<debtby60000cuts@post.livejournal.com>

One of the things that you hear when you read books about getting out of
debt is getting together a budget. My favorite two books on debt and money
management - The Richest Man in Babylon and Debt-Free by 30 (which is useful
even if you are past 30) are great examples.

Before you put together a budget, you need to figure out the answer to the
age old quesiton:

"Where the heck does all the money go?"

Have you ever tracked your spending straight for two weeks? Do it. Get a
notebook (those $1 day planners work great for this) and track every single
dollar that comes out of your pocket and bank account. The $3.17 you spent
for a coffeee, the $168.93 for the electricity bill. Track everything.
Every time you go to the ATM (make sure to include any fees). Every time
you take a train.

What did you find out at the end of your two weeks?

<debtby60000cuts@post.livejournal.com>

One of the things about debt is how lonely it feels. You feel like such a failure because I didn't know how to control my money. Even though I know that I am not the only one who doesn't know to manage their money. Clearly that isn't the case.

It's true what that New York Times op-ed. We look at debt as a numbers issue, but it's like any other addiction it's emotion. People either give money this mystical quality or they spend it. We really don't look at it and understand it. For me it's even worse, because I understand how money works. I know that wealth is created by the growing of money. I know how I am losing money on interest. Yet, I never looked at putting something on my credit cards as borrowing. If you told me, like I'm now telling myself before I use any card - I am going to borrow $800 to buy a sofa I wouldn't have done it. Yet, I whipped out my credit card like it wasn't a big deal.

I'm glad that I haven't used my credit card in weeks. I can't wait until this OrchardBank Card is paid off.

http://www.indexcreditcards.com/creditcardmonitor/

This is where this is taken from.

The average credit card has over 15% interest rate. Do you realize that if you earned 15% a year interest you would double your money in less than 6 years!?!?!? I recently paid off and closed a credit card account because they were going to charge me $15/month in a maintenance fee. Almost $200/year and that's NOT including the interest. And they didn't offer a grace period.

I only kept the card because I've had it the longest, but I couldn't justify lining their profits. Anyway, here is the article:

Credit Card Rate Average Breaks 15 Percent, Highest Level in Two Years
The average rate on consumer credit cards jumped almost a half-point between August and September, breaking the 15% barrier and hitting its highest level since September of 2007, exactly two years ago. The current average rate now stands at 15.39%, up from 14.99% last month. A number of major credit card issuers raised rates in the last month, with the most significant development being the elimination of many lower-rate tiers normally reserved for those with good credit histories. Major issuers are showing that in the current financial environment they simply don't trust anybody.

We note the particular significance of today's average rate equaling that of September 2007 -- a time when the Federal Reserve began taking steps to spur the economy by slashing interest rates. In September of 2007 the Federal funds rate was 4.75% and the Federal Reserve Board made its first in a series of interest rate cuts that eventually took that rate down to essentially 0%. However, while these cuts initially brought down credit card rates, subsequent events -- including rising defaults and the recently passed Credit CARD Act -- have spurred issuers to bring rates right back up. Credit card rates have come full circle in the last two years, despite the Federal Reserve cutting interest rates by almost 5%.

(NOTE: In pinpointing a single "average" rate, IndexCreditCards.com attempts to include all of the various rate tiers that card issuers offer based on an applicant's credit history, as well as the different rates associated with non-reward versus reward cards. Consumers with better credit histories can often find offers well beneath this average, while those with bad credit histories will likely be offered rates higher than the average.)

The average credit card rate for non-reward consumer credit cards jumped to 14.27% this month, up from 14.07% in August, while the average rate for credit cards offering rewards increased to 15.87%, up significantly from the 15.39% rate of a month ago.

While the averages listed above attempt to take into account the multiple tiers that many credit card issuers offer, IndexCreditCards.com also tracks the very lowest listed rates, those reserved for customers with the very best credit. As noted, these lower-rate tiers are under attack right now, and the jump in these averages shows it. For the market as a whole, customers with excellent credit are now seeing an average rate of 11.86%, up a full half-point since last month, when this rate was 11.36%. Breaking this average down, the average rate that excellent-credit customers can expect on non-reward cards jumped to 10.94% from 10.13% last month, and increased to 12.25% on reward credit cards, up from 11.89% last month.

Business credit card rates also jumped. The average rate for non-reward business credit cards increased to 13.37%, up from 13.19%, while the average rate for business credit cards with rewards increased to 13.83%, from the previous average of 13.71%.

Strangely enough, there was once again no change in the rates being offered to students -- the average student credit card rate remains at 15.33%, where it has been all summer. Note that this rate is now lower than the average rate for mainstream credit cards. It is hard to say whether we should interpret this to mean that students are now seen as lower risk than older adults, or whether rates are simply being ignored because so few cards are actually being issued to students.

Financial institutions represented in the survey include American Express, Bank of America, Capital One, Chase, Citi, Discover, HSBC, PNC/National City, Iberia Bank, Simmons National Bank, U.S. Bank, Wells Fargo, and more.

but I'm starting back up again so here are some words of wisdom.

Taken from: http://www.moneyunder30.com/the-10-habits-of-self-made-millionaires

What does it take to become a millionaire? Lottery winners aside, becoming wealthy has nothing to do with luck. Let’s look at 10 ten habits of self-made millionaires.

Some ideas featured here are from the book The Millionaire in You by Michael LeBoeuf.

Others come from millionaires I know, and they are living proof that these habits will make you millions.

1. Millionaires Are Frugal

The wealthiest people I know are also the cheapest. They buy used cars. They pack their lunches. It takes money to make money, and you can’t get the money you need to invest if you spend it.

2. Millionaires Think Big

Few people are surprised when they make their first million. After all, it doesn’t come easily. But long before reaching their goal, millionaires know they want to get there.

Rather than looking forward to an annual 3% raise, millionaires dream of working for themselves. Rather than serving 100 customers, millionaires see 10,000 accounts.

3. Millionaires Take Calculated Risks

Whether it’s investing in a stock or cashing in a 401(k) to start a business, millionaires take calculated risks. In these risks, the rewards of success are far greater than the costs of failure, and the chances of success are good.

4. Millionaires Network

Few people reach their potential alone. Millionaires build powerful networks of contacts in all areas of life. Millionaires know that their next employer, customer, or partner may be anywhere.

5. Millionaires Don’t Pay Interest, They Earn It

Millionaires learn the crippling costs of debt and avoid it at all costs. On the contrary, millionaires save, invest, and even lend money to others to earn interest themselves.

6. Millionaires Are Focused

Millionaires work feverishly towards their goals at all costs. The difference between dreamers and performers is not the number of ideas one has, but how one focuses on executing the best ideas.

7. Millionaires Do Whatever It Takes

The most inspiring success stories among all the people I know involve incredible sacrifice. From sleeping in cars between two jobs to forgoing personal relationships to get an education or build a business, millionaires don’t simply delay gratification; millionaires endure pain.

8. Millionaires Educate Themselves

It doesn’t take an Ivy League education to become a millionaire, but it does take a desire to learn. It doesn’t matter how you learn – from a mentor, night classes, or books and the web – but ongoing learning is critical to lifelong success.

9. Millionaires Lead

No surprise here, the same qualities enabling people to earn millions make them natural leaders. It goes back to the decision to become a millionaire in the first place: The resolution to carve a new path rather than follow the flock.

10. Millionaires Are Generous

Don’t expect your high-rolling neighbor to shower you with gifts. Chances are she’s donating to far worthier causes. It’s just another perk of having a million in the bank: you get to make a substantial difference in charities of your choice.

One of the things about debt is how bad it makes you feel. However, taking control of your debt and facing it is empowering. Yesterday, I sent an email to two people who between them owe me about $1500 and I said that while I am not forgiving their debt I would stop pursuing my collection of it.

The reason is I know I will never get that money back. See people like that, who shirk their responsibilities, who are afraid of hardwork and who lie will never get ahead in life. The thing is that if you steal, cheat and lie, eventually you will get caught. You may live the good life in the short-term, but in the long run it's not worth it.

So that is why I am working two jobs, trying to do private tutoring on the side and probably going to start making lamps - whatever it is I have to do to increase my income.

I've looked at some of those pyramid schemes - book your own travel, sell wireless services, etc and they never seem to be good except for those who got in on the ground floor. Does anybody else have experience with them?

Today, I will focus on the wonderful blessings that God has given me

So I was Googling this blog the other day and imagine my surprise to find there is another woman out there who is also $60,000 in debt! I am not alone. Right now my debt payment plan has stagnated due to things I need to get done on the house.

I also am taking a trip overseas (it's almost free thanks the the generous miles and points I get from my job) but I sat down and thought about it. If I get fired, I am going to have to file for bankruptcy. There is just no other way around it. What a sobering thought. I am doing better about controlling my spending and I had the epiphany that credit cards are not for using. If I can't pay cash for it, I don't need it. I wish my parents had taught me that 15 years ago! But alas, they have their own money troubles and have to borrow money from me from time to time!

Interesting that they are encouraging folks to get out of debt, but these are good tips!


12 Steps Out of Debt:

Do you feel like you’re in an endless cycle of debt? Want to break out? You’re not alone. Millions of Americans – even those that earn big paychecks – struggle with debt. There’s no easy solution, but here are a few simple tips to help you get started:

*
1. Face it and take charge.

Taking charge of your debt means making lists. Make a list of what you owe this month and compare it to your paycheck. When the numbers are on paper, they’re actually easier to face.
*
2. Look your paycheck in the eye.

Think you’re making $30,000 a year? $40,000 a year? More than you’ve ever made before? Congratulations – but don’t forget to think about “net” income and not “gross” income. Net income is what you have left after taxes, insurance, and other expenses that come out of your paycheck before you get it. If your budget isn’t based on net income, you might be adding debt without even knowing it.
*
3. Add up what’s going out the door.

List time again. Only this one isn’t what you owe — it’s what you spend. Lunches, lattes, having your nails done, a few beers with the guys. Keep a log of expenses for a week, then be prepared. You’ll be shocked at how fast those little expenses add up!
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4. Make the cut at home.

Bet you didn’t know there’s hidden money in every room in your house. Take the kitchen, for example. You can save big by joining a food club like Costco or Sam’s Club. They can be much cheaper than grocery stores. That’s significant, since the average family of four spends $450 a month on food.
*
5. Make the cut at work.

Don’t think nickels and dimes add up? They do at work. Pack just two lunches a week, and cut back on lattes, and you could save over $1000 a year — enough to take a bite out of your credit card debt.
*
6. Make yourself a job.

The bottom line is you need to make more than you spend. So to really get out of debt, you may need to consider a second job. Something that really works for you. Have kids? What can you do at home? A special hobby? How might that work? And once your debt is under control you can have the satisfaction of quitting!
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7. The government can provide help too.

For many of us, turning to the government for help is the last resort. Call your county, or check state and federal web sites to see about free job training, food stamps and free medical care. There may be other help, too — like free pet care provided by local veterinary associations. Check with your local pet supply store for information.
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8. Pay on time – and stop paying for time!

Want to beat credit cards at their own game? Be sure to pay on time so you can avoid expensive late fees, and always pay more than the minimum. Call in to get your interest rates lowered — nearly half of all customers who complain have been able to do just that. And finally, think green! If you use cash instead of credit cards, you’ll find you automatically spend a lot less.
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9. Give your checking account a checkup.

Bank overdraft protection fees can catch you by surprise – and they add up quickly. So keep an eye on your account balance and whatever you do, don’t overdraw. Overdrafts can be one of the biggest causes of unexpected expense.
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10. Say goodbye to the material girl.

If you’re bored or tired, stay out of the mall. That’s when the experts say you’re most likely to get into buying trouble. Even so, if you still find yourself spending too much on daily or personal expenses, make a list of your purchases. Wait a few days, then go back and put these purchases in three separate categories: “Want,” “Need” and “Can Do Without.” Need we say more?
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11. Polish your credit rating.

A good credit rating enables you to get better terms on all of the money you borrow. So be sure to find out where you stand with the three major credit reporting agencies. Dispute any discrepancies. Explain anything that makes you look like a bad risk. The bureaus may not remove disputed items, but they will include an explanation in your file. Go to www.annualcreditreport.com to get a free credit report.
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12. Count down to zero – create your own personal payment plan.

Enough advice -It’s crunch time. Time to pull together all your lists so you can figure out how long it will take to get back to zero. You start with what’s coming in. Then you look at what’s going out. You calculate your regular monthly expenses and your on-going debt like credit cards. Then you decide exactly how much you can pay and how long it will take. Once all the numbers are committed to paper or computer screen, you lay out your personal payment plan. It’s a month-by-month map that gives you the supreme satisfaction of crossing off your debt.

Please share your stories of debt and how you got out of debt.  I am now almost down to $57,000 worth of debt!  I am also working to at least switch my debt to lower interest. 

What you don't know about interest rates can kill you!

$25 here, $50 there.  It does't seem like much except that 10 times in a month and then you are in debt another $250 and $500.  I wouldn't buy one large thing at $250 and yet, I would spend $25 at the grocery store, $25 at Target, $25 on plants for the gardens and then next thing you know I have spent a nice chunk of change.  I made an error in my debt reduction plan to cut out large purchases, but I realized that I am going to have to cut out the large purchases as well.

And thanks to an error at my bank, I am $100 short on this pay period which means that I have $15 to last me through til next week if I don't want to use my credit cards.

So someone asked me what I thought of the wikipedia of Debtor's Anonymous.  I was ok with it because I think that addictions are all similar.  There is a point at which the physical addiction drives a lot of addictive behavior (e.g. withdrawal from caffeine), but even then you have to work through that and it is hard. 

People want life to be easy and it's not.  It's hard work.  That was an ephiphany for me.  I am struggling with how to make it seem less like work than living, but everyday is a struggle and not just because of debt.  Debt adds to it.  Every time I go into the grocery store, I have to ask myself, how much do I need this?  Will I eat this or will it just become money literally tossed in the garbage.

Any true change and recovery requires hard work and a day by day attitude.  There will be a time when I will mess up.  I am not perfect and my recovery is not perfect.  However, by sticking to my goals I can work to get myself out of this hole that I have dug myself into. 

One of the things about money is that no one talks about it.  It has taken on a mythical quality because very few people understand wealth creation.  I understand it and yet I have allowed myself to be held prisoner because I kept justifying my purchases.

Honestly, I can't wait to be rid of this debt and that is why I am working two jobs and trying to take on more.  Because I want to be done.  Now, if I can get this energy going behind me on losing weight. 

So today I get to pull together the funds to pay for my sump pump in the basement.  Unfortunately, I did have to borrow some of the money, but I was able to self-fund the vast majority of it  due to my renter and my balancing my budget!

One of the things about debt, is that we can't do it alone.  We have to find someone to help us.  Debtor's Anonymous which follows the AA model is a great tool and I wanted to post their twelve steps here for those who need it

12 Steps of Debtors Anonymous

1. We admitted we were powerless over debt--that our lives had become unmanageable.

2. Came to believe that a Power greater than ourselves could restore us to sanity.

3. Made a decision to turn our will and our lives over to the care of God as we understood Him.

4. Made a searching and fearless moral inventory of ourselves.

5. Admitted to God, to ourselves, and to another human being the exact nature of our wrongs.

6. Were entirely ready to have God remove all these defects of character.

7. Humbly asked Him to remove our shortcomings.

8. Made a list of all persons we had harmed and became willing to make amends to them all.

9. Made direct amends to such people wherever possible, except when to do so would injure them or others.

10. Continued to take personal inventory and when we were wrong promptly admitted it.

11. Sought through prayer and meditation to improve our conscious contact with God as we understood Him, praying only for knowledge of His will for us and the power to carry that out.

12. Having had a spiritual awakening as the result of these steps, we tried to carry this message to compulsive debtors, and to practice these principles in all our affairs.

Copyright © A.A. World Services, Inc. Adapted and reprinted with permission.

So yes, I have paid off $2,000 of my debt.  It would have been more, but I have been putting money away to pay for the needed sump pump in my basement, so I don't have even more of a water issue with my foundation. 

Someone posted that I should use a credit card counseling service and I am not for several reasons.  First, many of those services are scams.  The Better Business Bureau and the FCC and several other agencies get thousands of complaints about those types of organizations.  However, there are several that are not scams.  The way they work is the organization calls all of your credit card companies and have the companies agree to waive late fees, reduce or suspend interest charges etc while you pay off your debts.  You then pay the organization (not the credit card company) a lump sum and they prorate it among your credit cards.  As part of your agreement, you close your account.

Lastly, I actually called all of my card companies and pleaded my case getting my interest rates reduced as well as using balance transfers to reduce my interest rates further.  If you have a perfect payment history, like I have, many cards are bending over backwards to keep you happy because they don't want you to default and they don't want to lose good customers.  Default rates for credit cards are starting to skyrocket, and the era of easy credit is over.

So one of the things I am reading is how many people want to blame the credit card companies for their debt.  You can blame the card companies for keeping you in debt longer than you should be, but the card companies weren't the ones to say go out and borrow this money to buy that new flat screen TV (which I don't have).  Most people were probably like me - I don't have fancy electronics, but I just have a load of crap or things I spent too much money on, like the $3500 I spent to get my car fixed when had I known, I could have taken it down the street and paid only $1800, but I am learning.

I was listening my mom's pastor on cd the other day and I realized that one of the reasons I wrote this blog is to confess.  The first step of any program or becoming closer to God is confession.  If you are a non believer any "anonymous" program such as AA, the first step is to admit you have a problem.  I am admitting I have a problem and taking steps to solve it.  I am not going to file for bankruptcy or as the credit card company to take responsibility for the charges I took out. 

I have stopped using my credit cards, stopped shopping and have adopted a cash only policy.  I have taken the approach to self-financing.  What nobody prepares you for is the emotional side.  How hard it is to have all of this debt over your head. 

I really wish that someone had pulled me aside and told me to wait until I paid off all of my debts to buy a house.  A house is a money pit.  You have to pay for furniture, painting, maintenance (especially if you are a single gal like me with no husband to do all of the chores) and inevitably something will break.  I moved in the hot water heater broke - $400.  Then I had the sewage pipe back up and a major clog in two of my toilets - $1100.  Then another clog in the toilets, plus the cost of parts to change them to  higher flow toilets to prevent them from backing up.  Landscaping and now I have to get a sump pump put in - $3,900 and most likely more.

Owning a home is great, but no one should do it before they are ready.  We have this thought that owning a home is part of the American Dream and I foolishly went for a home instead of a condo.

If I had to do it all again, I would have chosen a home that was at least $50K cheaper, looked strongly at condos and looked strongly at buying in Maryland rather than the city. 

At times I've cried over my home and how it's making me poor and what can I do, but now I am just praying over it.  I thought about even renting my house out and going back to live with my mother, but that would make both of us crazy.  I got myself into this mess and I will need to work to get myself out.

So, I will continue to work my two jobs, yes, I have two jobs and try to get my finances back in shape.

You don't have to do anything...Just whatever you would normally buy online, use this link first

http://www.upromise.com/guest/2080517432

No, you wouldn't.  But that is exactly what we do every single time we use a credit card for everyday purchases unless you pay off your cards every month. So my topic today is about two things. First, graced periods on credit cards and what they really mean and second why those little things add up $50 here, $25 and all of a sudden your card which you paid off is back up to $1,000 that you owe.

First, the grace period or lack thereof.  First, what is it?  When you charge something (or rather take out a loan to buy something) most credit cards don't begin accruing interest right away.  They give you a grace period before interest charges occur.  However, if you have a current balance from last month, most cards waive the grace period which means you start paying interest the minute you charge your groceries.  Even if you pay off your bill this month you may own money next month because of finance charges.

Anyway, without getting too technical, it is yet another way that debt locks us in

So, debt for me is like my weight.  I know there are things I need to do, but I am not yet an expert at delaying gratification.  It feels like I am going to miss out on something, but what I am missing out on is the ability to have a body that I am proud of and financial balance sheet that reflects my position in the world.  There is no reason that I should have this much debt and while I am not insolvent and I am able to pay my bills, I am not able to really enjoy life like I want.  I should be taking advantage of low prices on TVs, furniture and everything else, but instead, I am worried about having to pay off this $60,000 in debt.

It is the same struggle I am having with my weight (I am also at least 60 pounds overweight).  Maybe it is that magic number.  What I really need is more social support.  Right now this blog is a secret from my friends because I don't want to discuss my inability to manage my life.  We are supposed to be adults.  We are supposed to have control over these things.  However, I know that I am not the only one who is suffering from feeling like they are out of control and helpless.  That's what creates the cycle.  I feel like I am helpless and I have no control, so I just say eff it, let me buy the $1500 sofa or have the meat-filled entree at dinner rather than the appetizer as the meal and only eat one bite of dessert.  It's hard to pay attention and that is what it requires.  When I was eating vegetarian or vegan I was doing great.  I need to have that same mindset for when I spend money.  

Do I really need this?  Can I get this cheaper?  How will this affect my debt reduction plan?

These first few entries are sort of background.  For me, my addiction to debt (and that's what it really is) began in college.  I had several credit cards and just kept charging ever since.  My parents never explained to me about saving or budgeting and I am not blaming them, but I had no role models.  Even now, they still have to borrow money from me.

When I buy something I have always tried to justify it by saying (oh it's on sale) or I can just pay it off in the future.  Well my future is here.  I am making difficult choices and it is more painful than I ever thought it would be.  For example, I bought a house that I really can't afford (I'll right more on that in another post) and I needed to furnish it paint and pay for the unexpected repairs that come along with home ownership.)

Even now I just feel like I'll never get ahead and get out of this debt trap.

Does anybody else have any tips for getting out of debt?

Well it starts off slowly.  And mind you this $60,000 in debt doesn't apply to my $80,000 in student loans nor my $382,000 left on my mortgage.  It starts off slowly and it starts off with the rationalization of "Oh, I'll get around to paying my debt, or I can afford it" only now as I am maxed out on every card and have no savings am I realizing the financial abyss I am teetering on.  If I lost my job, I would probably have to file for bankruptcy.  Part of the reason I started this journal was to expose my financial trouble (although it's anonymous) and partly to have something to review when I need to celebrate. 

I maintain all kinds of spreadsheets and check my budget everyday, but the root is that I spend more than I earn and that has to stop.  So here is a breakdown of my credit card debt which I have rounded the numbers

Visa Card 1	$   7,300
Visa Card 2	$     700
Mastercard 1	$ 11,500
Mastercard 2	$   1,350
IRS	$   2,000
Visa Card 3	$   6,500
401K Loan	$   5,900
Mastercard 3	$     750
Finance One	$   2,050
StoreCredit 1	$     150
Mastercard 4	$   1,800
Visa 4	$     800
Storecredit 3	$          -
Storecredit 4	$          -
Personal Loan	$ 18,300
Total:	$ 59,100

The thing about this debt is that it consumes you.  Like being overweight.  All you can think about is how to make it go away and quickly.  That's the reason I called this Debt by 60,000 cuts because each dollar you feel like it's a small cut of torture.  Like 60,000 paper cuts.  It's so spread out so I pay $50 here and it doesn't do much of anything.  I pay $100 but against a $7000 balance what does that do.  I often feel it's hopeless and I should give up, but I am determined to have this time be different.

A journey of how I worked myself into $60,000 worth of credit and bank lines of debt as a single woman.  To get out of debt, you need to talk about it.  I don't consider myself irresponsible and I am not asking for help.  What I am doing is hoping that my journey will start someone else along the path of debt reduction.  I will explore how my debt started, how it got out of control and what my plans are to reduce it.