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 Post subject: My Financial Meltdown... and my journey to financial freedom
PostPosted: Thu Jan 07, 2010 11:36 pm 

Joined: Tue Apr 15, 2008 6:48 am
Posts: 526
Location: Arkansas
This is possibly one of the hardest thread I have ever had to start. The reasons have definitely taken a toll and caused me to do a lot of soul searching lately. Some of the reasons were due to my own stupidity (ok... prob most of them) and some were from lack of knowledge or a plan. I am now working on a plan (whether right or wrong.. Its something), and I plan to use this thread to help keep me accountable and to gain support.

I have done some things right (at least I think I have) and I know I have done some things wrong. I have been battling getting my head above water for the last year or so, however a couple days ago I got a severe wake up call courtesy of my bank. I received a letter letting me know.... IM BROKE! or as they call it... insufficient funds to complete the transaction.... and its 5 days till payday. And here I was thinking I had several hundred dollars still stuck back. Guess not!

I have started many times to create a budget, but for whatever reason I just cant seem to stick with it... Or haven’t been able to in the past. Now I don’t have a choice. If I want to regain my life and be able to enjoy it... I am going to have to stick with it... for better or worse... so help me god. LOL

I used to have a $300 cushion in my checking account that I would end up dipping into from time to time... but that’s what its there for... to keep me out of trouble. I also had some savings $$$ tied to my checking. All of this is gone. What little bit of silver lining in this thunder storm cloud I can find is this. I am forced to start over. I did have some cash in a secondary bank and its just enough to get my account out of the red and should keep me afloat until payday.

A little Background....

I, like probably so many of you, was doing fine about 1-1.5 years ago. Yes I was deep in debt... but I didn’t have any problems paying the min payment and even had a few hundred left over at the end of the month. I was even using some of this to pay down my debt. Life was good. I had my toys and I was able to pay for them. Then the credit card industry started getting greedy (actually they lost their fool minds). My fixed rate cards weren’t fixed anymore.... my 9% interest cards were going thru the roof. I went from having a comfortable amount of extra cash at the end of the month to wondering if I was gonna have enough cash period.

This went on for some time... and finally all my cards with the exception of one jacked up my rates and in turn... my min payments. Times were tough. Like so many... I bit the bullet and paid the minimums and struggled along.

Who was I going to blame? I had to blame myself... I’m the one that put myself into this predicament, but I was also blaming the credit card companies for being greedy, money grubbing, short sighted dingbats. All they were seeing was the here and now... not what their rate hikes were going to do to their good customers. Six out of seven of my cards hit me with a rate hike..... that turned me from being a good customer with cash to spare... to almost being one that couldn’t even make minimum payments. I hope it was worth it for them... cause later in this story... I get my revenge.

So anyhow... time goes by and I’m plugging along paying my minimums and it seems like every time I turn around one of the cards is reaching for even more money in the “lets see how high we can jack his ratesâ€


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PostPosted: Fri Jan 08, 2010 5:43 am 

Joined: Mon Feb 04, 2008 7:35 am
Posts: 1148
Location: Maryland
I love a good story. I can't wait to read the rest. 8)
Now that you've finally posted airing out your "dirty laundry" it can only get easier, right? What's the first step? Acknowledgement? ha ha. I have no idea.


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PostPosted: Fri Jan 08, 2010 7:07 am 

Joined: Sun Apr 29, 2007 8:11 am
Posts: 1088
Location: Sunny Florida
The first step is to face the music which it sounds like you have done or are doing. When we started our debt payoff project it was scary, we had $55,500 in debt, 1/2 was student loan, 4 credit cards and 1 other debt. And we gathered up all the statements and information and wrote it down, whoo-hoo to see those numbers it was a shock to the system.

http://www.getrichslowly.org/forum/viewtopic.php?t=194 here is the link for our 2007 Fiscal Fitness Journal which documents our debt project.

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Sam

http://adventures-of-sam.blogspot.com
(Follow Sam's financial and real estate adventures.)


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PostPosted: Fri Jan 08, 2010 11:31 am 

Joined: Tue Apr 15, 2008 6:48 am
Posts: 526
Location: Arkansas
Thanks for the comments folks. I hope to draw strength from them because I LOVE to spend money.... its what got me into this situation.

The scary thing is..... my 26k+ is all credit card debt. That doesnt include the mortgage and such. I guess that I am lucky in some respects.... my vehicles are paid for.


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PostPosted: Fri Jan 08, 2010 1:01 pm 
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Your interest rates went up because the credit card companies were watching you get in deeper and deeper making you more and more of a risk. You admit you felt the squeeze, and they knew you were being squeezed in their own way. That is why they raised the rates, because you were becoming a bigger risk to them.


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PostPosted: Fri Jan 08, 2010 10:23 pm 

Joined: Tue Apr 15, 2008 6:48 am
Posts: 526
Location: Arkansas
DoingHomework wrote:
Your interest rates went up because the credit card companies were watching you get in deeper and deeper making you more and more of a risk. You admit you felt the squeeze, and they knew you were being squeezed in their own way. That is why they raised the rates, because you were becoming a bigger risk to them.


By raising my rates and almost doubling my monthly payment... that is when I became a risk to them. Until that point.... I normally had around $300 extra a month I was putting towards bills.


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PostPosted: Fri Jan 08, 2010 10:30 pm 

Joined: Tue Apr 15, 2008 6:48 am
Posts: 526
Location: Arkansas
Best laid plains....

Sometimes even go astray. Once everyone decided they wanted to take a bigger chunk out of my paycheck I started reading a lot of finance websites to try and gain some tidbits of knowledge to help me. But help me do what? At this point... I was looking for anything. Tips to getting a reduction in rates, tips in spending less, tips for saving more. Anything... I was desperate. I made some temporary changes, but unfortunately they didnt stick. It wasnt long until I was back to my old self. Spending.... If I wanted it... I bought it. That is what got me in this predicament to begin with.

I did however make some changes that half way stuck. I just have to refine them a bit and make sure it takes this go round.

Some of the things I implemented is using my financial software to its fullest potential. I have a system that I call "forecasting"


Last edited by N2Deep on Mon Jan 25, 2010 2:19 pm, edited 1 time in total.

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PostPosted: Fri Jan 08, 2010 10:34 pm 

Joined: Wed Jul 08, 2009 3:28 pm
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How much are your cars worth? Could you sell one to make a dent in your debt? Or anything else you own?


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PostPosted: Sat Jan 09, 2010 6:14 am 

Joined: Wed Oct 07, 2009 4:16 pm
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n2deep it seems as if you have already pulled yourself out of debt and just telling the story of how you got to the point where your at now. i am assuming you are now debt free and doing well. instead of trying to get out of debt which is the part that i am at. :cry:

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PostPosted: Sat Jan 09, 2010 11:16 am 

Joined: Tue Apr 15, 2008 6:48 am
Posts: 526
Location: Arkansas
pdxrocks wrote:
How much are your cars worth? Could you sell one to make a dent in your debt? Or anything else you own?


Neither one is worth alot. Both have over 100k worth of mileage.

I have a car that is a daily driver for the gas mileage (30mpg) and a truck for when I need to haul stuff or the 4x4 in bad weather (10mpg). Im unwilling to sell either cause it would put me in a bind. Both however are paid for.


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PostPosted: Sat Jan 09, 2010 11:26 am 

Joined: Tue Apr 15, 2008 6:48 am
Posts: 526
Location: Arkansas
fantasma wrote:
n2deep it seems as if you have already pulled yourself out of debt and just telling the story of how you got to the point where your at now. i am assuming you are now debt free and doing well. instead of trying to get out of debt which is the part that i am at. :cry:


I wish I was out of debt.... but I am still very much deep in debt.

Jan 6th, 2010 was when I got a letter in the mail from the bank telling me I was broke and had NO money in the bank. I am telling the story of how I got there and then eventually I will be able to tell the story on how I got myslef back from my financial meltdown. If its one thing I have learned in all my years... if something is not intertaining then folks will not tune in.

With that in mind... Im trying to make my crappy life (financially speaking) somewhat interesting so folks will be willing to tune in and in turn offer advice and support. Out of all the personal finance blogs I have read in the past they all said the same thing. The blog was the best thing I have ever done because it kept me accountable.

Well Im taking that one step further. I have this journal and I also now have a blog. Between the two... I hope to keep myself accountable and on the right track. http://www.journaltodebtfreedom.com

fantasma.... We are both on the same journey... just different trails. Eventually I hope to work my way off this very narrow, rocky trail onto something a bit more flat so I can pick up momentum and speed to the end (NO MORE CREDIT CARD DEBT). Do you have a journal page?


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PostPosted: Sat Jan 09, 2010 11:38 am 

Joined: Wed Oct 07, 2009 4:16 pm
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yes not as interesting as yours though.

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 Post subject: Re: My Financial Meltdown... and my journey to financial freedom
PostPosted: Mon Jan 25, 2010 2:22 pm 

Joined: Tue Apr 15, 2008 6:48 am
Posts: 526
Location: Arkansas
Sorry for the delay folks... but I have been working some overtime to try and get on top of things which has cut my computer time down.




Fast forward about 6 months….

I had started getting a little laid back on my plans and wasn’t sticking to them as tight as I should have… then American Express took steps to make sure I didn’t have any extra money to work with.

I had just received a letter from American Express stating that they want to be the greediest SOB’s on the planet, and they were raising my rates up to 27%. I called them up and they declined to work with me. I was hit. I had over 6k on that card at 27%… and I really didn’t have anywhere to move it. The monthly interest on that card alone was staggering. I think it was around $140 a month just in interest.

That night at work I spent a lot of time trying to figure out what I am going to do to keep my head above water. My options were slim and it was not really looking promising. The thought that kept coming back to me time and time again…. I really don’t have anyone to blame but myself. Sure I could blame the greedy credit card companies…. but I put myself into a position where they could abuse me with high interest rates. They didn’t make me spend more money than I made. They just made is SO easy for me to do it. In the end… It was still my fault that I am in the shape I am in.

Then I thought up a game plan.

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 Post subject: Re: My Financial Meltdown... and my journey to financial freedom
PostPosted: Mon Jan 25, 2010 5:44 pm 

Joined: Tue Apr 15, 2008 6:48 am
Posts: 526
Location: Arkansas
Steps to my recovery

That night at work I came up with a plan (even if it was not the best one… it was something). I spent the night working out the details and crunching numbers so I was prepared for the next day’s adventures on the phone.

The very next day I contacted my credit union. I had not done business with them in years but my account was still open. I told the loan officer what I was trying to accomplish and why. I was completely honest with her. She got my information that she needed to run her reports then she asked how much I needed…. I kinda snickered and stated “more than you will probably lend me I’m sure”. I got a little chuckle out of her then she asked how much debt I had. I told her and she said…. “Yep that’s more than we will lend, but not because of your info. It is more than our cap for a signature loan”. She then informed me that she could do a loan for 20k at 12% interest fixed and I would pay it off over the course of 5 years. I asked her what the monthly payment would be and compared that to all the numbers I had crunched. I asked her if I could think about it for a while and call her back. She said she understood and would keep my info and the application handy.

I spent even more time crunching numbers and comparing outcomes. One of the things that made me nervous was the fact that I would have one account with 20k instead of several accounts with smaller amounts. At least with several accounts once I paid them off… I freed up some money which would ease up the amount I HAD TO come up with monthly.

After trying all the options (which cards do I pay off with the loan) I came up with a plan. I called her back and finished the paperwork for the loan. Within 2 days I had 20k sitting in my checking account, and let me tell you…. It felt good to log in and see that kind of balance in checking. It felt like freedom, however I knew it was only for a fleeting moment. That money was earmarked to stick it to the credit card companies that had been sticking it to me with their extremely high interest charges.

So what made me decide to go this route?

Immense joy later on when I called the credit card companies
Initial savings of $50 a month (even though in the long run I could have saved more monthly by paying off the cards one at a time)
12% fixed vs (insert greedy amount here)
paying a lot less in interest
So just how well did the phone calls turn out to the credit card companies?

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 Post subject: Re: My Financial Meltdown... and my journey to financial freedom
PostPosted: Mon Jan 25, 2010 5:46 pm 

Joined: Tue Apr 15, 2008 6:48 am
Posts: 526
Location: Arkansas
Time to put the plan in motion....

I gathered all my credit card bills up along with all the paperwork that I had been crunching numbers on and using to formulate a plan with, and prepared to start calling credit cards.

List of potential cards on the chopping block

*American Express
*Chase
*Discover
*Bank of America
*Lowes
*Sam’s Club
*Citibank

The reason I say potential…. if they are willing to work with me, I’m willing to work with them because I don’t have enough to pay them all off. I had one thing on my mind. I have 20k sitting in my account with a 12% interest rate. The cards have to come down to at least 12% or I will pay them off and move onto the next one.

First on my hit list was American Express and their 27% interest rate. I called them up and they refused to budge at all. Ok… fine by me. I told the “Customer NO Service Rep” that if they wanted to be greedy… it will cost them. What’s my balance? Im paying you off here and now and you will not get another dime in interest from me. I guess zero money coming in from me was better to them than 12% interest and still bringing in cash. I paid that one off, shredded the card, and moved onto the next one on my list.

Bank of America got the same treatment as AmEx. Discover was actually willing to work with me, but it just wasn’t enough. They came down from 22% to 13%. Even though they were willing to work with me… they still were not willing to match my 12% loan so they too got paid off and the card shredded. Citibank also refused to budge and thus lost all potential income from me as well. They were paid off and the card shredded. Lowes was paid off but not because of a phone call… .that interest rate has always been high due to it being a store card. Same with Sam’s Club. By the time I got all those paid off… my funds had drastically withered down to almost nothing. I used the remaining part to help fund a savings account. Chase was never called… They are my oldest card and I also have a 12.24% interest rate with them. (Of course… this is subject to change on a whim)

The best part of the whole experience? Being able to tell those greedy credit card companies to stuff it… I’m paying off my debt. True… I’m still paying the bill, but its to someone (my credit union) that actually wants to work with their customers. In 5 years the debt will be paid off and at a much less interest rate. Until then I just have to buckle down because my monthly expenditures wont change much as far as a reduction of outflowing money.

Since I had reduced my monthly bills and lowered my interest rate, what exactly caused my Financial Meltdown?

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I can not dwell over that to which I have no control...


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