Monday, June 9, 2008

One Year Later- No Extra Debt!

A little over a year ago (March 2007) I began this blog. It started as a way to help me vent about what was going on with my debt repayment. I wanted to get some ideas out in the open so that I could see them in print and evaluate them. Some of those ideas have continued to be part of my plan. Some have not. So, a few months late…. Here is an update on my first year of debt repayment.

In the past, I had very little debt. Before I got married I was eligible for grants instead of loans for college. So, I had no student loan debt. I sometimes carried a balance on my cards, but I always paid them off each January with my tax refund. I had saved money and put ½ down on my first car. Then, I got married.

My husband had significant debt. We signed up with a credit counseling service and finally began paying on his debt (yes, I said STARTED paying… he was not making a single payment on over $7000 in debt) We were not making much money. I was still in school, now taking on loans, and since we had finally begun paying all of his bills there was little left in the monthly budget. I started relying on my credit card to help us buy groceries at least once a month. In the meantime, my husband became debt free.

I planned to pay them off my cards as usual in January, but then we had to pay taxes on the house. Then we had a baby. This was getting a little harder. I felt bad for my husband. He was not used to not buying things. When his computer went out, I bought him a new one… on my card.

In December of 2006 we spent too much on Christmas. We had some friends over for a little Christmas party and I was so embarrassed about our shabby furniture. I bought $10,000 worth of furniture the next month. By March, I realized things were out of control, and I had gone from virtually no debt to close to $50,000 in 5 years. While a large chunk was student loan debt, there was more that was not.

I read Women and Money by Suze Orman and realized that things had to change. I had no decent life insurance, too much debt, and we were living paycheck to paycheck and still not covering our bills each month.

I then read Total Money Makeover by Dave Ramsey, and when I got to the page about credit cards, I stopped reading, found each of my cards, and cut them into little bitty pieces. You would think that would be scary but actually I felt a weight lift off of my chest. I COULDN’T create any more debt!!!

At that point, I finally started paying the debt full force and quit adding to it. Of course we had a little surprise in July that wound up giving us another mouth to feed this past March, but we are forging ahead.

I am proud to say that I have not added anything to our debt in the past 16 months!! I HAVE used my credit cards (new ones were sent because the old ones expired) but only for emergencies and they were paid right back from my emergency fund.

So, I do now keep the credit cards around for emergencies. My emergency fund itself is not as liquid as I would like, so I need the cards in a pinch but they don’t keep the extra cash on them for long.

As far as my debt goes, I should have my first card paid off by the end of this summer. Then I can start rolling the snowball into my next debt. If I continue at the rate I am going I should have all of my debt save for the student loans paid off in two years. This includes my car. I don’t plan to buy a new car at that point either. I am hoping the car I have will last until my oldest starts driving. Then she can have that car and I should have enough money saved to buy a “new” used car.

I would say the biggest difference for me now is that I actually plan ahead. I am thinking 5 years into the future at this point with the car and my other kids being finished with daycare. Of course, stopping the addition of new debt has been a biggie too. I know it is so cliché, but honestly, if I can do this, anyone can.

No comments: