Start to Relieve Your Debt Burden by Making a Commitment

Today, I want to talk about the debt "feeling". I am talking about that overwhelming feeling and stress that accompanies the burden of too much debt. I have rid myself of that feeling in just a few months. Actually, the burden began to lift shortly after I decided to really do something about getting my debt to zero.

Once I made the commitment, the burden began to lift. I still am very aware of the debt that I still have on my books, but now it feels more like a goal that can be accomplished. Even though my debt is still quite high, I am thinking about the future and saving for the future. If I can stress anything to today, it is just make the commitment with the intention of following through and the burden will begin to lift.

Now that so many of us are in this together with the state of our deteriorating economy, it is the right time to make the commitment.

Credit Freeze

I've been thinking about freezing my credit. I have a couple of reasons for this. First, of my original $74,400 in credit card debt, I have now paid that down to $45,416. That leaves about $30,000 in "open" credit. My credit score should be improving and I don't want to be a victim of identity theft.

Second, under a credit freeze, even I could not get anymore credit without first "unfreezing" my credit through the credit reporting agencies. In the event that I got tempted to buy something on credit, this would certainly make it more difficult as I would first have to contact the credit reporting agencies that I told to freeze my credit to unfreeze my credit.

I don't see a downside as my credit score will not suffer. I think that I have convinced myself of the value of freezing my credit.

Money Obsession

I have been wondering why reducing my debt is working this time when I have tried and failed so many times before. What is different this time?

After a lot of thought, I believe that the main and most important difference this time is the commitment from both me and my boyfriend. Let's face it, if there are two people spending money from the same pot and only one is committed to a specific financial goal, it is not likely to be met. From the day we wrote $162,000 on the board, we were both committed.

Prior to our commitment to reduce our debt to zero, I managed the money and didn't let him in on it. He just thought that I had everything under control. I did not. I still manage the checking account and pay the bills but he updates the board with a lower number as we lower out debt. It is satisfying for both of us. We have a new mindset - something close to an obsession.

One final thought is that by displaying the number boldly on a board in the kitchen, we were (and are) committing our goal in writing and remain constantly reminded of our progress. I think there is something to writing it down that makes us even more committed. It serves as our "word" that we will do something, so we must.

Bottom line - commit in writing and commit together.

Long Road Ahead

Why now after not blogging in 8 months? Maybe it is easiest to answer the question of why I quit blogging. I began this journey so that I could share my success of climbing out of debt with others in a very public way.

By doing it publically, I thought that I might be more committed to actually getting out of debt because, after all, others were reading my story and would expect me to succeed in what I said I would. I also hoped to inspire others. I am not sure exactly what happened, but the more successful that I became in eliminating debt, the less desperate I felt and the less that I thought others would be interested in my story. I now look at things differently. The whole point is to feel less desperate.

With all that is going on in the nation and world today, I think it is more important than ever to give hope to people in the same situation as I. I began this journey eight months ago with a whopping $162,000 in debt. I am now happy to report that the number is now $124,600. That may still seem like a lot to many, but what I see is that in eight months, I have reduced my outstanding debt balance by $37,400. For me, that is quite an accomplishment. I know that I have a long road ahead, but for the first time in my adult life, I am eliminating debt rather than increasing debt.

How did I do it and what are my plans to reduce my overall debt obligations to zero? Well, that is what I commit myself to blogging about until I have accomplished my goal. I hope to hear from others who are in similar positions and hear their ideas about how they plan to go forward in light of their personal circumstances. So please post your comments and let's get through these hard times together.

Progress

As of today, my outstanding debt stands at $156,000.00. This is down $5,000.00 from where I started and it feels good.

Spending Withdrawal

I think I'm having spending withdrawal. What do I do with myself now that I am not spending money? I usually find myself at the Home Depot or other store on the weekend, but not this weekend.

For years, I have been telling myself and others that I don't like shopping and that I don't spend much money. After this weekend, I realize my statements have been totally false. I have been in denial. I do like shopping and I do like spending money. Now that I am refraining from such activities, I miss them - at least I think I do.

Maybe I just don't know what to do with myself. I'm sure it will get better, but I realize that this is just the beginning of a very long and difficult path for me. In my attempt to find something to do without spending money, I went on-line looking for inspiration. I found a blog by a person writing about her own financial habits. She recommends using a credit card for everything in order to earn air miles and then paying off the balance in full each month. She had a lot of positive responses from readers who felt inclined to respond. I was so surprised at the responses because they were not anything close to what I was thinking. Her words scared me.

I am even more determined to never engage in such reckless behaviors again. As silly as it may sound, I'm not sure how to spend responsibly yet. That will come later. Now, I need to focus on eliminating my debt. I suppose I did, after all, get the inspiration that I was seeking.

The Hard Reality of My Credit Card Debt

Today, I took a close look at my credit cards. I have six (6) cards and my monthly payments for those six (6) cards equal an astounding $2477.00. This is the first time I have ever added them all up and I am still a little shocked myself.

Of that amount, $1473.00 goes toward interest payments. Only $1004.00 of my $2477.00 in payments goes toward the principal amounts that I owe. I am disgusted. The good news is that I am no longer using my credit cards, so the full $1004.00 per month can be calculated in reducing my original $161,000.00 in debt.

To reduce my monthly interest payments (or finance charge), I decided to set up the ability to make on-line payments. I expect this to reduce my monthly interest payments. My old method of paying bills ensured that I incurred the highest possible finance charge. I used to hold onto my money until the last possible day and mail checks to my creditors.

I thought that I was being smart by holding onto my money longer. All I really did was ensure that I ended up in the red as I would time my withdrawals prior to payday knowing that my paycheck would be deposited in time to cover any checks or withdrawals that I had made. Sometimes it worked and sometimes it didn't. When it didn't, I'd end up paying multiple $20.00 charges for being overdrawn in my account. I also ensured that my average daily balance (upon which the finance charge is calculated) on my credit card accounts would remain high. By holding onto my money as long as possible, I was keeping my average daily balance as high as possible, thereby, incurring a high monthly finance charge.

I expect to see my monthly interest payments decline as I pay my bills on-line and on payday, causing my average daily balance to be lower. I will no longer hang onto my money as long as possible when it is to my detriment. Even with my new method of paying my bills, the banks will get a great deal of my money each month that they "earn" as interest. I have learned a very hard lesson about credit cards and can't imagine using them ever again. Several of my payments have hit bringing down my outstanding debt to just over $157,000.00.

Payday

Here it is payday and I am not upset. I generally start off with a large negative balance in my checking account. Not this time. As I started paying my bills today, I began with the entire amount of our paychecks.

Strangely enough, I feel proud. I have been broke (except for those few days after paydays) and living on credit cards for so many years that not starting a payday in the hole is a big accomplishment in itself. It's only been a couple of weeks and I don't like spending money. I think about each and every purchase no matter how small.

Not too long ago, every dollar and more would be spent on something. I was so undisciplined in my spending habits and in denial that I had a problem. I didn't even think about it. I just spent. I was basically an imposter living beyond my means. It's only been two weeks and my thinking about money has been completely turned upside down -- for the better.


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First Steps

If I'm going to share this journey with others, this is the time to come clean. Ann Gillmore is not my real name. Personal embarrassment is not the intent of sharing this journey. Trust me, I already feel the shame. By not identifying my true self, I will be able to be more honest in my disclosures.

Moving on, the first thing that I did was create a list of monthly bills with amounts due each month and separated them into pay periods - and to my surprise, there was enough to pay bills, but not much left over for food, gas, and other necessary items.

Then came the hard part. I called each customer service number for each credit card creditor, auto creditor, and other creditor to learn my exact outstanding balances. I wrote each number on my list of monthly bills next to the appropriate creditor.

The grand total (minus my student loan) totaled $160,948.00. Believe it or not, I did not feel overwhelmed. I actually felt inspired and determined to be free again. I shared my thoughts, and the numbers, with my boyfriend. We have been together for a few years and our finances are co-mingled. He was very supportive and also felt inspired. We wrote "161" in big numbers on a chalkboard in the kitchen to represent our debt.

The breakdown of the debt was as follows: $105,775 in unsecured debt ($74,700 in credit card debt and $31.055 in other debt) and $55,193 in automobile loans. We decided to approach this thing in steps. Dave Ramsey would probably recommend that we sell the cars and purchase what we can pay cash. The problem is that we don't have the cash. So, for now, we will continue with the car payments.

We decided to focus on the unsecured debt with the highest interest rate. We decided to make minimum payments on everything except for a credit card with an outstanding balance of $9,500 with an interest rate of 29.99%. Every penny that we have extra goes to that debt. What could we possibly have extra? Not much, so we made a very tough decision to temporarily stop funding our 401k's and put the money toward debt. The reasoning behind this decision is that we realized, at the rate we were going, we would end up retiring in the same position as we were, and still are, that is, owing a lot of money.

We chose to suffer short-term so that we could pay off the debt and then save for the future. We rationalized that our current debt crisis was determining our future and that we could not possibly save and retire comfortably on the current plan of making minimum payments. By such drastic action of eliminating our retirement savings, we would provide great incentive to ensure that all extra money goes toward paying off bills -- as our futures were, and are, at stake. We will bring home an estimated extra $1300 per month by eliminating our current retirement contributions.

All of this occurred almost two weeks ago. Since then, my boyfriend received a bonus. We used most of it to pay current bills and were able to send about $1500 to the credit card we are focusing on paying off first. Not even two weeks later, with the bonus payment plus reduction based on minimum payments, we were able to reduce the "161" on the chalkboard to "159". We are on the right path and it feels good.

Out of Control Debt

How did I get here? Does it even matter how I got here? What can I do about it? Can I get my debt under control? My debt burden has begun to consume my thoughts and my life.

I knew I had to do something when I didn't have enough in the checking account to pay my current bills even though my boyfriend and I just got paid. I had planned on going clothes shopping for myself, but for the first time that I can remember, I decided that I could not burden our lives with more debt.

That was almost two weeks ago. That weekend started out very anxious for me. I wanted to do something, needed to do something, but what? How could I get out of this and maintain my good credit?

I went on-line and bought Dave Ramsey's "The Total Money Makeover". I needed some inspiration. Quite frankly, I didn't expect the outcome -- I actually got inspired. I have started my own journey back from my burden of debt. By starting this blog, I intend to share my journey with others.