Back from the brink.

Have you paid off your debt? Managed to save for your dream home? Had an awesome investment pan out? Share your personal finance success stories here.

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Back from the brink.

Postby kjb516 » Wed Aug 20, 2008 2:00 pm

Late last year I found myself in quite a scary situation. My marriage had hit the rocks, I found that we had far more unsecured debt than I could have imagined with no savings to fall back on; there was a strong possibility that my job was going to be moved off-shore and the resale value of the house we purchased a few years back was dropping rapidly.

Many years back my (now) ex-wife consistently complained about how I handled the bills. Taking the seemingly easy road I simply turned this task over to her figuring that if she thought she could do better, let her have at it. BIG MISTAKE!!! While we did have some credit card debt, I managed to keep it from overwhelming us while she was still in school and not contributing financially. My thinking at the time was that once she graduated and began working again, we could eliminate our small debt and begin building a nest egg.

Shortly following her graduation she announced she wanted a divorce, forcing me to seize the reins of my own financial reality. Thankfully the value of our (soon to be my) home had not fallen too badly, hence allowing me to refinance a good portion of the unsecured debt into a fixed rate loan with a manageable monthly payment. Within weeks I was offered a contract-to-hire position with a very stable company that was located very close to my house, hence freeing up a lot of time previously spent in traffic and nearly eliminating fuel costs from my budget.

I was not too enthusiastic about this job being a contract-to-hire since I was looking less for more money and more for stability, the four months spent as a higher paid contractor allowed me to eliminate the remainder of the credit card debt and contribute a nice chunk towards savings. While I still have quite a way to go, I have established an emergency fund of three months of living expenses or nearly six months of mortgage payments in a high interest savings account.

I have reduced the credit cards in my wallet from six cards (all with balances) to only two, one with a zero balance and one that I pay off completely every month. During the first few months of this year, I was extremely leery to put anything on credit having just cleared that debt. However, I obtained one card with cash back rewards on every purchase and very closely monitor my balance on a daily basis. For the past five months, I have been putting nearly every expense on that card and paying the entire balance weeks before I receive the bill for the month.

The cash back rewards do not amount to a whole lot of cash, but I personally view it as “interest” and gives me the feeling that I am making back some of cash thrown away towards finance charges. The ability to combine my credit card and bank transactions gives me really good tool for tracking and predicting my expenses. Unlike life with my ex, I not only know how much I currently have and where my money is going, I can accurately predict my financial picture three to six months out.

As for the house, I’m not so sure that I really want to live in it any longer. The biggest downside of the new mortgage was a three year 1% prepayment penalty. Then again with the sagging housing market, I probably will not be able to turn a profit within that timeframe anyway and gives me time to recover from the shock of the divorce. Making such a decision would probably be more influenced by emotion than logic at this point.

I now get to experience that “I PAID OFF MY CREDIT CARD DEBT!” thrill every month and can shred all of those limited time 0% interest balance transfer offers I receive. Every few months I apply my cash back rewards towards my balance and add that same amount to my monthly savings contribution.

Somehow I do not think that my credit card company values me as a customer quite as much as they used to.

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Postby peachy » Mon Aug 25, 2008 5:09 am


Your title is quite apropos. :)

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Postby tjohnso » Tue Aug 26, 2008 7:57 pm

Congratulations! What an inspiring story. I know all of this has been hard, but, by gosh, you did it! My very best wishes for your continued success.

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Re: Back from the brink.

Postby DebtFreeCrusader » Tue Sep 02, 2008 3:26 pm

kjb516 wrote:Somehow I do not think that my credit card company values me as a customer quite as much as they used to.

I think you're known as a transactor by you cc company if i'm not mistaking.
When you're good to others, you're best to yourself - B. Franklin

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Joined: Wed Aug 20, 2008 10:51 am

Postby kjb516 » Tue Sep 30, 2008 7:18 pm

This evening I was reviewing the spreadsheet I created to track all of my accounts and stumbled across a very interesting discovery.

Viewing a graph of the cumulative total balance of all my accounts, I found myself becoming a little disappointed and impatient at my slow, chaotic, upward savings progress. I changed the graph from a "stacked line" or cumulative style to standard line to view my savings and checking accounts independent of each other. This simple change led to a true AH-HA moment.

My checking account now looks exactly like a healthy human heartbeat. Twice a month it "beeps" as I get my paycheck and clear all of my bills. Since I put the majority of my personal expenses on a credit card that gets cleared fully on one of those "beeps", I have been able to transfer whatever extra money I have into savings and maintain my checking balance at a very low level. Because my monthly expense cycle is so much more predictable, my savings and checking are linked (for any oversights) and the miserable 0.01% interest rate (No, that's not a mistype) on the checking account, it is ridiculous for me to leave any more cash sitting idle than need be. Six months ago the graph of my accounts looked more like the EKG of someone having a massive coronary.

My savings were even more telling. They showed a slow, steady and unhindered increase. Ah yes, "Get Rich Slowly". NOW I get it! My use of credit cards for the majority of my expenses is probably not a great technique for everyone and can lead to disaster (as it almost did for me). Lately I've found that I am far more leery to pull out a credit card than ever before. Cash however can evaporate from my wallet without a trace.

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