putting into the emergency fund for now.  I have to keep those numbers at bay in the calculations but I can allow myself to keep them in mind so I don’t go running out into traffic!  🙂  Good thing I’m a pretty upbeat person or I could see me spiraling into a very dark place! 

Until next time…

 


Debt Update…

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OK. Ready? Italy was unexpectedly tough on our finances.

We didn’t expect to have to pay a cover charge for each meal. We didn’t expect the exchange rate to be so poor. And we didn’t expect the high entrance fees to see the sights (and by high, I mean 50 euro – EACH).

The exchange rate surprised us the most. We made the majority of the plans in June – when the exchange rate hit its lowest. We traveled in October… the rate was nearly at its peak for the year.

I budgeted high thinking I would come home with extra money, money I could use to make a large debt payment.

That didn’t happen.

In fact, I had to stop by an ATM three times before returning home.

How bad was the damage? $500 out of our emergency fund. Eek.

Upon returning home, our water heater broke, taking out an additional $300 from the emergency fund plus another $35 for miscellaneous parts.

Add that to the $150 we had to spend on cleaning supplies and replacement curtains thanks to the stupendous house sitter.

Are you following my math?

We have $15 left in our emergency fund.

In the whole scheme of things, if this is the worst of the damage of an international vacation, it’s not bad. I just hate another month of no progress. Minimum payments this month so we can replace our emergency fund fully.

Here are the new numbers:

• Original Debt: $38,495.86
• Added Debt: $1,781.50
• Total Debt: $40,277.36
• Paid: $30,546.19
• Remaining: $9,731.17

• Broken Down
• Auto Loan 1: $0
• Credit Card: $0
• Student Loan: $8,781.17
• Auto Loan 2: $0
• Vet Loan: $950.00


Paying bills non-conventionally?

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I received the credit card/vet payment bill today for Hutch’s hospitalization (He’s doing WONDERFUL by the way. I went running with him last night and it was awesome!!)

$1781.00

I lost my breath.

But hey, according to the paperwork, if I make minimum payments…I can be paid off in 13 years. It annoys me that this credit card company hopes my debt may outlive my dog.

As I stared at the bill, I was annoyed with myself. Dave Ramsey encourages people to live outside the box rather than have a natural reaction to accrue more debt.

I didn’t think outside the box. I threw in the towel – and quickly at that.

The fact is, there will ALWAYS be a reason to jump back into debt. Car repairs, hospital bills, home repairs… VET BILLS.

I know it’s only a two month hiccup but I can’t help but wonder if I had offered to scrub dog poop, would have let me?

I’m working on changing the way I think. I’m slow – but I’m getting there.

What I really wonder is…

What is the strangest way you have paid a bill?

Have you cleaned your dentist’s home? Have you cooked for your mechanic? Have you babysat for your plumber?

My husband installed an exhaust fan for a 6 pack of beer so trust me – I know you folks are out there.