OK. In the last chapter I'd managed to get on a budget, but not much else.
So in late May 2007, about 2 months after we started, I finally sat down and figured out mine and AS's total debt. (NT's was still a mystery, and we were both avoiding it right now.) It was a bit of a shock to say the least: We had $40,803 in credit card debt, $32,118 in student loan debt, and $201,847 in home debt. The grand total? $274,768! I calculated how much our minimum payments would pay off, and it was a little over a thousand a month. At this rate I wouldn't be out of debt for 22 years.
In June 2007 I consolidated some of my credit card debts. I also rolled my $10,000 HELOC into it; the variable interest rate was at 11% and the payments didn't encourage me to pay more than the interest each month. Plus it didn't really qualify as home debt; I'd bought furniture and a computer with it. So my credit card debt went up and my home debt went down.
That same month, I dealt with the issue of the England trip we were determined to take the next year. I decided, rather than saving up for it, to add $5,000 to my debt total, then try to pay other, high-interest debts down more aggressively, to the tune of $5,000 extra before our trip. Then we'd at least break even on the trip. I started putting every bit that NT made as a temp toward debt. He got paid weekly, so even though the amounts were variable, at least I could see progress often.
July started out a good month because I completed my first monthly debt-payoff challenge, and NT got his full-time job. We still were getting very little spending money and only putting $500 extra toward debt each month, but I knew that would get better soon.
But the good news didn't last for long. Once NT had confirmed his new job, he felt able to let me in on his finances. He said he couldn't face it before, when he wasn't able to contribute at all.
It turned out he had not checked his account since he'd come to America. He had rental income getting direct-deposited and bills getting directly debited from that account. And he was pretty sure that the rental income was not covering the bills.
We logged in to his account and he was right; he was actually a few pounds away from reaching the limit on his overdraft account. His rental income was about $400 short of covering the minimum bills. His debts included $19,382 of credit debt (on four cards plus the overdraft) and $121,548 in home debt (a main mortgage plus two home-equity loans). We also knew he was going to college soon, and I estimated the tuition for four years would be about $40,000. So I went ahead and added that to his debt in my mind, bringing his total debt to $180,930, and our household total to $457,714.
So, to my rather glum thinking, after about four months of buckling down, I had paid off about $500 above the minimum but accrued $186,000 in debt and a new $400 monthly bill (to cover our minimum bills in England). Actually $450, because it cost $50 to do an international wire transfer. And my little family was nearly a half-million dollars in debt. Suddenly NT's great new job didn't seem like it would make a dent in our financial misery.
Whew! It's crazy even writing it down. Stay tuned for chapter 3, when we begin to claw our way out of the hole.
My close scrape with financial ruin: part 2
July 2nd, 2008 at 02:48 pm
July 2nd, 2008 at 03:15 pm 1215011722
July 2nd, 2008 at 03:20 pm 1215012028
July 2nd, 2008 at 03:26 pm 1215012374
I think new people look at you and think it was always easy for you. You just got on a budget and bang, your good to go. What people don't understand, is that you were in the same spot as them. Your were looking over the cliff. The stress in your life even at this time with a budget was unbearable. You had doubts and concerns. Would this work this time? What was different this time? What made it work?
It's not rocket science. Spend less then you make. Oh an the secret to losing weight, eat less then you burn.
July 2nd, 2008 at 03:38 pm 1215013135
July 2nd, 2008 at 04:34 pm 1215016472
July 4th, 2008 at 05:00 pm 1215190829