This is the first marking post along my road to financial freedom. My debt situation is not good, I fluctuate between feeling like I can conquer it (albeit painfully) and feeling defeated. I've been reading these journals and reading the forums and blogs for a while, wondering if there is anyone in a similar situation.
Most of my debt is from an expensive education, which I (with the help of the government and various creditors) funded myself. I graduated with a very large debt load, including an astronomical amount of credit card debt. I ran out of funding in my final year of professional school and financed many of my school and living expenses with credit cards. In retrospect, the smart thing to do would have been to take a year off, save some money and finish my degree later. But that's not what I did. Here is what my debt load looked like two years ago, after graduating:
Student line of credit #1: 40,000 @ 6% interest
Student line of credit #2: 15,550 @ 3.5% interest
Federal student loans: 28,600 @ 5% interest
Credit card 1: 9,900 @ 24%
Credit card 2: 5,500 @ 19.5%Total debt: 99,500
Phew, under 6 figures...
To add insult to injury, immediately after graduating and before I started my debt reduction plan, I leased a car.
I realized shortly after that it was an unecessary expense and, given my situation, a foolish decision. However, I did it, a 48 month lease at $306 per month. Adding an extra $14,688 to my liabilities column.
For a total debt load of: 114,188.
Around a year and a half ago, I came to the much overdue realization that this situation was untenable. Although I had paid for a professional education, I did not go into an extremely high paying job. Instead, I landed my dream job working internationally. While that is great in itself, the salary was not going to be enough to keep up with my ridiculous debt load.
I transferred the lease and now I have no car payment or insurance payment. I bike to work.
I implemented a debt snowball and started paying down my highest interest debts.This is my current situation:
Student line of credit #1: 37,680 @ 6% interest
Student line of credit #2: 14,537 @ 3.5% interest
Federal student loans: 23,256 @ 5% interest
Credit card: 7,421 @ 19.5%Total debt: 82,894What do I plan to do about it?
1. Continue with my debt snowball.
2. Track my expenses and implement a budget.
3. In spite of the debt, start saving.This is a rough monthly budgetIncome:
3500minimum debt payments
1st l.o.c.: 442.11
2nd l.o.c.: 151.11
federal student loan: 330
credit card: 150
[I know this is bad to have one big, catch-all "other" expenses category at this point... I'm working on it]savings
Issues (advice welcome):
1. My budget at this point is basically non-existent. I set aside enough money each month to pay rent, make the minimum payments on my student loans, and then put whatever is left at the end of the month toward my highest interest debt, the credit card. But given that I have no budget, it is easy to overspend. I am working on this, advice is appreciated.
2. The enormity of it all! Although things have improved, I am still staring at a mountain of debt and hundreds of dollars in interest per month. If I make the minimum payments, it will take me a decade to get out of debt. If I pay more, it is difficult to save for things like a wedding, a house, a car.
Sorry for the novel, if anyone read this far thank you and I will endeavor to keep this page updated.