by Jim
Well here we are in March, and like many people pointed out, I am a little clueless about lots of things, and that I could have prevented many things. I did make the choice to not go back to work. Do I regret it, to be honest most days I do not. I see my boy growing, and once he goes to school maybe I would go back to the rat race. Probably not, I have a entrepreneur spirit, I like to work for myself. Yes even if it makes me far less money. But I could scale it up, if I devoted more time to it.
What many of you don’t realize is that… At this time last year I had three store credit cards, one jewelry card, three credit cards, two personal loans, one furniture loan, and one car payment. I paid roughly 12,000 in debt since the beginning of my journey. I do call that quite the accomplishment, considering how much income we bring home.
| Rent | Electric | Oil | Verizon | Auto/Renter Ins. | |
|---|---|---|---|---|---|
| January 2014 | $600 | $105.44 | $1019.79 | $76.35 | $369.28 |
| February 2014 | $600 | $84.46 | $388.90 | $76.59 | $134.52 |
| March 2014 | $600 | $89.10 | $358.90 | $76.54 | $118.48 |
| April 2014 | $600 | $109.67 | $ | $76.54 | $126.50 |
Now these aren’t paid yet, but I do have all information, so I might as well put up the information. Considering the weather, I wouldn’t be surprised if there is another oil payment that will be made this month as well.
Now unto the credit!
——-
| APR | Current Amount | Last Month | Percentage of Change | |
|---|---|---|---|---|
| Store Card #1 | 24.99% | $80.40 | $203.18 | 60.48% |
| Store Card #2 | 22.9% | $442.44 | $532.55 | 19.97% |
| Credit Card #1 | 13.99% | $3234.59 | $3279.37 | 13.99% |
| Personal Loan | 15.5% | $1626.38 | $1725.63 | 5.75% |
| Car Loan #2 | 12.99% | $17914.69 |
So there you have it. So what should my next move be? People suggested that I immediately start my emergency fund. Is that what the consensus thinks?
Clearly, I’m not busy at work 😛
Question, do you have a fixed amount that goes to your debt (I might have missed it in your 2nd post). ?
Do you currently have anything in your savings? And do you already contribute to it? It might help to just present a monthly expense budget (averaged out since you have those swings) then we could probably help identify the next step. Is that a reasonable amount (i really have no context) ?
It looks to me like you could wipe out all but CC1 and the car loan in a fairly short amount of time. They only total to a little over 2grand and I think I remember you saying your income was around 8grand in one of the comments. With rent of $600 (SO JEALOUS) – i think it could be a fairly painless process and then you could work on the other two and build your fund at the same time.
I guess, what are your goals financially? Get out of debt this year? next year? in 5 years? Have $x saved?
Personally, i think if you already have something small in your savings (somewhere around $1000) then keep contributing a small amount to it monthly ($100-$200), while you attack your cards.
wow, $1000 for oil! I’ve never had to use oil so no idea how that works – guessing it’s for heat? That’s more than your rent!!
I definitely would get rid of the store card before trying to fund an e-fund. That’s a painful interest rate!
Hmm I could have sworn I replied to this…
Yes, up until the car broke down I was paying $1000 toward my debt.
I have nothing in savings, the little I did went toward oil this winter. I am not sure what a monthly expense budget is. I have always budgeted my debt, and I know a rough about on the utilities, but other than that I didn’t. Maybe you can explain to me what you are speaking of?
Yes, even CC1 was on the slate to be wiped out this month… until the car payment. This actually ate up the debt snowball I had going of around $250. My next two were the store cards and then the car payment. Which would have gotten me up to around $450. It was looking that I was going to be debt free by the end of the year.
Ohhh no… I wish my income was $8k every month. It is around $3k. Don’t be jealous of my rent, this is actually on the high end over where I am living. Everything around here is really run down.
To be honest the only goal financially short term I have right now is to get out of debt as fast as I can, but while living to my goal of being the best possible father/husband I can be.
Like I said don’t have anything in savings. And I am not sure if I should crank up the card payments until I have something saved, simply because I am trying to get out of the thinking I have bad luck. I just was not prepared.
Yes the oil sucks. But it wasn’t that bad the last two years. If I compare it from 2012 from Jan-Feb I spent $2601.06 and $7200 for rent. In 2013 it went up to $3370.55/$7200. And if it isn’t that bad of winter and I don’t have to get oil this month (which isn’t probably the case) I am still on par with what I started out in 2013 with.
I was actually pretty confused trying to follow the income/budget conversation in the last post.
But the bottom line is: you actually don’t have THAT much debt, about 5K in “terrible” debt and then the arguably “bad” debt in the car loan.
Keep plugging away, cut down your eating out, cut back on the extra spending on pictures packages and cigarettes, and you could really be done in several months? (with the “terrible” part)
I think that a modest emergency fund ($300-500) would be a good place to start. You can continue to add to it by $50-$100/month while you crank through this debt!
I was thinking the same thing, and I will be plugging away and cutting down everything. I am not sure about the cigarettes, if my wife does then it will show, but I will not force her to. I think it is a great suggestion on where to start. Thanks!
I must say – you are very brave Jim and I admire how you are reacting to all of the statements and suggestions about your financial situation. I am sure it is not easy to read many of these comments, including my own.
As far as grammar is concerned, I am a former English teacher and I really don’t think it is that important. I understand the points you are trying to make perfectly and I think it is more important that you concentrate on your debt goals rather than trying to improve your writing skills. Since we all seem to understand your communication, I think you are doing just fine.
I again will return to your attitude toward the debt and your finances. When you say you could go back to work but you prefer to work for yourself, I do understand that this is how you feel. But I think the question you MUST ask yourself is “can I afford to do this?”. Can you afford these big picture packages, can you afford smoking, can you afford eating out, etc. ??
Debt reduction is about deciding what you can afford and making the difficult decision to abide by that until your debt is retired. As someone said, if you really cut back on the eating out and incidentals, you could cut the credit card debt in a matter of months. Would taking on a couple of night shifts for six months really make that much of a difference in your relationship with your daughter? Just saying…..
At any rate – congratulations on eliminating the $12k in debt. That is a great accomplishment. I think if you can get your goals set toward debt reduction rather than how you want to live your life, you could make some serious progress very quickly.
Good luck.
Hi Lynn thanks for the kind words. But as I read this, I had to chuckle and think that she wouldn’t say this after the one comment I left on the earlier post. For the most part I have thick skin, it doesn’t usually bother me what others say about me. I know they are trying to help, but when I read a comment that is purely criticism with not nugget that I can get out of it, and they are basically calling me an idiot. Well, that can hurt a tad.
You are right about the grammar. They say that the best way to blog is to write like you talk, it helps the audience know you better. That is what I try to do, and what I have been doing over numerous blogs I have written on. Funny thing is, this is the first time I heard these comments. But at the same time, this is only blog that I wrote about something so personal.
I totally agree with the debt reduction part of this comment. And to be honest, we were strict to a few things, but we were about around the same amount of money spent eating out. But both the wife and I have come to an agreement that this is an area we will work on.
As for the comments on working for myself and will it affect my daughter and my relationship, I honestly think it would. You see, I am the step father. We were making great strides at this, and right around the time my wife and I got married our daughter started calling me Daddy Jim Jim. Well we come to find out that her real father started saying stuff and she told us she wasn’t allowed to call me that. And from that time she hasn’t.
I did have the conversation with her, that she can call me whatever she wants. I wouldn’t tell her what she can and could not call me, to go with her heart. But she hasn’t… I, again had the talk with her right around the time my son was turning one. I told her that he would be calling me daddy, but she still could call me whatever she wants.
With that said, I could take on some additional freelance work during the times that we do not have her. I am not that positive I can do night work, depending on when it ended… Simply because I get up at 4 a.m. every morning. But I can probably take on more during the day. I will search for more work.
Let me ask you something… do you think it one or the other about Goals? Can’t you have both? Debt Reduction Goals and How I Want To Live My Life Goals? Like the way I am reading this, well it seems you are saying it is one or the other. I don’t see it that way. I think you can have both. Just something to ponder…
Jim to answer your question, I think you can have two goals at once but I don’t think you can necessarily achieve them both at once – particularly when one goal is getting out of debt. This is my take (and you know the old saw about free advice) on debt. It is financial cancer.
If you have physical cancer, you can certainly plan to change your diet and live a healthier lifestyle and enjoy your life more because of that – BUT first you have to have that treatment of surgery, chemo, radiation whatever before you can get to making those positive changes.
The cancer of debt radiates to every other area of your life whether you realize it or not. There freedom of being debt free cannot be underestimated. I retired 3 years ago at age 61. I could afford to do this because we owed nothing and had adequate income. I am happy as a clam at home. 1 year later my husband was diagnosed with two separate cancers in 10 months time. He is doing well and we are very blessed. But looking back, even though I have LOVED every minute and facet of retirement, I should have hung on a few years longer to make us even more financially secure. Hindsight is 20-20. My point is you need to be as fiscally secure as you can because life has a way of throwing you for a loop.
My husband’s leukemia medication is $8k per month – yep per month. Luckily we have insurance that pays it but that was a real wake up call. We are frugal people who have saved all of our lives and have paid off cars and home and have a reasonably large amount in savings. But middle income people can’t save enough for an $8k per month hit on their budget. You are young and the sooner you can make yourself debt free, the more prepared you will be financially to cope with what life has in store for you and yours. You cannot underestimate that time factor when it comes to savings and investment. I envy you that.
Hope this wasn’t too much info.
Lynn,
We obviously disagree about this, but that is ok… Just promise me that once you see me hitting debt with as much as I can and still doing what I do, that you will say something like “JIM YOU DA MAN!” Something like that, so I remember.
I am glad to hear that your husband is doing well! I completely agree about being fiscally secure because of life. But at the same time, you should not have give up your dreams and goals to do this.
It wasn’t that much info, and I appreciate every word you said.
I give you all the credit in the world for making this effort right now! Be prepared, I will always try and steer folks toward the most frugal option but doesn’t mean I am not cheering you on!
Something to think about – shouldn’t your Debt Reduction Goals be part of your How I Want To Live My Life Goals? Personal finance doesn’t happen in a vacuum, it’s all in the context of your life. Why do you want to pay off your debt? So you can be financially stable and afford to live comfortably on your self employed income and spend time with your daughter, right? Paying this stuff off is just a step along the way to that life you want to live. I see the choice as whether you are focused on the big picture, long term reward or the present day, short term reward. You can be more comfortable now, or you can get where you want faster. It all depends on which one is more important to you.
I am finding the whole debt story a little hard to follow. Unless I go back to one of the first posts where you list all of your debts, it’s just confusing. In addition, I don’t think you are particularly well organized. I think that shows in the writing and in the budget. Organization is a skill that can be learned, but it’s a mess to follow along. With three other bloggers, you’ll have to get things better organized or from a reader’s standpoint, it’s just easier to skip and follow the other stories. I know it might take a while but you’ll have to work on the posts a little more.
A few comments overall:
1) Your budget categories need to be refined. Groceries should be groceries and I remember one item being listed as, “ATM” which isn’t a category. I think what is tripping you up is trying to classify a :receipt for a bill of goods” into a single “category”. Instead, break the receipt down into the categories and then record it. For example, let’s say I go to the ATM and take out grocery money, go grocery store and purchase a week’s worth of groceries and go over my cash limit and therefore put the remainder of my groceries on my debit card.. Next, I go to Walmart and purchase several items; let’s say I purchase some clothing, some groceries, some household cleaning items and some caulk (household repairs). I might go to Costco and do the same thing. I also get gas and maybe some fast food on the way home. You can see there are a lot of categories that I covered in those errands. When I get home, I take all of my receipts and open my bill notebook and post the items in each category in my bill notebook. I would record them like this: all groceries in the food category (so this is the cash amount I spent and the debit amount). Next, I take the Walmart bill and divide that bill into three categories: food, clothing and household. I put the dollar amount into my food budget, the clothing amount into my clothing budget category and the remaining items into my household category. I don’t worry that caulk is really a household repair item but rather I just put it into my household category which is my non-food items category. For the fast food, I keep that in a separate budget category called, “restaurants and fast food”. That way, I can see if I am eating out too much or going over my category. I purchase gas twice a month and put that in the gas column. If I went to Costco, I’d break it down the same way. I hope this helps a bit. If you break things down a bit more, you won’t have that mystery spending listed as “ATM” etc. or half your food into different categories. You can’t control what you can’t measure and you have to be more decisive. No More Harvard Debt had a good budget series. I think the reason the debt books didn’t help you (your words) is because you have trouble organizing. I was a Professional Organizer so I worked with people who saw things “differently” and helped them get a handle on their offices and in many cases their budget. One common thread was that many of them did not know where there money was going.
With regards to your debt situation, I think you need to return to work full time and work for a large company with good benefits. Once you get your debt paid off, then you can freelance or do whatever. $1500 isn’t a whole lot of money with a wife who is disabled, two children and a lot of debt. Here is what I am thinking. If you work for a large company with good benefits, there will be several advantages for you in no particular order: health insurance for the wife and kids. You mentioned your wife has mental health issues as well so you’ll need good health insurance. I am assuming she has Medicaid right now which doesn’t cover much. Also, you’ll have a flexible spending account that where you can save pre-tax dollars to pay for healthcare. You can also use pre-tax dollars for daycare as needed. Many companies also have some other benefits like discounted legal fees for employees. With your legal situation, it would be helpful to get some good legal counsel at a discount. Also, you’d have access to a 401(k) plan and maybe a company match. A company match is free money. You really need some great benefits with the medical situation. Also, you need good health insurance for yourself. Company benefits included disability insurance which would be helpful if you get injured or disabled. In addition to the benefits, you need to be making more money to make a dent in the debt situation. I know you are committed and love your family, but the income isn’t enough. Also, you mentioned about wanting another child and I don’t think that would be smart. If your wife has anxiety and depression issues and can barely take care of herself, it would throw things over the edge if you had a child with autism or ADD or anything that would require a lot of medical. Then you’d be in a situation where you are trying to take care of everyone and you’ll be in over your head in no time.
You could always go back to work for a few years until you get your finances in better shape and then if you wanted to leave and start your own business, you could. As it stands right now, you aren’t on very solid financial ground.
Exactly!
See Mary I think it is exactly opposite of what you are saying. I believe I am highly organized, I just have a problem trying to convey what I am trying to say. Because let’s be honest… Anyone that is on this debt journey, it is something they are highly passionate about. Everyone has their own way of doing their budget, and everything I see in what I read when I look in my Quicken Account, I completely understand.
As for skipping over me because of this, well that is the choice of the reader I guess. But so far I am the only one that is putting out this kind of information (plus it was my first month doing so). Do you read any blogs that show their income statements? Like for Instance Pat Flynn, of Smart Passive Income. This is a work in progress, and I am sure once I find the system that really works conveying everything I am trying to get out there, then it will work. My written out starting budget, that wasn’t even a budget. That was me telling everything where every dime of my money went. I didn’t have a “Miscellaneous” category or a Monthly Car Expense Variance, like the other bloggers. I broke every penny, and it was for this month only. Why did I do this? I was trying to get some help on how to make a budget, yet most people criticized me.
Onto next paragraph…
The ATM, happens once in every six months or so. It told me that I took cash out for something that I couldn’t use my card. I never carry cash, I know it had to be a family outing to a place that needed cash. In this case it was for a Chinese Auction to help a foundation that a friend started. I know exactly what my money is for. You might not like how it is put out there, and after this month you won’t see these reports. I will cut down the categories into into generic terms like what you are used to seeing.
See I see what you are saying on how you break down each category. And to be honest this method would not work for me. Not saying that I wouldn’t be open to it, but my monthly groceries change each month. I have a huge stockpile that I could live off of for at least a month or two. But with couponing one month I could buy lots of groceries, while the next month might be a lot of household stuff. It varies month to month, and I rather keep it under my Other Shopping Category, so I can see what my average is on my couponing. I know it should be around $300-$400 and I know I will get at the very least $1200-$1600 worth of products. I list it under ATM, so I can remember when my bank refunds me for ATM fees, that I don’t have to search what categories my last ATM purchases went.
And like you said many of them didn’t know where the money was going, the fact is you ask me what any expense in my account is… I go to my Quicken and know exactly what it was.
I will tell you this, I WILL not return to work for a large company. I will contract myself out to a large company at times. But I will not go back to being a w2 worker. This is your mindset, and this is my mindset. No $1500 isn’t a whole lot of money, but you know what it is… It is a lifestyle income. I have many things laid out, that can lead me into making a lot more, that can allow me to live this lifestyle and still make money. In fact, two of the things might come to fruition sooner than expected.
My wife and kids have great insurance, me on the other hand, is a little more cloudy. She isn’t on Medicaid but rather Medicare, which covers a WHOLE lot. More than any insurance I have ever had.
I like the idea of an HSA and FSA, for myself… and was planning on looking more into that. We don’t need a daycare, for my wife and I would rather teach our son before he enters into school. Discounted Legal Fees, I have available with one of my Network Marketing Companies. You are right about maybe getting some help on my situation, that I never thought about.
Everything you talked about after the legal counsel, you nailed everything perfectly. I would love a 401k with a company match. I would love better insurance and disability. My wife and I decided last week, that we would hold off until the bulk of our debt is paid until having another child. And just yesterday, she went back on her medications.
Have you ever read Rich Dad Poor Dad’s Cashflow Quadrant Mary? I just think that you and I are on different quadrants. Right now we are on different quadrants You being an E, me being a S. I am trying to go to the other side of the quadrant, first as a B, then as an I. If I lost you, please google it. But basically it just boils down to we are of two different mindsets.
See the thing is… if I did go back to “work” (Not sure what you consider I am doing) I won’t leave and start my own business. I care too much for my family, to put them through what we are currently going through again. I would have to start from scratch again… and like I said I have laid many lines and I really believe soon one of them will bite, if not after I knock the debt out, we can survive on this fairly well. No I am not on very solid ground, I might have been later this year, if not for the new loan. But for now I know that I can still knock out this debt!
I loved everything you wrote here, and I had even more fun writing my reply. I thank you very much!
Mary said it all!
I wish i can one day live where rent is $600 for a family of four! Which state do you live in?
haha, we live in Central Pennsylvania. And like I said that amount is pretty high for rent over here.
Random question: what is the oil for in the utilities? I’ve never lived anywhere where oil was a utility. Just electric and gas. Is oil gasoline? Or something else?
Basically Joselyn, it is the natural resource we use for heat.
Jocelyn, it’s more common to have an oil furnace in the Northeast-New England area. Basically, somewhere on your property is an oil tank that feeds fuel into the furnace. You have a contract with a local/regional oil company who comes every fall and fills up your oil tank, and then depending on how fast you use up the oil you may have to have them come and fill up multiple times during the winter. Now, in the late summer or fall you can agree to buy the oil at a set price for the winter or set up a payment plan with the company, but you’re always gambling a bit that 1) you’ll buy exactly how much oil you need at a price you can afford, and 2) you won’t run out before it warms up in spring, 3) you won’t get stuck with a ton of oil you don’t need in case of a very mild winter.
So a really cold winter like this, oil prices have been a lot higher because of demand, you’re buring more oil, and it’s thrown 90% of budgets off because no one really predicted 3 solid months of polar vortex.
Kerry,
I actually looked up both of these options. My oil company wanted all money upfront for option one. And for option 2 I would pay a certain amount every month, which is like $.20 more a gallon, they said it actually comes up to about $200 more a year, but they give credit back if you payed on time for the full year, so it would equate to about $100 more. I decided not to go this route because there is like five months that I don’t have an oil bill. It might be great for budgeting, but I just couldn’t justify paying every month.
As you were saying about the polar vortex, well if I was going since I began putting oil in my tank in October, I paid $3007, since that time. This isn’t how my report I made up is, but I did add it up for another commenter. I usually go by the year. So let’s compare by the year. In 2012 I paid a total of $2601.06, last year it was $4470.55. I know I will probably need at least another 100 gallons, so if I calculate what it is selling for today $3.589… I would actually pay less from January till now, compared to January 2012 – April 2012.
Thank you Jim and Kerry for the answers!
Jim – I really enjoy how you are putting it all out there. Yes, you do seem disorganized but you’re trying your best to sort through and develop a plan. You won’t reach this overnight!
I actually am in awe of your decisions to stay entrepreneurial without going corporate. Its great to know what you want and stick to your priorities. Seeing that you had success with debt repayment over the past year or so I don’t believe this decision is hindering you. Yes, you could go work for a corporation and get your debt knocked out faster. But debt repayment is also about balance and sustainability.
Angie,
Thank you! This is exactly the post I needed to read! So thank you very much!
I too think you are very brave in putting yourself out there. I can imagine it would be brutal to take on all this commentary on your life. I suggest that you take a few days off from these threads from today and maybe come back with fresh eyes in a few days.
A couple other thoughts to share. I too do some couponing and you can get some great deals. I suggest to stabilize the line item grocery (or whatever you call it) you give yourself a set (reasonable) amount to use for food or stockpiling of food and live within it. Right now you should be putting every penny towards an emergency fund. (literally find all the change in your house as well) You are better off with $750 in a Capital One 360 account then $750 worth of food that will take several months to eat. If you get hit by an uninsured driver tomorrow and need a insurance deductible I am pretty sure your insurance company won’t take peanut butter and canned soup in lieu of money. You need cash.
Also I hear you on your lifestyle choices. Just keep in mind that your lifestyle comes with a cost. (if I could bold this last sentence I would) If you die your wife has no insurance policy coming. No money to bury you. She and your son will have to move immediately (with no money for first months rent and terrible credit she is moving in with family or homeless), she will lose your car. These are the facts. There are some advantages to working for the MAN.
I really look forward to following your journey. Hang in there.
You are right. I actually just paid all my bills that I am liable for, plus threw some extra to it. I came up with close to $1600 I am throwing at Credit and Utilities (not including oil at the moment). After I really get a budget down and see where the rest of the money is going, I will put a percentage in my emergency fund.
My wife will have $400,000 coming in, if something were to happen to me. This is from my VGLI (Veterans Group Life Insurance) I pay $480 annually for this. That rate will go up when I hit 35. And up until July of last year there was an additional $450,000 on me in term life insurance. I dropped that only until I was out of debt. My children would also a monthly stipend till they were 18, if I remember correctly. Plus I would get free burial in a military graveyard.
I have nothing against the “Man” but I just see a better way.
Thanks for talking!
I am relieved that you do have some life insurance.
As you sort thru the budget don’t put pressure on yourself to make it perfect. You will most likely be tweaking it a lot at the beginning. And Google zero based budget. There is a Dave Ramsey link that comes up that gives you a clear definition.
Thanks I will do just that!
I’m relieved by the life insurance as well. My other major concern for you is retirement savings. You’ll want to do some thinking about how you will save for this in your post-debt life.
I’m new to this site, so perhaps it’s been covered already, but have you called to try and lower those interest rates?
If you haven’t already done so, I would get on the phone in the morning and try to reduce those pronto.
If I were you, this would be my first draft for a plan. There’s lots of room for debate, of course.
1. Make sure I’m set with cash for oil and any other such expenses for the next few months. Think of this as an anti-emergency fund. It would be an emergency if you didn’t do this!
2. Wipe out Store card # 1. Probably you would do this anyway!
3. Wipe out Store card # 2…if you can do it right away for a quick win, otherwise switch this with the next step.
4. Save $1k for emergencies.
5. Pay off personal loan.
6. Pay off credit card.
7. Save up more emergency fund – at least $5k minimum, most people would recommend more.
8. Take care of any insurance not adequately covered – life, disability, medical, dental, etc.
9. Begin saving something for retirement.
10. Pay off car loan – Refinance this as soon as possible, if and when you can.
It’s absolutely imperative to get some amount of savings going right away. Hopefully, planning ahead with expenses will get you a little savings for a while, let you knock out the two cards and then get a real emergency fund going. Most of this can probably get knocked out in a relatively short amount of time, but the car loan may take you a while. That’s why I suggest taking some other steps to get your financial house in order at that point. Hopefully, you can also refinance that to something a bit more reasonable by then. 🙂