Well, here we are, 2008. I’ve updated my monthly budget to reflect an all out attack at my credit card debt. Those of you that have been reading my posts, know that I have decided to focus most all of my money at knocking off my debts one-by-one. I have knocked off one credit card so far (7 credit card in total – 5 to go) and am now focusing as much money as can be spared toward the card with the lowest balance.

I’m using the debt snowball method now. So, I’ve adapted my 2008 Budget/Spending Outlook to reflect increased payments due to paid-off loans as I go. This (hopefully) will help me not only keep on track, but see this plan in a realistic light. I will not be debt free in 2009 – barring any new-found luck in the lottery (and yes I know the lottery odds and how it’s bad and so on…), but I will be closer. And as that’s a very good thing.

My decrease in savings is due to a car repair and a debt payment. I’m hoping to use some of my tax refund to replenish my emergency fund to $1000. Whatever is left I will put towards my large debt payment.

Presidential Candidate, Barack Obama, has spoken out against credit card companies:

‘‘The truth is, our middle-class families are not going to be secure so long as they can’t get out of debt,’’ Obama said Monday, sharpening the populist rhetoric of his presidential campaign. ‘‘If we’re serious about stopping Americans from falling deeper in debt, we’ve got to crack down on predatory credit card companies that are pushing them over the edge.’’

Obama pointed to studies showing that consumers have an average personal debt of more than $8,000, a load driven higher by credit cards. He said soaring credit card debt could turn into a crisis as big as the one in the subprime mortgage industry.

Now I am not saying that my debt isn’t my fault. The debt that I have accrued is 100% mine. But it’s good to know that a presidential candidate is interested in looking out for people like me to make sure that no one (and no credit card company) kicks me while I’m down.

I haven’t been close attention to the candidates just yet, but this has definitely piqued my interest.

So, as I’ve always mentioned, I’m not claiming to know the answers to getting out of debt – this is evidenced by my attempts at climbing out of debt and the failure I encountered.

In fact, as I type that I see how debt is like the Greek myth of Sisyphus who’s punishment from Zeus (for trying to be on the same level as the gods – Sisyphus was mortal) was that he roll a huge rock up a steep hill, but before he reached the top of the hill, the rock always escaped him and he had to begin again.

Not that money makes gods of people, but you can’t deny that having money – true money, not available credit – is a powerful thing. And they say that to err is human and what is now more human (or a bigger error) than credit card debt. As ‘humans’ we pretend to be on the same level as those with money – spending borrowed money in an effort to keep up or show ‘purchasing power’. However, we are then only punished with having to fight a seemingly endless battle with that debt. Pushing the rock up the mountain only to lose our grip and watch it roll all the way down again.

…too deep? Eh – it’s late, whatever.

Anyway, so I was reading a few bankrate articles on improving your credit score and I seemed to either have lost site of the fact that an important factor is keeping the cards around 30% spent in order to not lose any points on my credit score (some articles say around 50% is okay). After doing the math this evening, the 6 remaining credit card balances that I am dealing with are 97%, 93%, 89%, 83%, 78%, and 34%.

Not good.

A while ago I read Dave Ramsey’s Total Money Makeover (on sale now for $10 on his site…wink.) and, honestly, I wasn’t overly impressed. It seemed like 200 or so pages which could basically be summed up with the sentence “Just pay it off”. However, maybe I read it wrong since Mr. Ramsey seems to be doing fine (yes…he does accept credit cards…another wink) and has a fairly large fan base. I don’t know – I just feel that debt is more a mental thing than anything. If paying it off were that easy – everyone would do it and no one would need advice, support or…ahem…a blog. But it’s not easy, it’s really hard and I think most books don’t address that. Anyhow…

Mr. Ramsey says to pay down your debt with the lowest balance first – and the term he uses to describe how to approach this debt pay-down is “gazelle intensity”. While, being from Boston, the metaphor to me is a little odd – I do understand what he’s saying and have decided to give it a try.

Those of you that have been reading a long know that I’m not a great budgeter and prefer to set up automatic systems as a way to dummy-proof things. So I’m going to refer to a basic budget that I had been piecing together and max out payments to the lowest percentage debt and work my way up to the top. With the help of an expected (knock on wood) Christmas bonus from the new job – I plan to have the first debt (34%) gone by the end of December. The next debt, with the help of another small and expected windfall in the form of a tax refund should help me eliminate yet another debt by February depending on when I receive my W2.

It’s exciting to think of this new plan and to actually watch chunks of debt go away – but I know that regardless of the plan, the amount that I have to work with (my paycheck) doesn’t change and that it will take time, perseverance and some of that mental toughness that no one writes about…well…except for a blogger or two.

It’s strange – I feel good now that I’m back tracking my net worth and beginning to write blog entries again, but I also feel frustrated to be almost starting out again. At least that’s what I feel like in terms of the credit card debt – but at least now I have the beginnings of an emergency fund.

Some of the numbers between this month and last are slightly inaccurate since my October update was created a little late – so this month’s update doesn’t count some payments that will go through soon. But those will be reflected in next month’s review.

During my September Hiatus I received a few comments from some readers of the blog and though I read, consider and appreciate all comments, I felt that these two deserved some form of formal thought/response. They also helped me to shape some recent adjustments to my debt elimination plan.

Anonymous said…

KC I am ashamed of you, look at all your debt!!! pay some of it down, Kenny Chesney will be there next year… for now pay your bills.. and do you really have to go to the wedding ? come on ! its just a wedding… 4 hours of food and drinks and boring traditions.. just stay home and have them send you a copy of the video.

Yes, I realize that in order to achieve any goal – especially one as important and daunting as escaping major debt – you have to make sacrifices. Maybe I shouldn’t have gone to the concert, maybe I shouldn’t have gone to the wedding. But really, I can’t go about this goal by punishing myself, my friends and my family. Yes, I have to do a MUCH better job of living within my means, but going to that concert was the highlight of my girlfriend’s year so I don’t regret it. And getting married is a monumental event in someone’s life and I feel honored to have been made a part of it.

Jay said…

You want to get out of debt and you still have a credit card you are using? HA! You aren’t serious about this yet.

CUT IT UP and close the account.

You’ll never get out of debt while you still have one and keep charging to it.

I agree. As of this morning I shredded my remaining credit cards – all eight of them (3 mastercards, 2 visas, 2 amex, and a discover). It’s clear to me that I have an impulse buying problem. So here’s my plan:

Now without credit I will have to seriously consider whether I what I want to spend my $200 per pay check spending allocation on in order to make the money last. I have an emergency fund of about $1,200 – not even one paycheck, but it’s still growing and hopefully I won’t have to tap into it anytime soon. As for Christmas spending, I’ve been putting some money aside every month to prepare. If I ever feel that I need to use a credit card for something I can contact the company saying that I need a replacement card. This will give me 7-10 days, while I wait for it to be delivered, to decide whether I really need to use it and if there is another – better – way to get it done.

Thanks for the comments! Whether it’s support or critique it shows that people care and I really appreciate it.

Sorry for the delay – due to the new pay check schedule most bills of mine are now getting paid during the first month of the week. So I wanted to wait for some of the checks to cash before tallying up this month’s net worth.

Like I said in my last post, July/August hasn’t been the best of times. But, I never expected this stuff to be easy, nor did I truly expect my net worth line (located on the right hand column) to skyrocket straight up month-after-month. It would have been nice, but not realistic.

The main thing is that these past few months have served as a wakeup call and reinvigorated my desire to pay down this debt. I want to have the freedom to buy a home – maybe some rental properties. I don’t know really – but basically the key word/phrase is that I want freedom.