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Home > My close scrape with financial ruin: part 3

My close scrape with financial ruin: part 3

July 3rd, 2008 at 07:20 pm

So in late July 2007, I found out our true collective debt and learned that I would have to transfer money over to the UK just to cover minimum bills.

Once I updated my numbers and looked at them, and wrote a very morose Aug. 1 blog entry, I actually felt better pretty quickly. I was pretty sure we'd hit our lowest point and that things could only get better. The debt numbers were painful, but also somewhat fascinating. I looked at them and felt like I had a superhuman task ahead of me to pay it off, and I was interested to see if I could do it. I guess there was no other way to cope, so I just looked at it as a huge challenge that would be very, very satisfying to overcome, if I could do it.

I had gradually come up with my own budgeting system. I kept three unsent draft e-mails in my Yahoo account that I could access from work or home. One tracked projected income and specific expenses for a couple months in the future so I could make sure I always had enough in the bank for upcoming needs; I deleted items as they hit our checking account. One kept track of our current debt, divided by home, credit and education and totaled at the bottom. And another listed my general income and expense amounts so I could easily paste it at the bottom of my first e-mail when it was time to project further, and modify to real life as I went along.

I continued to set myself monthly goals for reducing my debt, and always set them as aggressively as I could depending on what I could see in my projected budget.

In early August I paid off my first debt since I'd started, the high-interest reserve line on my checking account.

When I learned NT's paycheck amount, I knew I'd be able to put over $1000 more toward debt and still have a little money for luxuries.

In September I calculated our collective net worth and discovered that it was positive by almost $55,000. Even though all we had were retirement accounts and homes, it felt encouraging. I knew the amount would increase as we paid off debt and added a bit to our retirement savings.

In October I paid off our second debt: NT's high-interest overdraft balance. I had started a page on my blog called "The Old Debt Graveyard" so I could record my paid-off debts and see the list grow.

In December, encouraged by our progress so far, I decided to make a big long-term New Year's goal: to pay off all our credit card and personal debt in two years. I also decided to count the loan from my Dad as personal debt, not house debt. So that brought our credit/personal debt up over $70,000. I continued to set monthly goals for my overall debt reduction, but I separately tracked the reduction in my credit/personal debt.

In January 2008, I paid off our third debt. In March, April and May I paid off three more debts. These were all small balances, but it was very satisfying to say I'd paid off 6 debts in less than a year! One of them was our trip to England, and it was paid for before we left for the trip. That was a first in my life, at least for a major trip.

We did suffer financial setbacks and unexpected expenses nearly every month, but we also got some nice windfalls. Overall we managed to maintain momentum through May 2008.

Now I'm hitting some doldrums that may delay my plan to be credit-card-free by 12/31/09. Our monthly income is taking a temporary hit; we have some management expenses coming up in England; some student loans will start coming due in August or Septempber; our ARM is going to adjust in November. There are definitely negative ways to look at my progress: We might be slowing down; we've only paid 7% of our debt off so far.

On the other hand, we've paid nearly a quarter of our credit card debt since January, and we've paid over $30,000 of overall debt in less than a year!

My specific number goals help me stay motivated, but they can also cause me to get discouraged when I don't meet them. I just try to remind myself that I am still making progress and that the numbers are just arbitrary. No matter how much or how little I accomplish, as long as I keep paying it off, putting a little toward retirement and not using my credit cards, I'm going to be better off than I would have been if I'd just continued to live as I had for years.

So, that's my story thus far. A work in progress, and hopefully, someday, a stunning success story. Long way to go, though. I hope this encourages some new members of the SA blogs; even though I'm not there yet, and it's taken a lot of focus and willpower to even get this far, it's been so worth the effort to me. I feel that I'm much better off than many Americans just by having changed my philosophy to taking control of my finances, paying off debt, saving up money for retirement and living within my means, no matter what.

2 Responses to “My close scrape with financial ruin: part 3”

  1. merch Says:
    1215112441

    Very well said Ceejay.

  2. Joan.of.the.Arch Says:
    1215133282

    I think you are right.

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