Minimum payments to credit cards are not cutting it. It's very easy to get discouraged. We researched the Consumer Credit Counseling Service of NY....a non-profit who will negotiate lower interest rates with some (but not all) creditors. It sounded good, but we had to decide if it was worth it to further trash our already trashed credit (for the record, we're only trashed because of our debt to income ratios, BTW. I'm NEVER late with payments). We decided it was not. So a little further research got me educated on methods of paying off credit cards. Here is what I learned.
If you are determined to pay off your credit cards (check), you must first commit to NOT USING THEM ANYMORE (check-all confiscated from Hubba Bubba's wallet and destroyed). Do not close the accounts, however. This is important. If you close the account, you lose available credit, which is an important component of your overall credit score. The Big 3 reporting companies don't need to know that the cards are cut into slivers.
The avalanche method- Now that you've done your budget, you know that you have $X to spend on debt. This amount HAS to be higher than the sum of your minimum payments, and the higher the better. You organize the cards by interest rate (highest first). Make minimum payments on all the cards except the highest one. On this one you make the minimum plus the extra you have in your budget. As soon as this card is paid off, you apply that money to the next card, and so on. Google "credit card paydown calculator" for many examples of this. Any one of these calculators will tell you exactly how long it will take to be out from under. You may be surprised.
The snowball method- This is when you organize your cards, not by interest rate, but by balance and pay off the highest balance first. Popular opinion is that this is not the preferred method if you have long-term goals. Again, don't take my word, Google it.
The snowflake method- so cute, those little snowflakes. This is for the truly regimented. This is where you determine what you could have spent, and didn't, and apply it to either method. Kind of exciting. I'm trying it, but the jury is still out. More on that later.
You know how they say that creative visualization is helpful in cancer patients? You imagine the cancer is an intergalactic battlefield and you are Luke Skywalker? Well, my credit card debt is Grendel and I am Beuwolf.
Wednesday, January 27, 2010
Monday, January 25, 2010
Decision made. Now what?
OK, it's really great to have a commitment, but let's be honest about New Year's Resolutions. Raise your hand if you've kept one beyond February. See? I don't see any hands. So that is why I am not considering getting out of debt a NYR, but more of a life change. I can live with "life change" but only temporarily, to get over the hump.
So now we have to get started and the first thing my Hubba Bubba and I did was agree to a spending freeze. This is REALLY easy to do right after Christmas when you are a) a little frazzled by how much you spent in the last month, and b) surrounded by lots of cool new stuff . I'm good at cold turkey, it's how I quit smoking and how I became a vegetarian and I've never looked back on either. I'm also good at being poor. I've done that, too. And although I will say that I'm generally happier when I have money, I was pretty happy when I was poor. So the spending freeze has not been a problem for me (we'll talk about HB later). What made me sick, REALLY sick was seeing how I actually spent my money over the last year.
I spent the first week of the New Year reviewing our bank accounts and sorting our spending into categories. I used to use Quicken, which did this FOR me, but that was at least two computers ago, and since Bank of America has this feature as part of their online banking, I just told myself I'd use it there. As if. So, what I should have been doing periodically over the course of the year, I now had to do over the course of the holiday break. And believe me when I say, it took a week to sort it all out. I went through month by month and sorted the spending, researched every check and debit card purchase. OYE!
The thing that boggles me is the waste. It's not just in the money I learned we spent on things like tolls--when we could have changed our EZ Pass plan ($745 vs. $180....DUH!), or the overdraft fees because we didn't transfer money from one account to the other (not even going there), but looking around the house during that week off and facing all of the STUFF that we have that we don't need or use. The stuff is drowning us and making us feel cramped. We complain that the house is too small so I'll go on a tear and decide that I need to organize, but in order to do that I'll need new bookshelves and bins and then Target is $150 richer and we're no better off.
De-cluttering is a process. It's emotional and irrational that I am very willing to donate garbage bag after garbage bag of clothes from my closet, but won't part with any Christmas card I've ever received (you know, you can make all kinds of crafty things out of the fronts of them). Each closet I did took HOURS and if you've been to my house you know that my closets are SMALL.
The treasures I found, though, were not in the long lost items that I'm happily reunited with, but in the MONEY that can be made by selling them!!! See, this excites me. I'm sure that there are people out there who want my books and will give me money for them. And the FABRIC! Oh, Lordy. I am sitting on a goldmine of yet-to-be-made handbags and who knows what else!
But baby steps, here, baby steps. Budget is the first goal. What did we actually spend and what can we cut back on? Do we need to have a house phone, a cable phone for unlimited long distance AND cell phones? Can I commit to handmade gifts only for one year? Every category is being called into question, and yet I'm being realistic. Will I cut out the wine budget? Hell no. But I can scale it back to $30 a month, or two decent bottles. Hey, nobody said this was going to be easy.
So now we have to get started and the first thing my Hubba Bubba and I did was agree to a spending freeze. This is REALLY easy to do right after Christmas when you are a) a little frazzled by how much you spent in the last month, and b) surrounded by lots of cool new stuff . I'm good at cold turkey, it's how I quit smoking and how I became a vegetarian and I've never looked back on either. I'm also good at being poor. I've done that, too. And although I will say that I'm generally happier when I have money, I was pretty happy when I was poor. So the spending freeze has not been a problem for me (we'll talk about HB later). What made me sick, REALLY sick was seeing how I actually spent my money over the last year.
I spent the first week of the New Year reviewing our bank accounts and sorting our spending into categories. I used to use Quicken, which did this FOR me, but that was at least two computers ago, and since Bank of America has this feature as part of their online banking, I just told myself I'd use it there. As if. So, what I should have been doing periodically over the course of the year, I now had to do over the course of the holiday break. And believe me when I say, it took a week to sort it all out. I went through month by month and sorted the spending, researched every check and debit card purchase. OYE!
The thing that boggles me is the waste. It's not just in the money I learned we spent on things like tolls--when we could have changed our EZ Pass plan ($745 vs. $180....DUH!), or the overdraft fees because we didn't transfer money from one account to the other (not even going there), but looking around the house during that week off and facing all of the STUFF that we have that we don't need or use. The stuff is drowning us and making us feel cramped. We complain that the house is too small so I'll go on a tear and decide that I need to organize, but in order to do that I'll need new bookshelves and bins and then Target is $150 richer and we're no better off.
De-cluttering is a process. It's emotional and irrational that I am very willing to donate garbage bag after garbage bag of clothes from my closet, but won't part with any Christmas card I've ever received (you know, you can make all kinds of crafty things out of the fronts of them). Each closet I did took HOURS and if you've been to my house you know that my closets are SMALL.
The treasures I found, though, were not in the long lost items that I'm happily reunited with, but in the MONEY that can be made by selling them!!! See, this excites me. I'm sure that there are people out there who want my books and will give me money for them. And the FABRIC! Oh, Lordy. I am sitting on a goldmine of yet-to-be-made handbags and who knows what else!
But baby steps, here, baby steps. Budget is the first goal. What did we actually spend and what can we cut back on? Do we need to have a house phone, a cable phone for unlimited long distance AND cell phones? Can I commit to handmade gifts only for one year? Every category is being called into question, and yet I'm being realistic. Will I cut out the wine budget? Hell no. But I can scale it back to $30 a month, or two decent bottles. Hey, nobody said this was going to be easy.
Sunday, January 24, 2010
New Year, New You!
I love to say that. It makes me laugh and gag at the same time. It's corny and trite and yet, there is that little part of me who gets turned on by the thought of reinventing herself.
I've been so many things in my short life. My Sagittarius moon keeps me dabbling and I'm interested in just about everything (except sports. I hate sports. Sports and electronics. OK, It's not that I'm not interested in electronics, I just don't care how they work. I want to push the thingy and have it go. Period.). As an adult, I've been a full-time student, a Mom, a real estate agent, a restaurant hostess, a small business owner and a full-time babysitter.
But here I find myself welcoming Twenty Ten (that is my stand, I won't say "two thousand ten", it just feels wrong) and, for once, am feeling some foresight into the many changes coming my way. I'm pushing 40, the kids are getting bigger, my husband's career is about to take off in exciting new directions and, yet, instead of feeling the excitement of new things to come, I'm dreading that when the platter of opportunity is presented to us, we will have to pass because we've gotten ourselves into a mess financially.
OK, so now my secret is out. My husband and I are educated and we come from good families. We have great friends and we love our kids. We move through the world with enthusiasm and a zest for life and we have been very, very stupid about money.
Sure, we started off great...moved out of the overpriced NYC suburb and into a small town where we could afford to live on one income, so that I could stay at home with the kids. But then we started getting lazy. I will admit that I like instant gratification and I definitely have an entitlement complex. I mean, I'm FABULOUS, why shouldn't I have everything I want?!? But, a few years went by...a new car, another kid, credit cards piled up, a re-fi to pay off debt that went to I don't know what instead. Oops, we did it again! A small second income that was to pay off debt that just became more money to spend every month. Another new car. It goes on and on. We've had our share of unexpected expenses, thankfully nothing catastrophic, but largely our mess is our own fault. And I do mean OUR. I take responsibility for my champagne taste, but Hubba Bubba has his own version for sure. I will say, though (and I do believe that this will be our saving grace), that as much as I am perfectly willing to spend liberally, I can be one helluva cheapskate. And now it's time for me to get my thrift on. But for real.
So, hello, New Year. Here is the New Me. I will get my family out of debt and into shape financially. We will have everything we need and take a look at why we want the things we want. To this end, we will use our talent and all of the resources available to us. And we will have fun and be fabulous along the way. I promise.
I've been so many things in my short life. My Sagittarius moon keeps me dabbling and I'm interested in just about everything (except sports. I hate sports. Sports and electronics. OK, It's not that I'm not interested in electronics, I just don't care how they work. I want to push the thingy and have it go. Period.). As an adult, I've been a full-time student, a Mom, a real estate agent, a restaurant hostess, a small business owner and a full-time babysitter.
But here I find myself welcoming Twenty Ten (that is my stand, I won't say "two thousand ten", it just feels wrong) and, for once, am feeling some foresight into the many changes coming my way. I'm pushing 40, the kids are getting bigger, my husband's career is about to take off in exciting new directions and, yet, instead of feeling the excitement of new things to come, I'm dreading that when the platter of opportunity is presented to us, we will have to pass because we've gotten ourselves into a mess financially.
OK, so now my secret is out. My husband and I are educated and we come from good families. We have great friends and we love our kids. We move through the world with enthusiasm and a zest for life and we have been very, very stupid about money.
Sure, we started off great...moved out of the overpriced NYC suburb and into a small town where we could afford to live on one income, so that I could stay at home with the kids. But then we started getting lazy. I will admit that I like instant gratification and I definitely have an entitlement complex. I mean, I'm FABULOUS, why shouldn't I have everything I want?!? But, a few years went by...a new car, another kid, credit cards piled up, a re-fi to pay off debt that went to I don't know what instead. Oops, we did it again! A small second income that was to pay off debt that just became more money to spend every month. Another new car. It goes on and on. We've had our share of unexpected expenses, thankfully nothing catastrophic, but largely our mess is our own fault. And I do mean OUR. I take responsibility for my champagne taste, but Hubba Bubba has his own version for sure. I will say, though (and I do believe that this will be our saving grace), that as much as I am perfectly willing to spend liberally, I can be one helluva cheapskate. And now it's time for me to get my thrift on. But for real.
So, hello, New Year. Here is the New Me. I will get my family out of debt and into shape financially. We will have everything we need and take a look at why we want the things we want. To this end, we will use our talent and all of the resources available to us. And we will have fun and be fabulous along the way. I promise.
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