I owe how much?!
Posted on January 16, 2006 by Her and tagged about, debt
Since this is my first post, I'll start at the beginning. As a freshman in college I got my first credit card, with a limit somewhere around $400. I remember my first purchase: A rocking chair. Yep, I took on debt to look geriatric at 18. It wasn't the rocking chair that did me in; it was the rush of being able to buy anything I wanted without paying for it. Within a few months I had blown past the limit on the card and was completely unable to make the minimum payment with my $4.50/hour job. My parents bailed me out and I was hooked. I immediately began charging the card up again.
Though I managed to always make my payments on time, I was steadily accumulating debt. I was paying for college completely on my own, so I would take out a student loan at the beginning of the semester, pay down some of my credit cards with the cash, and then spend the rest of the semester piling the debt back onto the cards. By the end of graduate school I had no idea how much I owed, but I felt confident with my new professional job and salary. I rewarded myself with a new pair of $500 high heels (a fact which I am now mortified to admit).
Then it all came crashing down. My student loans came due. I would get my paycheck and sit down to pay bills, but my paycheck could no longer cover even half my monthly debt service. I was unable to sleep and petrified to tell anyone, especially my then-boyfriend. Finally I buckled under the stress and confessed everything, bawling my eyes out in the middle of the night. He gave me an ultimatum: get rid of the debt or we were through. We had been dating for 6 years and were deeply in love, but he knew I had a serious addiction. The threat of losing everything saved me.
For the first time ever, he made me write down all my credit card balances and the corresponding interest rate. The amount was staggering: over $17,000 in credit card debt and about $140,000 in student loans. My interest rates weren't too bad, due to my timely payments all those years and a low federal interest rate.
I threw myself into debt reduction mode. I put all my credit cards into a box that my boyfriend hid. I wrote a list of all the people I was hurting with my debt on a piece of paper and put it in my wallet where my credit cards had been. I ranked my debts by interest rate and began paying off the highest card. I called my student loan companies and asked them to reduce the payments. I called the credit card companies and asked them to lower my interest rates. I quit spending money. And it was HARD. It went much deeper than being denied a few splurges at the mall. I had linked my self worth to my net worth, and with credit cards I had felt rich. Now I felt worthless and lost. I had to change every aspect of my life and it felt like I was losing everything. Thank God my boyfriend was there to support me. He helped me get through the really rough times and gradually helped me see more clearly what I had done.
With the new lower payments, I was able to use the extra cash to pay off my highest rate store cards first. With each card paid off, more money was freed up to pay down the next card. Today, my credit card debt stands at $14,800. I have paid off 16 credit cards and have 5 remaining. I haven't used a credit card to pay for anything in over a year. My student loans are down to $136,000. Every month when we pay bills we record our current debt on a spreadsheet in Excel and track our debt reduction with a graph. It feels great. But the real reward came this Christmas, when my boyfriend showed he trusts me again by asking me to marry him. As for the ring? We saved for months, he paid cash, and it's beautiful.
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Well done!! To the both of you. May I suggest paying off the lower balance cards first then as one card is paid off use that monthly payment amount from the paid off cards to help pay off the next.
Example:
Card A balance 3000 @ 12% monthly payment of $70 Card B balance 4500 @15% monthly payment of $107.
Pay off card A by whatever means possible.
Then use the $70 as additional payments to $107.
Now your monthly payments are $177 and you have already adjusted your lifestyle to both payment amounts so you not hurt anymore.
By simply paying the $70 that was reserved for card A debt payment to the card B principal the 5 year payoff @$107 per month is now reduced to 2yrs 8 mos.
You will get better results by systematically targeting each debt like a laser instead of a shotgun approach.
You can get more advanced tips and training from www.go2self.org/stop
Hey, that's fantastic that you and Him are able to bare it all and resolve to get out of your debt together. It's going to strengthen your relationship for the long haul. Don't beat yourself up over the sins of the past, just focus on that happy debt free future that's waiting for you! :-)
Erykah | Mar 13, 2008
Wow, reading that is very encouraging...I JUST found this blog while searching google searching about marriage allowances. But after reading all this its not just about that. We have GOT to figure out how to handle our finances as a couple to get rid of our debt and espcecially allow for those times where we just want to buy ourself something, whatever it may be.
Erykah | Mar 14, 2008
Let me just add we are almost 5 month in newlyweds. AND that it isn't about allowances for me. It started off that way through my search.
I really want STRUCTURE so that we save and put money in the right places instead of being careless.
Bills,expenses,tithe,savings,budgets,personal pleasures. Figuring out a way to get that to work the right way since we dont have joint accounts and just decide to pay as we see the bill with our own funds. Not working for me or us in my opinion and seems to be me as the only one concerned. I prefer the ONE POT deal to divvy all importance and extra be our seperate personal choice. There is an imbalance and it causes tension.
Advice?
Him | Mar 14, 2008 | Reply to Erykah
Erykah,
You may want to read up on our budgeting series:
erykah | Mar 14, 2008
thank you..i'll check that out..i just wrote a more extensive story of what im going through on "a new beginning"
2¢ Worth | Jan 17, 2006
Welcome to blogland - the first post said this was the second incarnation of this blog, hope to see more in days to come.
The part about linking self worth to net worth resonated; been there, done that, hurts like hell to feel that you're no-good, especially when everyone and everything around you gets measured by money. It isn't true, but it's a tough and lonely part to learn, even with supportive family and friends around.
Best wishes to both of you, for the future.
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