Smurfette's Debt Gazette

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Smurfette
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Smurfette's Debt Gazette

Postby Smurfette » Wed Oct 19, 2016 10:57 am

Howdy y'all

I started my debt-free journey January 2015 with $30,000 in consumer and student loan debt. I'm halfway done, but need an extra kick to stay motivated, hence this journal. My goal is to be debt-free by October 2017. Here's my situation:

Debt #1: Navient Student Loan
Interest: 4.9%
Original loan:$8,500
Current balance: $0 :clap:

Debt #2: My Great Lakes Student Loan
Interest: 7.9%
Original loan: $9,500
Current balance: $5,198
Monthly payment: $116

Debt #3: Car Loan
Interest: 3.49%
Original loan: $13,000
Current balance: $5,067
Monthly payment: $275

Debt #4: VISA
Interest: 9.5%
Original balance: $8,000
Current balance: $4,556
Monthly payment: $260

Total debt=$14,821

Beginning in January 2017, I will be able to apply an extra $300 to my credit card payments. My short term goals are to pay for the holidays in cash, begin saving for a 2018 vacation, and increase my $1,000 emergency fund. My long term goal is to re-enter the housing market, after a short-sale in 2011 that dropped my credit score to around 590. (It is now about 690).
Last edited by Smurfette on Thu Oct 27, 2016 8:18 am, edited 1 time in total.

Smurfette
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Re: Smurfette's Debt Gazette

Postby Smurfette » Tue Oct 25, 2016 12:46 pm

I totally blew my budget over the weekend. I'm a 51 year-old grandmother and there's something about being around your grandchildren that makes you want to SPOIL them.

I was down to my last $200 with a week left before payday. I ended up spending $188 on toys, meals and a trip to the zoo. I had to pull cash out of my reserves to get through the rest of this week.

I'm not disappointed or mad; I just accept that getting my budget under control is going to take time and that I won't be perfect in every instance. That said, I have many budgetary challenges ahead over the remainder of this year:
1. Car tags--$222
2. Membership dues--$450
3. Christmas travel--$250
4. Christmas gifts--$400
5. Holiday meals (Tgiving and Xmas)--$200

Total=$1522

I only have $200 in reserves (this is NOT my emergency fund) so these upcoming expenses mean I need to ease up on paying down debt so I can pay for everything in cash. It's going to be challenging but not impossible.

My credit union has a program that will let you skip a loan payment in December. I will still have interest, but the interest on my car loan is inexpensive. My plan is to skip the car payment and allocate the money to either the holidays or to pay down my credit card. I need to crunch more numbers to see what makes more sense.

Smurfette
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Re: Smurfette's Debt Gazette

Postby Smurfette » Thu Oct 27, 2016 7:58 am

I admit it; I'm the most impatient Smurfette west of the Mississippi. I want everything to happen right away. Obviously, given my personality, I'm prone to Debt Fatigue--I just want every dime wiped away now. Not surprisingly, it's this same personality trait that created the debt. I've really been focusing on the psychology of who gets into debt and why. For me, I tend to be an impulsive spender who is fearful of money. This means I spend without determining whether or not it's something I can truly afford. I also have had poor habits with budgeting. If everything is routine, I can pay my bills, but then an unexpected expense or an expense that only happens a few times a year, pops up so I charge it.

Now that I'm older, wiser and committed to getting this right, I understand more about why I spend--I just need to continue to work on changing it---otherwise I will find myself back in debt again. I have pictures that I pinned to a bulletin board of WHY I want to be debt free, to motivate me over the long haul. I want to travel, boost my credit score, buy a house or condo and save more for emergencies. I have one year to go to clear this debt. I'm determined to finish this journey I've started!

Smurfette
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Re: Smurfette's Debt Gazette

Postby Smurfette » Fri Oct 28, 2016 8:42 am

Today is payday, which is a relief because I was out of cash. The good news is that I didn't damage my budget too much, but I will need to be vigilant for the next two weeks, so I don't run out of cash again.

I use a combination of software, a phone app, a spreadsheet and a notepad to stay conscious of my spending and where my money is going. I don't plan my budget down to the penny; that doesn't work for my short attention span. Instead, what I do is use two checking accounts. One is for my bills, the second is for my varied expenses. I use a notepad to calculate how much disposable income I have with each check, then transfer that amount to the second account, which has a debit card and overdraft.

This way, I know every cent in the second account is the disposable income I have for gas, groceries, gifts, and whatever else. If I have money left over, great. If I empty the account, then I'm broke until I get paid again. I set up my first account to automatically pay my fixed expenses, including money for an emergency fund. I use a savings account attached to my checking accounts to set aside money for infrequent expenses.

It's taken me years to come up with a money management system that works for me. It's not perfect, but it's highly effective and is not a total time suck.

DJFlare99
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Re: Smurfette's Debt Gazette

Postby DJFlare99 » Fri Oct 28, 2016 9:47 pm

Smurfette wrote:I have pictures that I pinned to a bulletin board of WHY I want to be debt free, to motivate me over the long haul. I want to travel, boost my credit score, buy a house or condo and save more for emergencies. I have one year to go to clear this debt. I'm determined to finish this journey I've started!


I'm just challenging you to think about this some more. What you just said here is "I want to be debt free so that I can spend more and go into debt more (presuming you are using debt to finance a house/condo)". And that your journey ends with the payoff of the debt you have listed.

When I read what you wrote, my first thought is of a dieter who aims to lose xx pounds. They work out, they eat less, they eat healthy, in a total concerted effort to lose the weight. Once they hit their desired weight, they start by loosening up and "treating themselves". And before you know it, all their weight is back.

Just food for thought (pun intended).

Masterlandlord
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Re: Smurfette's Debt Gazette

Postby Masterlandlord » Fri Oct 28, 2016 11:42 pm

With family things next generation you beat me 100-1. Grandmother at age 51? You do get children at early age in USA. I am uncle to my brothers children and my sister (who is youngest( that is 26 years has said that currently she does not want children, but that might change in the future. Personally if people ask me if I will get children in future my favorite answer is maybe (i.e not must have but possible and I am against abortion).

Economically... well I do understand you are burdened with American student debt system and children and grand children. My studies did not give me any debt nothing but we have lower salaries and more tax in my country Finland (northern Europe).

That said economically I started saving for my first apartment (this is the Europe term same as condo in USA). at 18 years age and semi seriously i.e not huge sums, but not very little either.

DJFlare99 is correct on that on frugal(saving) actions you do have a lot to improve. In addition it is not enough to pay of debts. Usually nowadays in my country when people go to negotiate a mortage they do have some savings for example 10% of the purchase value.

You are older then me, but the time when Bush introduced the system that anyone can easily get mortgage and buy house is gone. In addition I tend to negotiate with more then one bank to get the best deal.

We offer constructive feedback. Here are some basic frugal speech from Dave Ramsey:
Dave Ramsey Live 7 Baby Steps
https://www.youtube.com/watch?v=bU7HEIs3IWw

EDIT seems link url posting is disabled currently in the forums and it means unable to do technically, but you can find on youtube it easily simply type Dave Ramsey Live 7 Baby Steps.

Smurfette
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Re: Smurfette's Debt Gazette

Postby Smurfette » Mon Oct 31, 2016 8:05 am

I totally appreciate these comments on my journal and I have taken the time to read and carefully consider the advice--especially the counsel to be more frugal. Indeed, cutting my spending is my biggest challenge; I admit that.

One thing I might mention is that in addition to my goal to build up an emergency fund, I have stepped up saving for retirement. Currently, my savings rate totals 15% of my income, so all of the money I'm using for expenses, etc. is what's left in my check.

I spent last weekend with my daughter and grandson. We went to an indoor arcade/amusement park. I spent about $70 over the weekend, which is within my budget.

I've had three possible/new items pop up on my expense budget; 1) a trip to Denver in March 2017; 2) a trip to Minnesota in April, 2017; 3) a trip to Vegas in November, 2017. As you know, TRAVEL is high up on my list of WANTS.

My estimated budget for each trip:
Denver
Hotel: $100/night x 3 nights
Registration: $600
Shopping/Incidentals: $200
Gas: $100
Total: $1,200

Minnesota:
Hotel: $100/night x 2 nights
Shopping/Food: $200
Gas: $100
Total: $500

Vegas:
Hotel: $100/night x 3 nights
Food: $150
Flight: $400
Other: $300
Total: $1,150

Clearly, I have to ask myself if I prefer to apply this money toward debts or do I want to go on these trips. I believe that right now, I'm telling myself that if I can pay CASH for these trips and not incur ADDITIONAL debt, then I could go. Otherwise, I need to stay home. Again, its time to put pen to paper and do the math, because the math won't lie.

Over the weekend, I mentioned to my daughter, my desire to buy a house. She reminded me of how much I hate yard work, therefore I'm a much better candidate for a condo. Trouble is, condos don't appreciate in value and then there's the HOA fees. I live alone and I'm not young. I have no idea what I would want to do. All I know is my instincts are telling my not to buy before 2020. I will be 55, then. Plenty of time to save for a healthy down payment, whatever I do. Maybe I buy a modest 2BR; 1BA house with a small yard and pay someone to do the yardwork. I dunno. I will figure it out.

So, here's the gist of my budget:

Monthly net income (after taxes, retirement, insurance, cafeteria plan)
$3852

Rent (includes water, gas, electricity, trash): $1117
Phone: $80
Car: $275
Car insurance: $79
VISA: $260
Student Loan: $116
Netflix: $9
Cable: $114
XM Radio: $20
Emergency Fund: $175

Total: 2,245

Monthly Revenue less fixed expenses: $1,607

There are other expenses--eg memberships, gifts, vacations, donations, property tax, etc. that occur 1-3x a year.

Smurfette
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Re: Smurfette's Debt Gazette

Postby Smurfette » Tue Nov 01, 2016 2:45 pm

Spent a bit of time reviewing how I spent my money in October. My account is linked to Finance Works Software, which helps me manage my money. Overall, I stayed within my monthly budget, but went over on my allowance for dining out. I underspent in my utilities and clothing categories, which kept me on track. That said, I need to step up on my weekend cooking so I'm not grabbing lunch at nearby eateries during the work week. Time to get the crockpot out and get back to some recipe basics.

I also spent some time looking at my upcoming expenses and I'm in good shape. I am confident that I will be able to pay for everything with cash, so that's a stress reliever.

I hit a major milestone on my debt payment plan, so to reward myself, I'm booking a salon appointment to get my hair done. Before I started this journey, I was doing bi-weekly manicures and hair appointments. Now, I only go a few times a year. It's a shift, but the savings have gone straight to my bills.

It's hard to form and stick to new spending habits, but it's the only way that I will be able to stay on track.

Smurfette
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Re: Smurfette's Debt Gazette

Postby Smurfette » Mon Nov 07, 2016 12:00 pm

Weekends tend to be dangerous for my budget. All the downtime gives me multiple opportunities to overspend. This weekend, I did pretty good:

1. I went to the mall and stuck to my shopping list. I didn't do ANY impulse buying, so that's a victory.

2. I didn't go anywhere else that tempted me to spend.

3. I cooked and ate all my meals at home.

4. I paid my property tax online. Once I get paid on Friday, I will transfer cash to my credit card.

5. My emergency fund is now about $900. That will cover a majority of my emergencies. (If I lose my job, I have $16,000 in a 457 account I can access. I would owe taxes, but there are no penalties if I withdraw it.)

Next, I have membership dues that I need to pay. I will pay $225 this month and $225 next month.

So far, so good. Been at this for nearly two years, so keeping the motivation going is a challenge. This journal definitely helps.

Smurfette
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Re: Smurfette's Debt Gazette

Postby Smurfette » Wed Nov 09, 2016 11:56 am

Net Worth estimate:

Assets:

IRA: $90,000
457: $16,000
403B: $16,000
Car: $8,000

Total Assets: $130,000

Liabilities:

Student Loan: $5,107
VISA:$4,455
Car: $5,078

Total Liabilities: $14,640

Net Worth: $115,360

Not spectacular, but it could be much worse.

Still chipping away at the debt:
1. Paid for the property taxes I charged to my VISA to bring my balance down.
2. I have the cash for my membership plus $350 set aside for the holidays, to prevent my having to charge stuff.
3. My next milestone is to bring my total debt to less than $10,000.

Keep in mind, I started with $30,000 in debt in January 2015. I feel good about the progress I'm making despite living my life and not going on a draconian debt diet. The budgeting and keeping impulse spending to a minimum has really helped. I still get impulsive, but it's improving. I just have to stay focused for the long haul.

Smurfette
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Re: Smurfette's Debt Gazette

Postby Smurfette » Fri Nov 11, 2016 8:24 am

Spending from a place of Scarcity

Why am I a spender instead of a saver? Is it helpful or defeatist to label myself as a spender?

I believe I spend because I don't always believe I'm going to have money so when a few dollars cross my palm, I "treat" myself. It's like someone who starves themselves then binges once they're around food. Somewhere, deep in my subconscious, I believe that I won't have money for long, or that my next paycheck will not materialize, so I adopt a Carpe Diem attitude.

Now, I'm at a point in my life and career where I need to let it go. I'm not rich; but I'm solidly middle class. I should own that from a place of power and not feel scared, nervous or insecure. Those feelings drive materialism. I want to be anti-materialistic. I want to live modestly, but from a place of security and peace of mind. Peace of mind does not arise from hiding from money, or spending it like water on things because of its perceived scarcity.

So now, I'm ready to settle down, remain in control of my money, direct it to things that truly matter to me and find a way to be patient with my debt and forgiving of past mistakes. In the scheme of things, I'm blessed. I need to frame things in a positive light when I consider my finances.

LiquidMercury
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Re: Smurfette's Debt Gazette

Postby LiquidMercury » Fri Nov 11, 2016 12:21 pm

Keep it up! As far as the spend vs save paradox I get where you're coming. I suppose for me I've tried to think about it in reverse of "what if I lose my job" I sure as hell better be prepared. Additionally I've gone on a new path of being financially independent so I could quit work whenever I feel like it (my assets growth out paces my withdrawal rate without touching principal is my idea of financial independence). I've also got it stuck in my head that I'd like to retire by 45, and to do that it's drastically changed the way I approach my finances because I've got a number I need to achieve to do that. I started calculating my savings rate as well and it's become a bit of a game for me to see how I high I can get that on a monthly basis. Check out my journal for a bit of my ramblings and calculations. I went from spending-maniac to a pretty good saver now (though I still don't live what I would call a frugal life).

Smurfette
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Re: Smurfette's Debt Gazette

Postby Smurfette » Mon Nov 14, 2016 8:25 am

Well, this weekend in a nutshell has been two steps forward, one step back. On one hand, I spent $18 dining out, which is within my budget; on the other hand, I plunked down $320 for a plane ticket home for Thanksgiving. I hadn't planned to go home and the $320 was not in my budget. I also paid $225 toward my year-end membership dues, which was planned.

Now, how do I absorb the $320 into my budget without going further into debt. The only thing I can think of, is that it will be offset by not spending $$$ on dining out, gas or food for three days. That might total about $50 that I can transfer to my credit card. Then, there's $260 that I will pay on my card this month, bringing my total payment to $310. I can transfer part of the $350 in reserves to my card toward the balance, too.

It's so easy to be aggressive about paying down debt in the earliest days, but after two years---I'm doing well to remain vigilant and not go into Ostrich mode, and stop paying attention to my money. So, for the month of November, the difference on my card would be a net neutral. No progress in paying off the debt, but not adding to the balance.

If I can get through the holidays without adding to my debt, that will be a victory in itself. Maybe in December, I should take a breather, pay minimums plus interest and stay in a holding pattern until January.

Smurfette
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Re: Smurfette's Debt Gazette

Postby Smurfette » Fri Nov 18, 2016 8:51 am

I spend more time than I should browsing through sites like Trulia and Zillow looking at condos and houses and dreaming about the day when I will be able to afford to jump back into the housing market. I was burned on my most recent property. Here's the backstory.

In December 2004 I sold a house and relocated to a new community. I had made $10,000 on the sale, but opted to use $7,000 to pay off a car loan and $3,000 to put down on a duplex. I wasn't crazy about the property, but it was in a great school district way out in the suburbs. I figured that I would live there from 2005 to 2010, sell it and move closer to the city once my child graduated from high school. I financed about $134,000 at 5% interest. My monthly PITI payments were around 1080. I was earning about $50,000 and receiving about $2,500 a year in child support.

In September 2006, my car died and I purchased a brand new one with a 60 month car loan. My monthly payments were $333 a month. My finances started to feel squeezed. I had trouble saving and turned to credit cards. It didn't take long for me to accumulate $5,000 in credit card charges.

In December 2010, I paid off my car. In March 2011 I lost my job. I decided to sell my property and discovered I owed more on it than it was worth. I owed about $132,000 and it was worth about $85,000. I decided to do a short sale. The property didn't sell, so it went into foreclosure. In February 2012, I gave up my keys and moved to an apartment. I had found another job in August 2011, but it only paid $45,000. I had been earning $60,000. From 2012 to 2013, I struggled to make ends meet. I owed money on two student loans, and I had $8,000 in credit card debt. I withdrew $10,000 from my 457 account and used it to pay down the credit card debt.

In 2013, I found a higher paying job. I was finally able to catch up on bills and set a little bit of money aside. But my credit score was a mess. After the foreclosure, it had dipped to about 590. I focused on rebuilding my credit.

In 2014, I was in a hit and run car accident. I was not injured but my car was totaled. I purchased a late model used car for $20,000, putting $8,000 down and financing about $12,000 over 4 years at 3.49% interest with monthly payments of $275. My credit score was around 650. I was so happy to get a decent interest rate, despite my mediocre credit.

Anyway, ever since my bad real estate experience, I have mixed feelings about returning to the real estate market. What if I lose my job? Can I afford to return to the demands of maintaining a property? Even if I had the cash for a down payment--would I want to invest it in real estate? As I found out, properties don't always increase in value.

I feel like I spent my 40s languishing financially and not getting ahead. I'm determined to change that in my 50s.

DJFlare99
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Re: Smurfette's Debt Gazette

Postby DJFlare99 » Sun Nov 20, 2016 1:37 pm

Smurfette,

Based on what you wrote, I don't think you've fundamentally changed anything. You may be focused on paying down debt. But when you talk about emotional decisions such as spending on your grandkids or "treating yourself" or looking at homes, I predict that at the end of your 50s, you're still going to be in the same financial position...struggling in the rat race. I'm trying to give you a wakeup call. If you're in your 50s with a negative net worth, you really need to double your effort. Paying down debt is just step 1!

Most Americans like yourself determine "if I can afford it" based on monthly payments. If you think to yourself, "I make xx per month and I can afford yy PITI payments per month", then you've already lost.

Get out of the "income statement" mindset and more into the "balance sheet" mindset. In other words, stop thinking "oh I can buy this or that because I have $xx coming in" and change it to "how much have I accrued in net worth this month". Paying off debt is accruing net worth, but if you really want to get out of the "rat race" you are currently stuck in, you need to accrue wealth faster. Not meet some targeted emergency fund, debt, or budget. Budgeting, paying off debt, etc are just small pieces of the overall pie.

Be smart about setbacks. The setbacks are expected, not "unlucky". Did you carry collision insurance when your car was totaled? If no, why not?

Tell yourself you will not buy a new house until you can pay for it CASH. Because it will truly be your permanent home, and you don't have to worry about losing your home because you lose your job.


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