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.

How Did We Get Here?

I apologize for breaking today's information into so many posts, but I know how it is to try and read an exceptionally long blog and there are so many aspects of our debt that I thought each issue deserved it's own entry.

So, how did we get here?

Let me start by saying, I was not very smart as a college student. Not to say that I'm not smart, but I made some pretty stupid decisions, especially when it came to finances. I was offered a full scholarship to any Florida school, based on my high school GPA and test scores. Instead, I chose to go to an out of state school where I was offered no scholarships, the federal maximum in grants, and the federal max in student loans. Because I came from poverty and my mom was not eligible for PLUS loans, I took out federal unsubsidized loans as well.

I knew I would have to pay them back. I went through all of the introductory information, had a full explanation of how student loans worked, and signed off on a promissory note. Even having an explanation of how student loans work, I didn't realize the ramifications of taking out the maximum amount I was eligible for.

I graduated from college in six years, with a four year degree in English and nearly $60,000 in student loan debt. I got a temporary job right out of college with an insurance company. I worked hard and was offered a permanent job. My employer asked me how much I needed in order to accept the job. I calculated payments on student loans, rent on our apartment, monthly bills, and gave them a number that was the minimum I would accept. They offered me exactly that; $30,000.

A year later, I found myself married with a new baby, and offered a promotion. In order to find an apartment that met our space needs, we would have been paying $750-$800. We decided a better financial option would be to buy a house. We bought a house we could afford, and then we started filling it with stuff.

The "stuff" is what brought us to where we are now. It started with a couch, then we decided we needed a tv stand because we didn't want the tv on a coffee table. But it didn't stop there; tv, blu ray, entertainment system, toys, clothes, video game systems, camera's, vacation, bed... on and on, thinking that we could afford it because it was on credit and we could afford the payments.

And then things started to break. We were told to take the extra expenses of a house into consideration, but we didn't. Three air conditioner repairs in two years, flooded basement, broken stove, increased property taxes, increased homeowners insurance premiums.

As soon as we'd pay a large chunk of debt down, we'd charge twice as much for an emergency expense.

Now I feel like we're suffocating. For the first time, I had a credit card declined because they wanted to place a hold that was twice as much as the car I was renting, and I went through a mental checklist of which cards had which balances, and only one had enough available balance to rent the car.

It's been a reality check. Trying to cut back on things we've been doing for years has been difficult. Our balances still seem to be going up instead of down. But now we have a game plan, and I will keep researching to figure out how we can make it better.

Once we're out of this debt, we won't get back here again. That's a promise I've made to myself.

The Solution?

I mentioned in my introductory post that I am a bit of a shopaholic. I don't necessarily buy the finer things in life, but I buy a lot of little things. I love buying clothes for my kids and I love buying toys for my kids.

In May, I started researching different methods of paying off debt. The one I decided to adopt, for now, is the snowball method.

To explain about my debt, shown in my first entry, we have two Best Buy cards. Both have 0% interest on each purchase until an established deadline. The first deadline is approaching in December. If you don't know how these 18 months/no interest deals work, if you don't pay the entire amount off by the deadline, you are responsible for all interest accrued through that point. The thought of paying something down, having a $25.00 balance left, and then having $800.00 in interest added to that $25.00 balance just sickens me.

Currently, the minimum payment on one of the Best Buy cards is $33.00. I am paying $220.05 on this card. The minimum payment on the other Best Buy card is $27.00. I am paying $197.02. For all other credit cards, I'm paying the minimum payment. Based on these payments, the lesser debt will be paid off in April 2011, and by making a snowball payment (applying the $197.02 that was previously being used for the smaller card), both cards will be paid off by June 2011.

Following the same principals, and assuming I acquire no new credit card debt, our Target credit card will be paid off February 2012, the Ohio Health card will be paid off June 2012, and the Kemba card will be paid off October 2012.

These numbers do not take into account any potential raises (or pay cuts), any bonuses, tax returns, or other windfall that we may incur during that time.

Day 1: Where we are now- $179,727.57

I've recently embarked on a plan to pay off our family debt. Not so long ago, we were in a good place financially with very little debt, aside from my student loans.



In 2007, we bought a house, in a way that we considered to be financially responsible. We calculated what we were paying in rent, how much we were able to save over a six month period, and determined what we were willing to pay for a house. It was just before the housing bust began and when we visited a mortgage broker with our real estate agent, we told them what we were willing to pay. They told us that, given the interest rate we qualified for, we could afford $100,000 house.



The mortgage broker then used our income at the time, put it into a calculator, and told us that we could afford a $170,000 house based on our gross income at the time and pre-approved us for a $170,000 mortgage. My husband and I were pretty steadfast in not wanting our total mortgage payment, including payments, interest, PMI, taxes, and insurance to go over $1,000, so we rejected the $170,000 house our realtor showed us. We rejected the $140,000 house that we were shown.



In the end, we ended up with a house that cost us $112,900; higher than the amount we wanted to pay, but with payments still under $1,000. We came away from the home-buying process feeling pretty proud of ourselves.



I don't know when we stopped thinking logically about money, maybe it was the day we got the keys to our house and went to buy a couch for our living room, but now we find ourselves deeply in debt and I'm struggling to get us out.



We are fortunate in the fact that both of us still have full-time jobs. I am on salary and have actually been promoted and received raises in a time that many have not been so fortunate. My husband is an hourly employee, his wages have not increased in two years, and he's receiving less hours than he was before. We have two young children, and I have a shopping addiction.



Currently we have the following debt:














For those playing at home, that is $20,156.96 in credit card debt, $42,568.15 in student loan debt, a $8724.95 car loan, and a $108,277.51 mortgage, for a total debt of $179,727.57.

It's very depressing to see real numbers.

And so the journey begins.