Day 200: Nowhere to go but up

Today is day 200 of my “Debt payoff journey”, so I thought I would take a moment to assess how horribly we are doing.

Christmas was bad for our credit card balances. Pretty much every card has a higher balance now than it did a month ago. We also had to buy a second car, the payments on which begin in January. As you can see, we've actually added over $17,000 in debt in the past six months, $3478 of which was on credit cards. We received our check from the county, to reimburse us for costs associated with a backed up sewer in our basement, eleven months after it happened. I have not yet used that money to pay a credit card bill because I am waiting to make sure we actually have enough for two car payments. I should receive my bonus the second pay check of February, and we’ll get our tax return either in February or March, depending how long it takes for me to get all of the necessary paperwork from both of our employers, the mortgage company, the student loan companies, our credit unions, etc. I’m trying to remember who all we get W-2’s and 1099’s from so I don’t miss anybody. I’ll get a second, significantly smaller bonus at the end of March, I believe, and hopefully a raise at the beginning of April. I have gotten at least a small raise every year I’ve been with this company, so I don’t foresee this year being any different. I’m hoping for a slightly larger raise since I’m the lowest paid person on our team.

Anyway, so we picked up a new car payment, to the tune of $244 per month. I’m going to schedule the payments biweekly at $122 every two weeks so that it doesn’t hurt as much coming out. Our insurance also went up $30 a month because we had to get full coverage where we’d previously had liability only. But we cut our cable package, saving us $37 a month, so we sort of broke even there.

I am trying to figure out what order I want to pay off credit cards. I know I have to pay a chunk off of a Best Buy card to prevent the $600 in interest from being added to our account. I want to pay off our Target card first, because it has a 24% interest rate. I was planning to use my bonus to pay the Best Buy card, but I’ve been thinking that I’ll use the money from the county to pay the necessary portion of the Best Buy card and then put the rest of it towards our Target card, then the whole of my bonus can go towards paying off the remainder of the Target card.

I’m thinking about doing a virtual “garage sale” type thing on Craigslist, just listing lots of clothing, toys, furniture, etc that we need to get rid of. Maybe create a website specifically for listing all of my items and then linking it to the Craigslist post? I don’t know. I don’t have much experience with Craigslist, aside from selling our washer and dryer on there.

I’m feeling pretty dejected right now, and completely overwhelmed by the amount of stuff in our house. If I’d gotten motivated earlier, I could have done the virtual garage sale a few weeks ago, and then donated what was left by year end, so I could deduct it from my taxes. But, I wasn’t that motivated, so now if we donate, it won’t be until 2011. With Christmas being my favorite season, the weeks following always leave me in a pretty blah mood. Next year, we buy in moderation. I love seeing my kids faces when they open gifts, but my daughter really didn’t need three LaLaLoopsy dolls.

Here’s to a better 2011. Hopefully when I write this entry going into 2012, day 565, I will have a much more upbeat attitude.

Day 170: No Good

I didn’t want to post this entry this month. I kind of want to beat myself after looking at it, honestly. Here is our debt for this month, including the money we’ve spent on Christmas so far.

So what can we discern from this image?

I am lousy at paying off debt. We have added over $17,000 in debt since June. We have added over $3000 in credit card debt since June. We have added over $2500 of that credit card debt in just the past month. From last month to this month, we have added nearly $2000 in overall debt.

Taking stock in our current financial picture, I think it suffices to say that I am not meant to be a debt counselor. Our balance transfer from our Target card did us no good. Not only did it max out our credit union card, but the Target card is now nearly maxed out again.

We are foolish. We are never going to get out of this debt trap. I’m ready to return my washer and dryer. My husband is using that purchase as an excuse to go out and buy himself an expensive Christmas gift, even though the conversation we had when we bought the washer and dryer was “If we buy this, then we’ll just buy small gifts for each other.” I should have known that he’d want everything to be “fair and equal.”

This is why I don’t let my husband know the state of our financial affairs if we get extra money. He will never know how much of a bonus I bring in. He won’t know how big our tax return is. He won’t know anything about money I’m putting into savings. Is it horrible that I’m thinking about withdrawing our kid’s savings accounts to pay off our debt? I feel like, if I do that and I’m not paying interest on credit card debt, that we can replenish their savings accounts quickly.

Does it make me a bad mom for withdrawing their savings when they’ve earned less than a dollar of interest YTD on either account? I just kind of think that’s the only way we’re going to get rid of our debt. But what if that doesn’t work either? I feel like we’re drowning.

On a slightly less desperate note, I joined Swagbucks three weeks ago and have since earned enough swag bucks for three $5 Amazon gift cards. If you're interested in doing things to earn Swagbucks (which can ultimately be cashed in for real gifts), please click the button to the right to sign up using me as a referral. I also cashed out all of my survey winnings last week so I can put that towards paying off Christmas. It was only about $60, but $60 is better than nothing, right?

Day 159: Why?

Why do we keep doing these things?

We went and bought a washer and dryer last week. To be fair, it was an amazing price. A Samsung steam washer and steam dryer, king sized capacity, for about $1300, plus we got a $130 gift card back on the purchase. I love the set, and I’ve been looking at upgrading our washer and dryer for about three and a half years now (since we bought the house), and like I said, phenomenal price! We put them on our Best Buy credit card at 18 months with 0% interest and justified it because of the no interest financing.

To be honest, I also justified it because of the Energy Star price tag that says it uses $12 a year to operate based on a $0.10/kilowatt energy rate, versus our old washer that used $77 per year based on a $0.07/kilowatt hour energy rate. The sales man also told us that while traditional washers use close to 50 gallons of water per wash, the set we bought is probably closer to 16. Given that we were doing probably 8 loads of laundry a week, that’s a substantial savings. Oh, and since this is a king capacity set, we’re not doing as many loads as we were before. Well, we are this week, because I’m so in love with the set that I can’t stop washing laundry, but once the novelty wears off, we’ll probably be down to four loads a week, maybe five. I’m anxious to see next month’s electric bill, just to see if the cost savings are that substantial, and then our water bill in two months.

I’ve seen a difference in our electric bill since I hung blinds and curtains in our daughter’s bedroom last month, but I don’t know if it’s because the weather is warmer than this time last year, or if it’s because the heavy curtains legitimately make a difference. I should have hung the heavy curtains in my son’s room too, so maybe I’ll see if I can find the liner that you attach to the back of existing panels. The true test will be in January, which has traditionally been our highest energy month over the three and a half years we’ve lived in this house. I signed us up for the budget payment plan in May for our electric, and right now we’re running a surplus of over $170 for the past six months. If the energy efficient measures we’ve taken do what they’re supposed to, perhaps our electric bill will be closer to $120 a month next year, instead of $160. Hopefully, it will be even lower than that.

In good news, I found out that my bonus next year actually comes the second pay day in February, instead of April as I had thought. I will actually receive two bonuses next year, a large one in February, and a significantly smaller one in April, because I changed jobs three months into the year and I get bonuses from both departments. We should see our reimbursement from the county in the next month, the bonus in February, the tax return in March, and the second bonus in April, then my husband should receive his bonus in June, and I should receive a pay increase in March, so hopefully in four or five months, I can stop obsessing over where the money is going to come from and instead obsess over how we’re never getting back to this place again.

Also, I signed up for swagbucks. If you're interested in doing random things like using a search engine, taking surveys, answering polls, and watching videos for points that can be redeemed for prizes, please consider signing up using my referal. I have been doing it for less than a week and have already earned enough points for a $5 gift card from Amazon. I appreciate your help. http://www.swagbucks.com/refer/justaname

Day 149: Annual Enrollment

I completed my Annual Enrollment last week. I went back and forth many times, worrying about what it was going to do to our bottom line if I took the steps I wanted to take. Ultimately, I knew I had to make a decision and I decided that it was better to save money on the premium and go with the High Deductible plan. I contributed $900 annually to our HSA, which will be matched 100% by my employer. That only works out to $75 per month. When I plugged it into our monthly spreadsheet for next year, it did take us negative for a few weeks, but I have a few months until I have to worry about that.

I don’t know if I’ve shared or not, but because I’m so obsessed with improving our financial lot, I’ve created a spreadsheet. It originally started with just listing monthly bills and their due dates, that way I could check off items that I paid and I’d know what was still outstanding. As we’ve gotten further into debt and been teetering closer to the edge, I added columns with each weeks pay date. I now break down exactly what is coming out of each paycheck based on what we need to pay our bills. I added a conditional format to let me know when our balance for the week is below $0. In 2011, we have 14 weeks that are below $0, and two months that are cumulatively below $0, however, we have several months at the beginning of the year that leave us with $300-$500 extra after paying bills, which means probably $50-$150 after paying for gas and groceries, so hopefully it won’t be too much of a hit.

While completing my annual enrollment, I established a separate savings account. Since I am only contributing $75 a month towards our HSA, I have decided to have a separate savings/checking account for the additional premium, to balance everything out. I will be contributing every two weeks to this savings account. It is tied to a checking account because if we have to pay medical bills, I want easy access to this money. But, if we don’t have medical bills or a financial emergency, the debit card for this account is going to stay locked in our fireproof lock box. Assuming we have no medical emergencies, we would accumulate $2600 in this savings account, $900 of my own contributions to our HSA, and $1160 in company funds in our HSA by the end of next year. That’s $4660 that can go towards medical bills if we ever needed to pay our deductible.

I know putting the $2660 in the savings account is not the best financial decision since it is not tax free, however, since we do not have an emergency fund and the $200+ monthly hit would have been too great for us, I think this is a great option for this year. This money can serve as both our medical savings, and our emergency fund, should we have an emergency that demanded this money. If I contributed it all to an HSA, we’d only be able to use it for medical expenses.

My other plan is that I’m going to increase my exemptions to 3 and change my status to married, and contribute the difference to a secondary savings account. My credit union allows you to create multiple savings accounts for multiple purposes. My plan is to divert the money that we were previously paying in excess towards our federal taxes into this savings account. Every $500, I will put into a CD, staggering the maturity dates. This will allow me to earn interest on money I was previously loaning to the government interest free. If I owe taxes at year end, I will have that money sitting in a savings account/CD and it won’t hurt our financial position to pay it. If our taxes stay at the same level, we would still see a tax return, it would just be a lot smaller, and we’d have earned interest on the difference throughout the year.

I’m not going to lie, these changes make me very, very nervous. I’m used to knowing that I have a small deductible and that most everything is covered by my insurance. I’m used to knowing that I’m going to receive a large tax return at the end of the year. The thought of not receiving that lump sum of money makes me very nervous. But we have to stop living like we are, and having money in savings, even if it is an emergency fund, will reduce a lot of the stress in our marriage.

I really just want us to be happy again. And I want to be in a place that I can teach my kids to be responsible with their money so they don’t go through the same mess when they get older. Like I’ve said before, my parents didn’t really teach me anything about money, at least not anything good. I want to change that with my kids.

Day 143: Financial Anxiety

It’s Annual Enrollment time again, and this year I find myself experiencing high anxiety at the thought of making decisions that will impact us for an entire year.


Our company offers a Health Savings Choice Plan, in addition to the traditional PPO plan that we have had for the entire five years that I have worked here. The health savings plan includes a $35 biweekly premium, $2700 deductible, and $900 company matching, dollar for dollar into an HSA. The PPO has a $154 biweekly premium, $1000 deductible, and no company matching or HSA. Looking at what we have paid over the past several years, I don’t believe that we would ever even touch that $2700 deductible.

With preventative care 100% covered with no copay or deductible, the HSCP sounds like a great option. But what happens if we’re hit with a catastrophic medical issue? What if we don’t have a $2700 deductible if one of us has to be admitted to the hospital? What if I start contributing to an HSA in January, only to have one of our children break an arm in February? Or worse? There’s also the fact that HSA contributions only come out of the second pay of the month, so even if I wanted to put the difference between premium ($119/paycheck or $257.83 per month), we would be taking a HUGE hit every second paycheck. Do we have the self control to budget the extra $119 so that the money lasts us all month? My other thought was contributing $119 per month to the HSA and then $119 to a savings account on the first pay of the month. We’re still saving the same amount for health expenses, but the first $119 would be in a savings account that could act as both an emergency fund AND a health savings account. It wouldn’t have the same tax benefits as an HSA, but we would still be saving the money, gaining (minimal) interest, and we’d have it available if we had a catastrophic emergency.

Since I’m in the “planning for next year” mindset, I’m also considering increasing my exemptions, claiming married status, and putting the difference into a savings account. Based on this years tax rates, I would have saved $2568.80 in a savings account, accruing interest. That’s still less than our projected $3700 tax return, so we still wouldn’t have had to pay at the end of the year, but we would have been earning interest on that money (although again, it’s minimal). Although I know it makes good financial sense, I’m still suffering some severe anxiety at the thought of not receiving a massive tax return in 2012; although, if the Bush tax cuts expire, I won’t be receiving a massive tax return in 2012 anyway.

I know I can change the tax exemptions later in the year if it isn’t working out for us, if I find that we’re not saving like we’re supposed to be, but the annual enrollment terrifies me. If I decide that I don’t want to pay a $2700 deductible, I’m out of luck until 2012.

My husband told me he trusts me to make the right financial decisions, but it’s moments like right now that I’m not sure what the right financial decisions are.

Day 138: Interesting Reading

This is going to sound horrible to say, especially in today’s economy.

My job is so boring. I should be glad; it gives me plenty of time to search the internet for interesting articles. I can do a lot of research on how to save money, how to spend money, and how to live more frugally. My actual work load encompasses about five days a month, and then for the rest of the month, I’m left wondering what I’m supposed to do. Maybe I just work faster than others? Other people doing the same job make it sound like they have no time and have to put in extra house. I’m more inclined to believe that they spend just as much time surfing the internet as I do; they just don’t feel bad about it. But, I’m glad I have a job in this economic climate, so I’ll keep doing my thing with the illusion of being busy.

Today I found two different articles that I found interesting (and it’s only 11:00!). The first is What You Should Expect from Social Security. I don’t have much to say on it, just found it interesting. I’ve become particularly interested in how I’m going to fund my retirement as of late, although I’m only 29 years old, because I hear so much dire information regarding the future. Last week I read an article about how the government is going to confiscate private pensions and 401(k)’s and redistribute the wealth. All of the comments on it were paranoia inducing. People were talking about withdrawing their entire 401(k) and hiding it under a mattress, stocking up on guns and non-perishable items because “the revolution is coming.” I don’t really believe that is going to happen, but I do think it is going to get worse before it gets better. I would still like to contribute to my 401(k) because my company matches 50 cents on the dollar up to 6% of my pay. It’s a 50% return on my investment just by investing. I will never contribute more than 6% of my pay though, because I see no benefit to it. I would rather put additional funds in an IRA, a savings account, CD’s, money market…. Somewhere that I have a little more access to if I need it. I contribute to a Roth, so I’m not getting the tax savings that are touted by professionals. I would like to know how to do things myself, like sewing, knitting, growing a garden, etc, because if there ever is some sort of total economic breakdown, I would like to have some skill that would be beneficial to my family and would provide a product that could be traded/bartered. Doomsday scenario, but I like to be prepared.

Anyway, enough on that. The second article I read was 6 Ways to Save $2997 a year on Food. I didn’t find the article itself very useful, but the comments were rather interesting. I do not follow an across the board “eating out is more expensive than eating in” mentality. We have started eating in more, with me cooking more dinners and we have been buying less fast food since we started buckling down. We still eat out on occasion, but we were eating out three to four nights a week, every weekday morning for breakfast, and every weekday afternoon for lunch.

I have not stuck so steadfastly to my “I’m not eating out anymore” because we haven’t been to the grocery store for a real shopping trip in probably a month. We’ve stopped here and there to buy little things but for the most part, no grocery shopping. We’ve tried to decrease our grocery bill, along with our fast food bill, and I think it has been largely successful.

Below are the common philosophies that I use when preparing meals. They change often, but these are pretty constant.

1. Plan meals ahead, but don’t assume that you have to put all of the ingredients in them. For example, a lot of the recipes that I use have a lot of very specific spices, some that I can’t find, some that are just way too expensive for a single meal, so I adjust the recipe to fit our budget and it still comes out delicious.

2. Sometimes, eating out is less expensive than eating in, even if it isn’t healthy. We stop at Little Caesars every couple of weeks when I don’t feel like cooking. One large one topping pizza costs us $5 and feeds the whole family. A $5 footlong sub is less expensive than buying 3 different kinds of lunch meat, bread, condiments, and veggies.

3. One of the most delicious meals that I make is a whole fryer chicken that I cook in the oven, and it’s pretty cost effective as well. I buy a whole fryer ($0.79/lbs- usually $4.50 for the bird), a garlic bulb ($3.69/lbs- usually about $0.39 for the bulb), celery, baby carrots, an onion, and some red potatoes. Last time, I soaked the chicken overnight in a brine mixture of kosher salt and water, and patted it dry, rubbed the outside of the chicken with a tbsp of butter, then combined spices; salt (I prefer kosher), pepper (fresh ground for me), garlic powder, onion powder, parsley, thyme, whatever I feel like throwing in. I rub it all over the inside and outside of the chicken, and put some between the skin and the meat. I crack a couple of cloves of garlic away from the skin and put those, along with some onion, in the bird. The bird then goes in my roasting pan, and I put a combination of the other veggies into the bottom of the pan. Last time I made it, I poured ¼ cup of white wine over the vegetables (we got the wine at cost, because my husband works for a wine distributor), and then roasted it in the oven at about 400 degrees for an hour, until the juices run clear.

For one thing, it’s really, really good. The meat is usually juicy and tender, and very flavorful. It also provides a lot of meat. The kids like it, I take leftovers for lunch the next day, and sometimes for two days, so for less than ten dollars, we’ve gotten three meals, one of which feeds four people.

I have a lot of favorite “go to” recipes. Maybe one of these days I’ll get around to posting them all, or I can post one a day or something.

5. I know some people baulk at the idea of packing a lunch, however I’ve found that it saves a lot of money; probably $400-$500 a month for me alone. Usually I take a $2 frozen meal, but I do enjoy the nights that I have leftovers for lunch. Dinners like spaghetti, where we usually have a lot of extra, can provide up to three days worth of meals.

6. If there is a local meet shop, mom and pop grocery store, ethnic food store, or whatever, check it out for specials. A few weeks ago, I went into Carfagna’s. They had 15-20 lbs New York Striploin for $2.99/lbs, which they would cut into steaks for you—free of charge. We got a 20 lbs striploin, which generated 20 steaks and 2.5 lbs of ground sirloin for about $60. Even if it were just the steaks, we would have been spending about $3 per steak, which is a phenomenal deal, but the ground sirloin was so much more flavorful than anything we pick up in the grocery store. They also have great prices on fresh produce and a wide variety of cheeses that I don’t find anywhere else.
Anyway, the stuff I do is pretty basic, but it amazed me to read on that article that people don’t think cooking in or taking lunches makes a huge difference to your bottom line or is more expensive. I used to think so too, until I really added up how much we were spending on fast food.

Day 137: Self Pity

It’s time to face the facts; I can’t stop spending. I keep making all of these grand plans about how we’re going to pay off our debt, but neither my husband nor I are willing to make the changes necessary to actually follow through. I obsess daily about how we’re going to pay the debt off in this time frame, making this amount of payments, contributing this amount of bonuses towards debt pay off, and tax returns, and whatever additional windfalls we come across, but the simple fact is that we never follow through.

This week, I have added to my Target card, twice. We went to dinner last Friday and spent $40, then went to Target and spent another $65. Some of it was necessities, most of it was not. The problem is, by time I pay our mortgage, utilities, insurance, car, student loans, and credit cards; we have no money for anything else. We don’t have money to go grocery shopping, or for gas, or to buy clothes that the kids need for winter, so they go on the credit cards, which means the minimum payments never drop and neither do the balances. Instead, we stay in this same never ending cycle where we’re just throwing money down a rabbit hole.

Today I feel dejected, and I feel like a failure. How long have I been at this? And how much progress have I made? My brake light popped on this morning while driving to work. I remember how much it cost to replace my brakes last time. There is always something that comes up. It’s great that we’re getting $1400 back from the county, but when half of that goes towards new brakes… it doesn’t really leave much for credit cards and savings. There’s always something.

Day 129: Rambling about the Past and the Future

I read this article on Yahoo yesterday, regarding 401(k) matching. As I wrote about a month or so ago, I discontinued my 401(k) contributions temporarily because we needed the additional income to help pay our bills and I was facing a consistent negative rate of return on my investment.

Reading the comments on this article (which is no small feat, given the numerous server errors that plague Yahoo articles), made me really think about my investment philosophy and planning for our future retirement.

I don’t know if I’ve spilled any personal information about myself, but I am 29 years old and my husband is in his mid-30s. I make approximately $42,000 a year plus bonuses (which have ranged anywhere from $500 up to an anticipated bonus this year of closer to $1500). My husband is on an hourly wage and generally has a gross income between $21,000-$25,000 and has not seen a raise in three years. Given our yearly salaries, I find it very sad that we have no savings accounts to speak of.

I put $25 per paycheck into each of our children’s savings accounts and then transfer those funds into small, short term CD’s whenever the savings account balances reach $500. I keep the CD’s small, and occasionally have multiple CD’s with different maturity dates, usually only buying 3 month CD’s due to the low savings rate. If the savings rate ever increases (which I anticipate it will in the future), I may buy more long term CD’s. My children know these bank accounts exist, even if they don’t fully understand them. In addition to my automatic contributions every two weeks, we also put any change and cash they receive into their piggy banks, and when the piggy banks get full, we take the piggy’s to the bank, dump the change into the change machine, and deposit that money into their savings accounts as well. When they get older, I will teach them how money is used to buy things, and we will maybe put half of their change into savings, and the rest of it will be used to buy things they want. I will also give them an allowance for doing chores around the house; something I never received growing up.

I think a lot of my financial immaturity can be traced back to my parents and how I was raised. I don’t want to blame my parents, because they did the best they could, given their financial position. They were both teenagers when I was born and my mom dropped out of school at 16. My dad graduated, but always worked hard, manual labor jobs just to make ends meet. They had five kids, and then divorced, and spent the next 14 years arguing over money, child support, medical bills, and everything else. I remember my dad, over and over again, telling me and my siblings how my mom was being unreasonable, expecting him to pay half of the medical and dental bills when he already paid child support, even though that was what the court order stated. I remember him showing me his paychecks and telling me, “This is how much I bring home, and this is how much I pay your mom, and how much does that leave me with? Do you think that it’s fair that I should have to pay her more for doctors and dentist bills?” Similarly, I remember copying every check that my dad sent my mom for child support so she would have proof for the courts that he wasn’t paying his fair share, and knowing how much she was bringing in, and how much the mortgage was, and really having no clue on utilities or car payments. Based on what I know now, as an adult, it’s no wonder our home was foreclosed on when I was 17 years old.

When we bought our house, we made an effort to determine how much home we could afford. I never wanted my children to feel the sense of loss that I did when we lost our home. It was as if I went off to college, and never had a home to go back to. Apartments never felt like home, and I moved every year so I didn’t really accumulate much from year to year. My first apartment was furnished, but my second was not, and the only furniture I owned was a queen sized bed and a 19” tv. I sat the tv on a box and didn’t have cable. My living room was empty. Same with my second apartment, until my (now) husband bought me a tv stand to set my tv on for my birthday. It wasn’t until I moved in with my husband that I actually had furniture in my living room, and even then we had a broken down couch that he’d gotten from friends, or family, or somewhere, and a dresser that had broken handles. We got a free washer and dryer when we signed a 15 month lease with the apartment complex, which worked great for us at the time. We got an old desk from a friend that was moving and furniture from friends and family when they replaced theirs.

So as we were saving to buy a house, we calculated how much we were spending on rent, and we put whatever we could into savings every month. We kept track of what we were able to save, what we were spending on extraneous items, and where we could save more. When we met with a mortgage broker, we told him we could afford no more than $950 a month for our mortgage, interest, and insurance; knowing that we could afford closer to $1000, but not wanting to push our budget. He told us that with the amount we were looking to spend, we could only afford a $100,000 house, but that with our income, we qualified for $160,000 home. We disagreed, telling him that $1000 would be pushing our budget and he told us that we would see raises and be able to afford more in the future. I am glad we didn’t listen to him.

We looked at homes between $99,000 and $113,000, and ultimately bought the most expensive one that we looked at, but it had four bedrooms and one and a half baths, and did not need near the work that the others we saw needed. It was, for all intents and purposes, move in ready.

When we bought our home is when finances started going downhill for us. We bought a new couch, new bed, new tv, new tv stands. It was almost as if when we were told we could afford more house, we thought we could afford more stuff to go in it. Of course, we had no more cash, and since our mortgage payment was at the top of our limit, everything went on credit. At a time when many people were losing their job and defaulting on debt payments, we were a great asset to companies looking to make a profit, like banks. We bought and bought and made the minimum payments and finally, at Christmas last year, hit a point where we were questioning how we were going to buy gifts for everybody that we were supposed to buy for. We had been buying with the assumption that our tax return would bail us out, that bonuses would hold us over, that all of the spending that we did throughout the year would be wiped out with the influx of cash in the spring.

The problem was that with the credit card reform that went into effect earlier this year, some of our creditors, especially the ones with the biggest balances, decided to change their fixed rate cards into variable rates, and increased the interest rates to the point that 90%+ of our minimum payment was going towards interest. This led to higher minimum payments to cover the interest plus a minimum payment towards the balance, and without the tax return, we didn’t have the money to pay the balances down.

Then we were hit by problem after problem financially. Our air conditioner broke, twice. Our basement flooded with sewage. Our air conditioner broke again. The bottom of our car was rusted out and it would have cost more to repair than it was worth to keep it.

Through it all, though, we’ve managed to keep our heads above water. Our 2010 tax return went towards paying off the credit cards we used to fix our basement. Our 2011 tax return will go towards the other problems we’ve had crop up throughout the year.

Once we’ve made a sizable dent in our debt, I will start putting a percentage of our pay into savings for a rainy day fund, instead of throwing so much money towards the debt, that way we will have a cushion. We’re less stressed with an emergency fund.

And after we’ve made payments towards these credit cards and I feel that we have sufficiently gotten our heads above water, I will resume contributions to my company 401(k). My company matches 50 cents on the dollar up to 6% of my salary. I contribute to a Roth 401(k) because I’d like to think that I will be making more money when I retire than I do now, pushing me into a higher tax bracket. Even if I’m not making anymore, I will still probably be in a higher tax bracket due to inflation. After contributing to the maximum that my employer will match, I plan to contribute to a Roth IRA, eventually up to the maximum that I am allowed. I would eventually like to put some amount into the market for long term investing, not to play the market. I want to learn more about buying stock and diversifying my investments. My company also offers a pension, in addition to the 401(k), which I am well aware makes me very fortunate.

Anyway, this discussion about planning for retirement has gotten very long winded and off track, but I guess I just needed a brain dump today. To sum it up, I want to diversify. I know that 401(k)’s aren’t guaranteed, so I’d like to also contribute to a Roth IRA and savings and CD’s, but I’d also like to try some long term investing in the stock market, and hopefully by time we retire, we’ll have paid off our mortgage and won’t be carrying debt, and we’ll be able to live comfortably without worrying where our next meal is coming from.

Day 128: Tiptoeing Forward

We’ve had a small step forward this month; or maybe a big step, depending on how you want to define it. Our debt actually went down across all categories, even credit cards. Only one credit card balances actually went up, but everything else was down. All told, we cut over $888 from our debt balance. It is a very exciting month for me, and the fact that my husband finally seems to be getting on board with some of my plans makes me very excited for us as a family and our financial picture.

We also got some good news from the county last week. They will be reimbursing us the out of pocket expenses that we incurred in January as a result of the county’s sanitary sewer flooding our basement. We will be receiving $1377 back from the county. My husband and I have discussed it and decided that $377 of that will be going towards credit card balances, and the other $1000 will go into a savings account for an emergency fund. We debated putting the entire amount towards a credit card, but decided that we are less stressed when we have an emergency cushion, even if it is only $1000.

We will be paying our Target credit card off in the spring, when we receive our tax return. Knowing that we give the government a “loan” every year doesn’t feel so bad when I know we’re getting a chunk back to apply towards our credit cards. I’ve already sat down and planned out where the money is going to go based on the expected refund. Last year we received a refund of over $4000. This year I anticipate it will be closer to $3000 because I’ve recently adjusted my withholding to put more money towards debt now, instead of waiting until tax time. I have abandoned my plan of paying off both Best Buy credit cards with the tax return because we’re not paying interest on them and I felt It was more important to pay the cards that we are paying interest on off.

I can’t wait to watch balances turn to $0. In March, the Target will be at $0, then in June, Best Buy #1 will be at $0, and then December will be Best Buy #2. With my anticipated bonus in April, we may even be able to pay down half the balance on CU 1 in the spring. The thought of eliminating that much debt makes me so giddy. More than that, the thought of being able to save money, instead of putting it all towards debt, makes me giddy.

We have been doing better than I anticipated at paying off debt and staying within our means. I may be able to resume contributions to my 401(k) after the first of the year. I just feel good.

Here is a picture of where the debt is as of the time that all October payments are made. The total for CU 2 is in gray because it has not yet been paid, but this is an estimate based on the minimum payment and total amount that will be applied towards interest.

Day 121: Little Failures

I haven’t had much to write, and I haven’t really wanted to reflect on my failures this month. Everything went up except for the two categories that could only go down. Credit card balances are up, we have our new car loan, and we’re pushing closer to $200,000 in debt than we ever have been before. Even though the balances on both of our Best Buy cards are going down, pretty much every other card has gone up.

My husband and I have been arguing about what exactly a budget it. He doesn’t seem to grasp the concept. He thinks that you can’t budget because “little things pop up” and I’ve told him repeatedly that the point of a budget is that those little things don’t pop up. He’s not talking about emergencies; he’s talking about wanting to go out on weekly shopping trips for non-necessities, like books, like clothes, like toys. As long as he thinks that a budget is supposed to be busted by these “little things that pop up” we will never get on track financially, no matter how hard I try.

I honestly don’t know how we’re paying for Christmas this year. I told my husband that we’re going to have to limit gifts to 5 per child. He thinks that means five big gifts. I told him this year is not the “Barbie jeep” kind of year. Last year we bought our daughter one of those Power Wheels Barbie jeeps and she hardly drives it. My plan for Christmas this year, is to sit down with sales ads and write a list of exactly what the kids are getting, and then go out the day after Thanksgiving to buy the things that are on deep discount. We’ll do the remainder of the shopping throughout the month of December, but will not deviate from the list. We can’t. We can’t afford it.

I’ve also been looking into Once a Month Cooking, or at least once a week; buying and cooking in bulk and freezing meals. Anything I can do to simplify my life and decrease our variable expenses (like groceries.)

Here is our snapshot of our outstanding balances after paying all bills for the month of September.

Day 100: 100 Days In

I made a stupid decision this morning, or maybe not. I paid a collection account. I know the experts say not to pay collections, that in most instances they can be gotten out of, especially on a debt that is four years old; however, I really felt that I needed to pay the medical bills for when I had my daughter.

I didn’t even know that a new collection agency had the bills. They’ve been passed around a lot. When I first incurred them, I fought them because the hospital hadn’t processed our application for financial assistance, then I fought them because I simply didn’t have the money to pay them. We didn’t hear anything for years, and it wasn’t until this spring that we heard from another collection agency. I actually originally thought that the collections were from when I had my son, but upon further examination, realized that they were from 2006.

So, why did I pay them, knowing that conventional wisdom says that I could keep disputing the debts and having them passed around until the seven years that they wouldn’t be able to put them on my credit report anymore? Because I don’t want to fight them on a debt that I know is legitimate. I honestly thought I’d paid them in 2007. And, they discounted it to half of the outstanding balance.

I figured if I was going to pay off debts, paying off a medical bill that’s been haunting me for four years wouldn’t be a bad one to start with. At least I feel like that’s one albatross that is no longer hanging around my neck.

In our financial world, things kind of took a deep dive this weekend. I learned that my husband can’t be reigned in financially, and when he splurges, so do I. If I’m being honest with myself, I did need to two new pairs of shoes that I bought. Realistically, working in an office, I needed shoes that didn’t have holes in the soles. It was a financial expense that I had to incur. It hurt, but it needed to be done.

We bought our daughter a new bed this weekend. As I stated, she is four years old, and she was still sleeping in a crib. She was above the weight limit for the crib, and it’s actually recalled, so I knew I needed to get her a new one. I wish we would have had a way to get it home ourselves because we spent $40 on delivery. Hopefully when we return the recalled crib, we’ll get some money back to offset the expense.

We also bought birthday gifts for our daughter. I had planned to buy her one toy and some clothes. My husband went crazy and spent close to $130 on toys for her. I reminded him that Christmas is only three months away, but it didn’t matter.

So we completely undid all of the good we had done on paying off our debt in one weekend. Now we’re back to square one.

My mother, sister, and I are going to have a garage sale the first weekend of October, so hopefully I’ll make a little money and be able to put it directly towards credit card debt. First of the month, with winter clothes as we’re entering fall, and some homegoods that we no longer need… I think we’ll make decent money, at least. Last time I made $200 with one box of clothes. Hopefully I do at least that this time.

Day 97: Plugging Along

I haven’t had a lot to write about our debt payoff journey lately. As it stands, things are stagnant, but not, if that makes any sense.

I don’t have any big plans up my sleeve to eliminate half my debt overnight. I think we’ve made all of the big moves that we can, and now comes the time to follow through with our debt payoff plan. We just have to hammer away at it.

Effective my next paycheck, I will not be contributing to my 401(k). This is only a temporary bump, and I intend to start investing again in March when we receive our tax return. When we receive our tax return, we will be paying off three of our credit cards, eliminating nearly $300 a month in credit card payments. Once those three credit cards are paid off, our financial picture will look a lot brighter. I keep telling myself, “Six more months until we have some breathing room.” Not to say we’re going to go crazy with that breathing room, just that it will be a welcome change from our financial state for the past six months.

My husband is still a nonsmoker, for a month as of Wednesday, but he’s discouraged because we’re not seeing immediate financial returns on his quitting. I’ve tried explaining that we have benefited financially from it, because if it weren’t for him quitting, we’d be even further underwater with our bills than we are right now, but he wants to see positive growth in our savings account, not elimination of credit card spending.

I read financial articles every day, and see people complain that the economy isn’t getting any better and people are still broke. They blame the president, the banks, the realtors, but never seem to point the finger at themselves. It’s a bitter pill to swallow, knowing that we’ve lost $20,000 on our house in three years, knowing that we’re locked into a 6% interest rate, and we can’t get out of our home because we’ll never make back what we owe on it. But I don’t blame anybody else for our financial position except for myself. I don’t even blame my husband, because he told me three years ago that we should stay in an apartment and save money for a down payment, instead of putting nothing down on a house that we were only lukewarm on. Instead, I wanted out of an apartment, and here we sit.

I could blame the credit card companies for our outstanding financial debt load. They did, after all, increase our interest rates to 24%+ and convert our fixed cards to variable cards, but if we hadn’t used them irresponsibly in the first place, we wouldn’t have had as much debt for them to profit off of.

I could blame the student loan companies for not reigning in the amount of loans they were allowing me to take out, giving me more than three times tuition costs. I could blame the car company for selling us a lemon, or giving us a high interest loan…

You get the point.

But, it’s nobodies fault except ours. We’re the ones that got dollar signs in our eyes and thought we were made of money. The funny thing is, we’re not making anymore money than we were before. Our utilities are going up monthly. Our mortgage bill went up substantially, because of escrow. We’ve got a new, higher car payment, and a new higher insurance bill. And yet, we’re paying credit cards off. Funny how that can work, when you prioritize your spending, cut out fast food and cook at home, eliminate unnecessary shopping trips that you were only making for the sake of boredom. Looking at our financial picture, I am amazed how much money we were hemorrhaging.

Six months. It will only be six months until we have breathing room; until our credit cards aren’t maxed out, until we’re not scraping pennies just to make ends meet, until I can start sleeping at night without having nightmares of losing our home. Six months seems a long way off, but soon it will be Halloween, then Thanksgiving, and then Christmas.

Until then, I’ll just keep swimming.

Day 80: A Pretty Big Setback

Our debt headed the wrong direction in a big way last night. We bought a new car. A brand new car. Ultimately, it was the right decision. I need to keep telling myself that, because the new car payment makes me want to scream and throw myself off of a building, but it was a necessity.

A little over a month ago, we were told that our car had a rusted out cross member. We were quoted between $5-6k to fix it. We owed $8000 on the car. And it was only worth $5500 in trade. We looked at the numbers, tried to figure out what our best option was, and ultimately decided that we needed to get a new car. We wanted to keep the payments as close to our existing payments as possible, which meant $288 a month. After walking into several dealerships and being told that it was an impossibility for a new car, we started revising our numbers. After looking at our actual payment (we were paying on a biweekly basis) and realizing we were actually paying $313 a month, and seeing that our gas mileage would be cut in half with the new car, saving us about $50 a month (maybe more) in gas, I set our ceiling at $350 a month.

We were still being quoted in the $360-$370 range though, so I told my husband that we should wait until next month and see if there were any other incentives, lower interest rates, or Labor Day sales. I thought, when I left work yesterday, that we were waiting to buy a new car. However, one of the guys that we had been talking to called and told my husband that he could get us into the car we wanted for $350 a month, so we went up tot he dealership. Of course, we got there, and he told us the lowest he could go was $367. So, my husband decided to play hard ball and called the other dealership that we had visited and they said they could beat that. So the dealership we were at said they could go to $365, taking a loss on the car, and they would throw in the free Homelink mirror and oil changes for a month. The other dealership said they could beat that, and the men at the dealer we were standing in were irritating me anyway.

My husband decided that $2 was worth driving to the other dealership. I told him there was no way we were going back to the first dealership if we left. We got tot he second dealership and they quoted us $367 with no Homelink and no free oil changes. After buying Gap insurance because of the negative equity we were rolling into our loan, we ended up with a $378 a month car payment (nearly $30 more than my ceiling) for less of a car. I was, and still am, pretty irritated.

Ultimately, I know that we were lucky to get a new car for less than $400 a month. We are lucky to be out of the money pit that was our old car and we're lucky we got $5500 on it, given everything that was falling apart. I'm just angry that we could have got the car we really wanted, for less, at the first dealership, but my husband wanted to haggle over $2 and we ended up paying even more. I can tell you, when I buy my car (not the family car), I'm doing all of the talking and I'm deciding which car we buy.

I plugged the numbers into my debt snowball calculator and discovered that it will take a year longer to pay off this car than it would have taken to pay off our old car. With a 3.9% interest rate, by paying it off early, we'll be saving quite a bit of interest. Our old car loan was at 6.75%, so I don't feel so bad about the 3.9%. It's better than what either of our credit unions could have given us.

I'm just sucking hard on that $378 a month car payment.

Looking at the numbers, I hope it works out the way it looks on paper and we are only paying about $15 a month more for car ownership than we were, but that only works if the car gets the mileage they say it does.

I also made a decision that a lot of people will probably disagree with this morning. I stopped deductions from my paycheck for my 401(k). As I see it right now, I'm looking at negative return on investment consistently. I felt like I was throwing good money after bad, and feel like, after about six months of applying my 401(k) deductions to credit cards, we'll be in a better place financially so I can start contributing again. Right now, I just really want to get out of this debt that is plaguing us so I can stop worrying about making our monthly bills all of the time.

I put in a call to our mortgage company last week and they haven't called me back, so I'll have to follow up with them today. I also contacted my credit union to see if they happen to refinance upside down loans. I'm trying to streamline our finances as much as possible. It will relieve a lot of stress in the long run.

Day 72: Small Changes

I can not believe we are 72 days into trying to dig our way out of this mess. The days just blend together, and it feels like we're making no progress. I know we're making progress, because the numbers are obviously going down, but it's such small progress that it almost feels pointless.

I got our monthly statement for the Target card, which we transferred half the balance from. It was kind of disheartening to see that the minimum payment was still over $100 and we still paid $88+ in interest. I know they use an average daily balance method for computing interest, so we still paid interest on the huge balance for a third of the month, but it was a little discouraging. The fact that the minimum payment only went down $28 was kind of discouraging too. Hopefully September's statements give us a much better picture of what our new monthly payments will look like.

I got some advice about our mortgage, so I'm going to have to contact our lender this week to discuss some refinance or modification options with regards to our loans and the governmental programs that are in place. It looks like our mortgage is held by Fannie Mae, which opens up some new options for us. It looks like one of the options allows up to a 125% LTV refinance option, but it only makes sense if there aren't astronomical fees associated with it.

And one of the biggest things that has happened to help our financial picture? My husband quit smoking. He's going on day five without a cigarette. Eliminating that expense will make a pretty substantial ($350-$400) difference to our budget, not to mention he will be healthier and the kids won't see him smoking. He's angry with me right now, because of the way he quit smoking, but hopefully in the future he will realize that I only did it because I love him, and the good reasons (health, kids) weren't working, so fighting about money did. If he's healthier in the long run, I think I can deal with him resenting me for now.

Day 66: This Month's Picture

Here is our debt picture today, August 17.

Overall, we've paid our debt down $340.52 in the past month, and $1288.25 since I started keeping track in June. The bad news is that our credit card debt has actually gone up $142.25 in the past month.

My husband and I had a not so pleasant discussion on the state of our financial affairs tonight. I'm extremely unhappy with his $400 a month cigarette habit.

We were denied the refinance. We would need to refinance 112% LTV and the refinance plan only allows up to a 110% LTV, so we have to pay another $4000 off of our principal, or our house value needs to increase (which it won't) in order to be eligible for a refinance. That means that now, we're going to have to find a way to come up with an additional $85 a month for our mortgage payment, which is going to be hard to do when we're already running a $1000 a month shortfall. I know that can't be entirely accurate, because our credit cards only went up less than $150 this past month, and I don't see any week where we can't meet our bills over the coming month, there's just no extra money.

I think I'm going to look into a second job this week, see if I can pick up something in retail through the holidays, if anybody is even hiring. At least knowing that it's temporary will help me get through the days/nights. If we can get one credit card paid off, it will help our financial position immensely.

Day 55 Continued: A little good news

I got a call from my credit union. They were not able to give us the full amount we were requesting for the credit limit increase, however they were able to to raise the limit to $10,000 and we transferred $2000 of the balance from the Target card, leaving us with $2733.75 on the Target card, and a $9,420 balance on the credit union card. They're also lowering my interest rate to 7.99%, so I lost a percentage point. My credit score was 740, so I am feeling pretty good right now.

We're trying to decide if we try again for a personal loan for the other $2700 so we're not paying anything to Target. If not, we'll just throw the rest of our money at that outstanding balance and get it paid off. Transferring a little more than 42% of the balance will help decrease the amount of interest we're paying on the Target card, so it will give a little extra to go towards principal.

Now, we just need the mortgage company to give us a call back. Fingers crossed.

Day 55: Just Waiting for Answers

The past five days have been filled with activity.

Yesterday, we met with the mortgage broker to discuss refinancing our house. We were going over the numbers, he discussed a FHA refinance program, and the noticed that our loan was actually conventional. I had thought it was FHA too, but apparently not. He also thought that the sellers had paid our down payment, when in reality, there had been no down payment.

We talked numbers, he asked what houses were selling for in our area, I told him I wasn't sure but that Zillow had our house valued at about $95,000. Its weird, because the house right next to ours is built exactly the same, except that they added a bonus room to the back, and it's at $105,000 on Zillow. The bonus room only added an addtional 100 square feet. Anyway, I told him that we've had at least four foreclosures on our house, and that if he'd called us two months ago, our value was sitting at closer to $105,000, but in the past two months we've lost about $10k on the value of our house because three of those foreclosures sold at less than $40,000 each. That's been since the first of June.

He gave us two different possibilities and is looking into which one will work for us. If he's able to refinance our conventional loan under the FHA program, we won't need an appraisal and we'll need to show up to closing with $1500 to start our escrow account. We'd close the end of September and not have an October mortgage payment, so it's completely feasible. If we can't do the FHA refinance, then we'll have to do the Fannie Mae refi, which involves an appraisal. I'm not sure if our house will appraise high enough to refinance that way or not. It may, because our house is the second highest valued on the street, according to the auditors office and Zillow, but it may appraise lower because of cosmetic things that we simply haven't had time to fix, like the fence our neighbors ran through, the hole in the wall behind our front door where my son slammed the door handle into it, and the crack in the ceiling above our shower. I do know that if we have to have an appraisal, I will probably be painting the bathroom sooner, rather than later, to get rid of the peeling paint and border.

He should be giving us a call back in the next two days. Regardless, both options make our monthly payment about $50 less than what we're paying now, and $138 less than our new payment that will go into effect on October 1, so we'll be better off financially. I figure that if we are able to refinance, I will continue to pay that additional $50 towards our principal, so our payment will stay the same.

I forgot to mention, the mortgage lender will also be paying all closing costs for either option, including the appraisal fee if we need one. We only have to come up with the escrow amount. It won't actually cost us anything additional.

The other thing that I have been looking in to, and am waiting on a response regarding, is a credit limit increase and balance transfer. I already struck out with my husband's credit union, but my credit union has always been a lot more likely to work with us.

For example, my husband's credit card through his credit union has a $3500 credit limit and a 14.99% interest rate. It's been the same credit limit for years and years and years. When we applied for the credit limit increase, instead of giving us a reduced amount, they offered us a fixed term personal loan.

My credit card through my credit union started with a $5000 limit and a 13.99% fixed interest rate. I called this past January for a credit limit increase. They increased my limit to $7500 and asked if I would be interested in moving the balance to an 8.99% variable rate card and told me that, if at any point in the future, it looked like interest rates were moving so high that the variable rate card was no longer a good option, we could always move it back to the fixed rate card. I called them on Monday and asked how long it would be before I could apply for a credit limit increase for the sole purpose of a balance transfer.

The loan officer told me, "Usually, it is between six months to a year, however you have a very extensive history with us and an excellent payment history, so we may be able to reconsider you now. Let me get this to one of our underwriters and I will give you a call back". I love, LOVE that they look at my entire history with them and not just how much total debt I have. Even if they can't give me an increase, which I kind of expect, I'll still be singing their praises because they looked at more than just our astronomical debt when I told them that we're trying to transfer a balance from a 24% interest card.

So today, I just get to sit and wait, and see if I get good news from either company. If we were able to refinance and do the balance transfer, we'd probably be saving close to $100 a month in interest, maybe more. That's money that would be going directly towards paying off the principal amounts.

On a side note, our mortgage broker mentioned the fact that they're building a casino near our house. He said that he expects to see property values increase once it's built and they start to improve the area around it and suggested that in the next two to three years, we check our property values and consider moving, if it's feasible. We had already told him that we wanted to move in probably five years, so it was nice to get that bit of info from him. Of course, by then interest rates will probably be sky high, but we'll see.

Day 50: The Downs and The Ups

Yesterday was not a good day. We got a notice from our mortgage company that, after rebalancing our escrow account, we're running $595.06 short for the year. We also had an increase in property taxes due to a school levy, and an increase in homeowners insurance premium due to a sewage back up in our basement that resulted in a nearly $10,000 claim. So, after adding the increased taxes, premium, and shortage and dividing it over the next twelve months, our mortgage payment was going up $85 a month. That might not seem like a lot to some, but it's enough to put us over our heads and ultimately result in us falling behind on our mortgage.

If it weren't for the massive minimum payments on our maxed out credit cards, we wouldn't have a problem with paying our mortgage, even with this increase. We have got to find a way to get out from under our Target credit card and it's 24% interest rate. For ever $135.00 minimum payment, $96+ is going towards interest. We tried applying for a credit limit increase with my husbands credit union last month, so we could do a balance transfer. They countered with an offer for a private loan with a 10.74% interest rates, but the monthly payments would have been over $400 a month. We're trying to reduce our payments, not triple them.

Yesterday, the mortgage broker that we went through to buy our house called my husband. He left him a voicemail about reducing our interest rate on our house, and subsequently reducing our minimum payments. I've been looking at refinancing for several months, because right now we're in a 6% fixed interest rate on a 30 year mortgage, which almost seems criminal with the historic low interest rates we're seeing at the moment. But here's the thing; we owe over $108,000 on our house. According to Zillow, our house is only worth $95,000. Every refinance offer I've looked at has required a down payment of 5% minimum. We don't have any money for a down payment, we don't have money for closing costs or fees associated with refinancing, and we're not sure how long we're staying in the house anyway. The refinance offer I was looking at last night required a 5% down payment to refi, and would have taken 14.5 months to recoup the costs associated with the refinance.

However, the notice from our mortgage lender yesterday was enough to push us into action. My husband called the mortgage broker back last night and left a message for him to give us a call. The worst that can happen is he can offer us nothing, right? I contacted our insurance company to see what impact raising our deductible to $1000 will have on the premium for our car, and for our house. I don't think we can change the deductible for the house mid-term, but I want to see what the different rates are with our current provider because I'm going to shop around. I hate to, because I've been a customer for 13 years, but we just can't afford to pay any more than necessary. I work for an insurance company and would get a 15% employee discount if I switched, but I still don't know if it will be low enough to replace our current company. I'm going to give my credit union a call this morning to see about a credit limit increase/balance transfer from our high interest card. I've gotten a pretty decent raise since our last credit limit increase. And if we can transfer the balance, we're going to have to cut up our Target card. just get rid of it. It's a toxic card.

The good is, my husband got his bonus this morning. I wasn't expecting it until next month. The bad? It's 8:30 am and the bonus is gone. I paid our past due cable and electric bills and the Target bill that's due next week. At least we're current though. As long as we can keep current, we'll be ok. I see a garage sale in the near future. If I'd known my neighbors were having a garage sale today, I would have probably taken the time off work to have one myself. Oh well, hindsight is 20/20.

I think my husband is finally seeing how much we're struggling. Not enough to quit smoking, but enough that he's planning to start rolling his own cigarettes as a cost saving measure. Hopefully that will transition to quitting altogether in the near future.

Day 49: Figured it out, I think

I think I've figured out the discrepancy in the Average Daily Balance and the payoff amount. All of these purchases are on interest deferred payment plans. Although we're not paying interest, and won't as long as the balances are paid off in a timely fashion, however, the interest is still accruing and is being included in the average daily balance.

I already intended to pay off these purchases before the payment period expired, however realizing that I'm accruing interest on top of interest on top of interest that is deferred has ensured that I will NOT pay these off late. I might even make sure I pay each of these off a month early so there is no way they can charge me the deferred interest.

We keep talking about having a garage sale to clear out our house and make a little money. I think it's time to stop talking and just do it. As long as our minimum payments stay as high as they are, we're never going to get out from under these credit cards. We'll make progress one month, and then as soon as something pops up, we'll be back under again.

I'm having a hard time getting my husband to stick to this too. He texted me yesterday and asked if it was ok to buy $30 worth of books. I felt like saying, "Well honey, we paid our cable bill late and I've got a medical bill in collections. Do you think it's a good time to spend $30 on books?" Instead, I just responded with, "It's probably not the best time."

He wants to crack down on things that are fairly insignificant, like buying necessities at Aldi, but doesn't want to cut the biggest money wasters, like his smoking, or buying books. This past weekend he wanted to go shopping for clothes for the kids because he wanted to get out of the house. We still have a few months until we have to worry about buying winter clothes, or at least one month. My point is, it's not a necessity.

I've cut down on little things too, but it doesn't seem to matter. For example, I used to stop and get breakfast every day at McDonalds on my way to work, easily $5.50 a pop, and then I'd go out for lunch at $8.00+ a day. Now, I stop in the morning and get a parfait and a Diet Coke ($2.08), and I bring a Lean Cuisine for lunch ($1.98) for a savings of $9.44 per day. Multiply that by five days a week and I'm saving us nearly $50 a week on food alone, or about $200 a month. Our grocery bill is a little higher, but not $200 a month higher.

My husband should get his bonus from work next month. That will help, to be able to dump $500 into one of our credit cards. It will at least bring the minimum payment down a bit.

Day 43: A little confused about Average Daily Balance

Does anybody know how Average Daily Balance works, as far as calculating interest? I'll tell you why.

I'm looking at my Best Buy cards, the ones that I'm working to pay off before we get charged any interest on the purchases. Today, I happened to notice where they are calculating the interest on the credit card site itself, not the pdf format of my statement.

Basically, it looks like they're still assessing interest based on the original purchase price and not the current balance. For example, one purchase currently has an outstanding balance of $1946.91. On the website, the average daily balance for this purchase is showing as $2878.31 for this same purchase. All of the purchases are like that; one balance on the statement, another on the website, and the statement itself doesn't show the average daily balance being used to calculate interest. Is this right? Is it normal for there to be a nearly $1000 difference between the balance on a purchase and the average daily balance for interest calculations?

If they're assessing the accrued interest based on inflated numbers, we'll definitely be sure not to pay Best Buy any interest.

Anyway, all of our balances went up this month, except for Best Buy. Our anniversary ended up costing us nearly $200 between dinner, movie, popcorn, etc. I also have a collection agency contacting me about a medical bill from four years ago. I'm going to see if the hospital can call it back from the collection agency so I can use my Health Savings Card. I don't think I'll be able to use my card for a collection agency. I fully intend to pay it, I just have to figure out how.

Day 34:Restructure?

I've been looking the past couple of days and I may need to change our debt payoff strategy. I was adding up our bills, all of our bills, and realizing that we just don't have enough money to go around. There are probably things we could cut, like cable (currently runs us $163.25 per month) and if my husband would ever quit smoking, it would save us over $300 a month. We can't change our phone plan because we just signed a new two year contract; besides, three iPhones on an unlimited data plan and two regular phones without a data plan is actually a pretty good deal at $210 a month. It would cost more to break the contract than we'd save in fees. We've been trying to grocery shop more often to spend less in one trip and throw away less perishable goods, but it's hard for me to shop for one week, or two weeks, when I'm used to shopping for three or four. I also signed up for our electric companies budget plan so our bill remains pretty stable. So far, it's only fluctuated $2-$3 per month, and we're accruing a credit to apply towards our winter heating bill this year. It's easier to be on the payment plan than pay $125 during the summer and $300 during the winter.

I was also considering moving payments around. Currently I'm paying $200 on one Best Buy card and $225 on the other. These values were based on what it's going to cost to pay off "No interest" purchases by the maturity date. The thing is, I didn't take into account that these purchases expire at different times, and HSBC applies payments first to the minimum payment due on each individual purchase, then any purchase that isn't on a payment plan, and then on the no interest payment that expires first, so even though our largest purchase expires in December 2011 and accounts for 34% of my estimated payment, 100% of that payment is going towards our smallest purchase. I think it will make more sense to include a picture of what I mean.

The above chart is a representation of our current purchases on our Best Buy cards. The items highlighted in the red color are on one card, the one we're currently paying $225 on. The items highlighted in purple are on another card, the one we currently pay $200 on. I've been considering paying less on the Best Buy cards, once I have the item expiring in December paid off, and applying the extra payments to our Target credit card, which has the earliest balance. By playing with a debt snowball calculator, it appears that going this route would not only pay off all three cards earlier, but save us over $800 in interest. My only concern is that if we don't get our tax return on time, we'll end up paying interest on the purchase that expires in March.

None of this matters though, if we can't stop using our credit cards and eliminate something somewhere. We're struggling with this right now, because we're just having a hard time sticking to our budget over the weekends, which means we end up having to use credit cards to cover a necessity, or we're short on mortgage. I wish I could point to one thing that's contributing to our downfall, but it's all of us. This past weekend we ate out four times, easy $100. This coming weekend is our anniversary and between dinner and a movie, we're looking at another $100. I know we'll get there, just right now we're struggling.

Day 29: This Months Picture

So, we've made payments on all of our debts for the month, so here is the synopsis of this week.

We didn't pay as much off of our Best Buy #2 card as expected because my husband made a purchase on it, but otherwise things are moving along the way they're supposed to be.

Our total credit card debt is below $20,000! Small victories.

Day 23: Does Every Little Bit Count?

We haven't used our credit cards in 23 days, aside from my husband buying a new satellite radio. It was more than I expected, but it is one of those things that I went along with because he "needs" it for work. It will be paid off on Thursday when I pay towards our Best Buy cards anyway. It pushed our payoff date back by a month, but it was just one of those things. Aside from that, we've been paying cash for the little things that we were using credit cards for.

I had been stopping at McDonalds for breakfast every day on my way to work, for the past week I've been taking dry cereal and only stopping for a pop. For the cost of one day's breakfast from McDonalds, I've eaten all week and will next week too. I stopped at The Container Store yesterday and bought one of those cups that you put the milk in the bottom half and cereal in the top half and then mix them when you're ready to eat. There were a couple of other things I would have liked to buy, but I'll wait until I have a gift card, or something.

I've been taking surveys online on several sites, just to see if they even resulted in anything. So far, nothing. I've earned points and dollars on a couple of sites, but not qualified for a lot of surveys. I haven't made enough to cash out on any of them, but I figured if I take enough and earn some gift cards, then it can help towards my little shopping excursions.

Next week, I'll make payments towards our Best Buy credit cards and our Target card, and then I should be able to update our debt totals for this month. I think it'll help to see a difference in our balances, going the right direction. It might help to motivate us to keep it up. I've been questioning whether I should be making large payments towards the two different Best Buy cards, or whether I should pay off one and then the other, but I guess ultimately, it doesn't matter.

Day 19: Changing Your Mind

I read and article this morning referencing 10 sings that you're headed for a debt disaster .

1. Your bank account is consistently overdrawn.
2. Your credit card balances are rising.
3. You're only making minimum payments on your credit cards.
4. You and your partner are arguing about money.
5. Your savings account is busted.
6. You're juggling your monthly bill payments.
7. You don't know how much you owe.
8. You're keeping secrets.
9. You've got a credit card collection.
10. You're near the limit on your credit cards.

I meet eight of the ten signs, or met eight of the ten before starting our debt payoff process. Our credit card balances were rising (not anymore), we are making the minimum payments on all but two of our credit cards, we argue about money, our saving accounts are busted, we're juggling monthly bill payments (although not to the extent in the article, we now know how much we owe, we've got a credit card collection, and we're near the limits on most of our credit cards.

Reading that article led me to an article about Debt Relief Firms and how they put debtors in a deeper financial hole. I don't use debt relief programs, and in most instances, I don't like debt relief programs. After reading the article in the New York Times, I like them even less.

In the interest of full disclosure, I have to tell you that I briefly (two weeks) worked at Consumer Credit Counseling Service. CCCS is different than the debt relief programs that this article talks about in that they negotiate lower interest rates and payments on your debts, collect your payment from you, and distribute it to your creditors according to your established payoff plan. There is no saving until you have enough to negotiate with your creditors before payments are made. Consumer Credit Counseling Service is a non-profit credit counseling agency. They have counselors in their office and you come in and meet with them in person. They have low fees ($25 set up and $25 per month) but do have a process to waive these fees if you're in a financial hardship situation.

A quick search for their website shows me that they're now known as Apprisen Financial Advocates. Again, I used to work for this company, but I have no personal interest in their success or failure at this point, as I have not worked there in over ten years and have no affiliation with them.

I have not personally considered working with this company. Why? While I feel that they can be beneficial for individuals who have a hard time juggling their monthly debt payments and budgeting their monthly expenses, I believe that if you are motivated, dedicated, and educated, you can pay your debts off yourself without costing $25 a month in account service fees. The problem is that many people with massive debt, such as myself, are in that position because they couldn't stop themselves from using credit in the first place. If you can't change the root cause of your financial problems, you are doomed to repeat them.

Just this past week or two, my husband and I were discussing taking a vacation to Florida. My mom, sister, and niece are going next month. We went last year and took them with us, and we both wanted to go again this year. Even with our credit cards maxed out and working to pay the balances off, I have been trying for weeks to come up with a way to afford this vacation. To me, it didn't matter that we're sitting on $20,000 in credit card debt, or that we're trying to pay those balances off, or we're a flat tire away from being broke; all I wanted was to go on vacation, however I could make it happen. I was even considering applying for another credit card just so we could go. Logic finally kicked in this morning and I realized that this need for instant gratification is what got us in this position in the first place.

My husband, while apologizing for us not being able to go on vacation this year, said that maybe starting now, we put $50 a paycheck into a savings account for a vacation fund for next year, that way we can afford a real vacation without scrimping and saving. I guess he's right, although I would never tell him that, however the beach we want to stay at is on the Gulf coast and I'm afraid that this time next year, it'll be saturated with oil.

We were talking this weekend and I told him, "Do you realize, if we pay off these credit cards, we'll save $825 per month in minimum payments? $825!" He replied with, "Yeah, that sounds great and all, but we use these credit cards for everything. We'll never pay them off if we don't stop using them." To which I answered, "We haven't used them since I told you we're broke. We can live without them, we just have to learn how to."

It's amazing what you don't need when you put your mind to it.

Day 14: Student Loans

My student loan payments right now are not that unmanageable. I have low interest rates on two of them, and a 5% rate on my Perkins loan, which is not really that high when you look at the fixed interest rates being issued now on all loans across the boards.

In my endeavor to reduce our debt, I was looking at consolidating my three loans and possibly getting an Income Contingent Repayment plan, assuming that it would decrease my payments and interest overall. Apparently, based on our income and family size, an ICR would put me on the hook for nearly $925 a month, or approximately 16.5% of our monthly pre-tax income. I'm sorry, but that's almost my mortgage payment! What am I supposed to use to pay, I don't know, my utilities? My car payment? My groceries? Who in the government determined a formula to figure out how much the average person could afford to repay?

I'm sure this is a low end estimate because I used my base salary, not any bonus's that we might receive throughout the year, and my husband is paid hourly. And if you assume that we're paying approximately 25% of our paychecks in taxes, the $925 per month payment becomes 22% of our take home pay. That's just unreasonable.

I was still considering consolidating my student loans, but while investigating repayment options, I saw a statement, in red, that told me that I'm on the grandfathered Graduated payment plan. If I change my payment plan, I can not go back to this plan. My problem is, I don't know if this grandfathered repayment plan is better than the ones that are now offered.

A few years ago, I paid off one of my loans early. My plan was to continue applying that payment amount to the existing Perkins loan, therefore paying it off early. Instead, I applied that payment elsewhere and have continued making the minimum payments. I believe I selected my current repayment plan while looking at the amortization schedule and realizing that overall, my payments would never get higher than I was paying when I first graduated from college.

Now I'm looking towards going back to school and working on a Master's degree. A new degree will mean new loans with higher interest rates and a longer repayment period. In case I haven't mentioned this previously, although my debt payoff mission is primarily to improve our overall financial position, it is also geared towards ensuring that I am able to go to school full time without worrying that I'll need to get a second job to pay the bills, or that one of us will lose our job and our whole family will be underwater.

In my mind, if I can get our credit cards paid off quickly, I will feel a lot more comfortable enrolling full-time in college in September of 2011. Based on our current debt snowball plan, all credit cards will be paid off in November of 2012. That doesn't take into account bonuses, tax returns, any windfall we may receive. Unfortunately, that's just not soon enough.

I keep trying to remind myself that this is a process. It took us five years to accumulate all of this debt, it might very well take us five years to eliminate it. Today, I'm just chipping away.

Day 12: Denied

We applied for a credit limit increase on one of our lower interest credit cards last week. I included a coversheet with the application, stating that we were looking to increase our credit limit specifically so that we could request a balance transfer for one of our higher interest cards.

They called my husband on Friday and told him that based on the information they had in hand, they could not approve us because of our high amount of unsecured debt. They asked him to send copies of both of our last pay stubs, but he wasn't clear on whether these paystubs were to try and approve us for a credit limit increase, or if they were trying to put the debt into a personal loan with a fixed term.

We discussed our options and decided that we did not want a personal loan. Although the payments would be lower, because there would be a lower interest rate, we don't like the idea of a required monthly payment that is higher than our required payment now. The interest savings would not be so great that it would be a good option for us, especially since we're trying to stick to a somewhat self designed debt payoff program anyway.

The biggest roadblock we have in paying off our debt is our desire for instant gratification. Last year we went on a great vacation on the Gulf coast of Florida. We stayed in a resort right on the beach and had a great time. We also racked up over $2000 in debt. Some of my family is going to Florida in August and they've been asking if we're going with them. It's hard because we both want to go, but also both know that it's not financially responsible or feasible for us to go. We're just not used to being this broke, and it's hard to reign in our spending.

Day 7: Taking Steps

We applied to increase our credit limit on one of our cards, and I included a note with the application that we were looking to do a balance transfer. It makes sense because there are no balance transfer fees on this particular card, the interest rate is the same on balance transfers as regular purchases, and we should receive cash back awards for the amount being transferred. It takes us from a 23.24% interest rate (corrected from the 24.24% I posted on my last entry) to 14.25%, which is still high, but significantly lower than what we're paying now.

Any little bit helps, right? I'm trying to coordinate with my mom, sister, grandma, and aunts to have a garage sale next month. It'll give us the opportunity to clear stuff out of our houses, make a little additional money, and pay down some debt. Hopefully it comes to fruition. Last time I made $200 selling baby clothes. This time, I have two to three times as much, plus baby gear my kids have outgrown.

I'm trying as hard as I can, because I hate feeling this claustrophobic cloud over my head.

Day 4: Working on Our Game Plan

Today, I started looking at ways that we could more quickly pay off our debt.

We're trying to increase our credit limit on one of our lower interest cards so we can transfer the balance from our high-interest Target card to something lower. Even our lower interest rate cards aren't that low, but 14.25% is better than the 24.24% that Target charges. It would be even better if we could transfer it to the 8.99% card that I carry, but we maxed it out and they already increased our credit limit for an emergency in January, so we're kind of out of luck on that one. Because I am carrying such a high limit on my credit card, I don't think my credit union would approve us for a consolidation loan, otherwise I'd consolidate all of our higher interest debt into a personal consolidation loan at 10.99%.

I also looked into consolidating my student loans. My interest rates actually aren't too bad on my loans. They're exceptionally low, and I'd like to lock that in. I was looking at filing the consolidation application yesterday and read that the interest rate on my variable rate loans is actually supposed to go down on July 1, so I'm holding off on consolidating. I'm not 100% sure that I want to consolidate them anyway, if it means changing my payment plan and term of the loan.

I was also looking into refinancing our house, but after looking at the interest rates, closing costs, and the amount of time we anticipate staying in our house, I don't know that it would save us any money in the long run. Part of me wants to just stay in this house and pay it off so we don't have a mortgage anymore, but the other part of me wants something bigger and more convenient. I mean, if we're paying this much for a home, shouldn't it be a home we like? Once we get our credit cards paid off and start saving the amount of money we're paying every month, we can evaluate it a little more.

Speaking of credit cards, I have never really paid attention to what our monthly interest charges are on these cards. It kind of made me sick to really look at our statements and see $100+ in interest per month. Credit card companies really are out to keep people in debt, and people like me keep buying into it. I sometimes wonder how much people look at their statements and wonder if everybody else is perfectly content to remain oblivious to how much money they're giving the big, bad banks every month without batting an eye.

My husband and I had a heart to heart conversation about money tonight. It's sometimes difficult for us to discuss because we both feel attacked, like the other person is blaming us for the financial mess we're in. The fact is, we both have our vices and we both see no problem with spending money on our vice, but hold the other person responsible for spending money on theirs. During our discussion, I told him that we needed to be on the same page to improve our financial position, and he said that we were on the same page. Only time will tell.

Day 3: Analyzing How It Went Wrong

As I've been writing the past few days, I've been trying to figure out where it all went wrong.

I still drive a 1994 Saturn that was probably paid off before I even got my first drivers license. My dad gave me his old car when I graduated from college. Before that, I had an old Grand Am, and before that a Dodge Dynasty. We bought a 2004 Chrysler Pacifica in 2007, which we are still paying off, and will be for the next three years. We pay every two weeks and refinanced last year to decrease our interest rate on the loan.

We bought a house that fell within our price range, based on our salaries three years ago. I've received raises since then, including a promotion. Our home owners insurance went up as the result of a claim for a flooded basement, and our property taxes went up because a school levy passed. Our monthly mortgage payment is still hovering around the same level as it was when we bought the house, but will go up when they reevaluate it this year.

I consolidated my student loans in 2005 to lock in a low interest rate. I took an additional disbursement after the consolidation though, so it has a variable interest rate, and I have a Perkins loan that I didn't include in the consolidation because I hoped to teach high school in an economically depressed area and hoped to have the loan amount forgiven. My career has gone a different route since that time and I don't believe it will go back that way. I found out today that the interest rate on my variable rate loan is supposed to go down again on July 1. I will probably consolidate again at that time, because I don't believe interest rates can go down much lower.

We do not use our credit cards wisely, obviously. We started out using them like you're supposed to; buying things and paying them off monthly before they could accrue any interest. Somehow though, they started spiraling out of control. We used them for a new couch and paid it off before any interest accrued, we did the same with some of our electronics on our Best Buy card, but then we used interest bearing credit cards to buy Christmas gifts, and a bed, and a vacation, and before we knew it, they were maxed out. We planned to use tax returns to pay these items off, but then the ac blew up, the basement flooded, our car got a flat tire and all of the tires needed to be replaced. It was sort of the "when it rains, it pours" phenomenon.

We're pretty much waiting for my car to blow up, and you can be sure that it will happen at the most inconvenient time. We spend a lot of money on things we don't "need"; premium cable package, cell phones, clothes for the kids, toys for the kids. We've already addressed that though, haven't we?

I have been trying to find ways to budget, but it seems like everything is a "need" to us these days. I went to pick up a few things tonight, just stuff for the week, and walked out with $50 of junk.

I just keep telling myself to keep swimming. One of these days, when we're debt free, I want to be able to go back to my husband and tell him, "Look what we did. Look how much we've paid off." Two nights ago, after writing my first entry that added up our all of our debt, I told him how much we currently owe. He said, "You can't do that. You can't include student loans, mortgage, and the car loan. Those don't count as debt."

It's all debt. And it all has to go.

Day 2: One Step Forward, Two Steps Back

If I can be honest, our biggest issue with sticking to a budget and paying these credit cards off is my husband. I love him dearly, however he does not understand the concept of a budget, does not understand that broke means broke, and I'm convinced he thinks I'm deliberately hiding money from him.

Today, for example, we had appointments with the optomotrist (you'll see why this is relevant later). At 8:00 this morning, we all piled in the car and headed to the office. After both of us had gone through the rigors of an eye exam and we had all piled back into the car, my daughter asked if we could go to breakfast. My husband looked at me and asked what I wanted to do and I told him I wanted to go out for breakfast, but it wasn't financially responsible, so we could go home and I would cook breakfast.

After breakfast, I put the kids down for a nap and laid down for one myself. When we woke up, my husband announced that he needed to get out of the house and wanted to go to the store to buy a Father's Day gift. We picked up my mother in law and headed to Kohl's.

I bypassed the shoes that I was looking at for my daughter, passed on buying new bath towels that my husband suggested, and walked out with only a Father's Day card for my dad.

We went into Target, so we could look for Father's Day cards for my husband and father-in-law, and that's where things started to decline. I picked up what I needed, my husband picked up what he needed, and then he picked up a pack of water guns for the kids. I picked up a clearanced wicker bench for the kids. We walked out $45 poorer.

Then we went to Borders so my mother-in-law could pick up a book for my husband. I picked up a box of books for about $9. We walked out of there $45 poorer.

Combining the $45 at Target, $45 at Borders, $20 at the optomotrist, $3 at Kohls, and $2 for a bottle of water, we spent $115...all on credit.

It's like we spend without even knowing that we're spending. My husband refuses to see the benefits of a budget, and because they've never worked for us before, he's convinced they never will. Every time I tell him there's no money, he tells me that I'll have to "move it around". We're out of money to move around. Our savings account hovers around $5 plus our mortgage payment, our checking account starts at $100 for the week and steadily declines from there.

We're in way over our heads and I can not get any support from my husband, and I just don't know that I can do it on my own.