How did I get here? A walk down memory lane...

Earlier today, I was thinking back to how I started down this road into the pits of debt. I was trying to remember when I first started thinking I could use credit cards without any problems.

When I was a freshman in college, I got my first credit card. I think my story was very similar to many other young people. I signed for a Citibank card from a guy at a table on my college campus. I think it might have come with a free t-shirt. The shirt was like a little something shiny to catch my eye, but the real excitement was the realization that I was now officially an adult, at least in the eyes of citibank. I remember that my credit limit was $500. I remember that I always used to say that you can't into trouble with only $500 of available credit.

After a short time of charging things up and paying them off promptly, my limit was raised to $1000, then $1800, then finally $2500 by the time I graduated from college. I remember that at one point, I was worried that I had too much available credit. I even went as far as to call them up and request that the line be lowered back down. That was the point at which I learned about the ratio of available credit to outstanding balance impacting my credit. In my infinite wisdom, I realized that the more available credit I had, the better off I would be. (sigh).

At some other point during college, I also opened up a Victoria's secret card, an Express card, and a Macy's card. Each time it was to save something like 15% off my purchase that day. So, for probably less than $100 in total "savings", I ended up with 4 credit cards, none of which had SUPER high limits, but that I would still make the occasional late payment, simply due to my forgetfulness. I could have paid it, but I just didn't remember.

When I started working full time, I wasn't making a lot of money, but I was the first of my friends to actually have a "real" job. I liked to buy stuff with all my new money and I usually used credit, then paid for it later. I still wasn't really in much debt, but I did always care a small balance.

Ironically, the real trouble came when I actually started making more money. My second or third year after graduating, my balances started creeping a little higher. At the end of the year, I got a nice big bonus check, which i used to completely pay off my debt. That is what started my cycle of overspending. Every year, I would systematically spend just a little more than I made and by the end of the year, my credit card balance was high! But, I would get a bonus, and pay off my credit card, and then start the cycle over. The problem was that my spending got higher and my bonuses didn't keep up. For a few years, I would only be able to pay off almost my whole balance before I started running it up.

About 3 years ago is when my spending got really out of hand, which I discussed a while ago. I just love to spend money! It almost doesn't matter what I'm spending it on! It's crazy to think that what started out as only $500 in available credit turned into almost $40,000 in debt. Reminding myself that it took me over 10 years to really get myself into this situation helps me be patient while trying to get out of it! I wish I could see progress faster, but slow progress is still better than no progress. :)

“Some debts are fun when you are acquiring them, but none are fun when you set about retiring them” - Ogden Nash

House repairs - no bueno

I got the estimates for the repairs that I need to do on the house before it is ready to sell. It's better than I feared, but not as good as I had hoped. I think it's going to come out to around $3,000, if I do some of the work myself. If I have to pay to have all of it, it will probably be closer to $4,000. Since I'm going to ultimately make a profit on the house, I'm okay with paying for some repairs, but it stinks in the meantime. I've decided that I am going to have to put some of these things on a credit card. I just don't have the cash flow to pay for all of this stuff, plus my regular bills. I'm trying to limit what I pay for with credit to the absolute minimum, and then make minimum payments on my one remaining credit card and use cash for everything else.

This is not what I wanted to do, but I don't really think I have any other options...

Selling the house

So, it is official! I am selling that house! I got all the information back from my Realtor and there is not going to be any tax issues with selling the house after all. I am going to do some minor repairs and cosmetic improvements over the few weeks, then it is officially going on the market! I'm very excited! I can't wait to get out from under this house!

My concern is money in the meantime. The mortgage payment is due and I don't have the money to cover that, plus refund the security deposit from my previous renters. Add to that the cost for repairs and I am definitely coming up very short in the cash department. I had a long debate about this and I've determined that the only thing I can really do is to use my credit cards. :( I really don't want to do that, but once the house is sold, I should have the money to replace my emergency fund and to pay off my credit cards again.

Rolling change...

I'm looking for all the ways to get a little traction going back on my debt snowball. I cracked into my little piggy bank and rolled all my change. It came out to about $90.00. It's not a ton, but it's something!

Rental Property

I don't think I've mentioned before I that I have a rental property in the town where I went to college. It's a kinda odd situation that I've never really known exactly what to do about:

My parents were kind enough to buy a house for me to live in while I was in school. All 3 of our names are on the deed to the house, but only my parents' names are on the mortgage. After I graduated college in 2003, I've been handling all of the issues with the house including making all of the payments. Since I've moved out of the town, I have continued to rent that house out to college students for the past several years. We've had the house for 10 years now and the mortgage is $1220. I've been able to rent it for $1600 for pretty much the whole time I haven't lived there, but I also pay the HOA and the water/trash bills. Plus, every time the tenants moved out, the place needed some MAJOR repairs before it was in good condition. (I also realize that those repairs are part of what got me into such debt!)

My current tenants are about to move out and I am debating between selling the house and finding some new renters.

My biggest considerations are if I sell the house, the profits could likely be entirely eaten up with taxes because of some issues my Dad had from his old business ownership days. I'm not sure how I would be affected since my name is not on the mortgage to the house. If I continue to rent the house out, I could keep lowering the principal, but what would be the point if I'll never come out ahead with the tax issue.

The other option would be for me to try to buy out my parents share of the house, so that I will own it completely and I won't have to worry taxes from them. I don't know exactly how that would work either.

I've met with a Realtor about selling the house and she's awesome and very optimistic about getting it sold quickly and for a higher amount than I had originally thought. (She is one of Dave Ramsey's ELPs) There are a few cosmetic updates we would need to make to the house before selling it, just to make sure we get top dollar, but thankfully it doesn't need any work that is too extensive.

I'm hoping that I'll be able to get this sorted out ASAP, since as of July 1st, the house will be not be bringing in any rent and I'll be paying the mortgage out of pocket.

Spending

It is so hard to stop the miscellaneous spending!! I was doing such a great job for a while, but I keep making little slip-ups. I know it happens, but it's really disappointing when I feel like some months I am able to make HUGE payments to my credit cards and other months I am only really able to make the minimums. I guess this goes back to just really sticking to a budget!

This month, I had a few bigger purchases that I wasn't planning for. I had to buy a new phone because my old one broke. I could have gotten a cheap regular phone, but I just replaced my iphone with another one (although I did get a good deal...). I also had to replace my car battery. That wasn't too expensive either and I do have miscellaneous car repairs in my budget, but I don't usually have to dip into it. The auto shop also made a few additional recommendation for other repairs that I should do soon, so I need to account for those.

Beyond those things, which I think are more essential spending (okay, I know my iphone is not technically essential, but it feels like it!), I have let myself make a few other smaller slips in spending: A new shirt, a little wallet, an extra coffee or two. None of those items cost much, but they were definitely things I really didn't need to spend money on.

I am realizing that when I don't feel like I'm making big progress, I have a harder time feeling focused. I hadn't posted anything here for a few weeks. I didn't get any big extra checks to use as payments. I need to make sure to keep myself feeling 'gazelle intense' about everything.

My Debt Snowball: Rolling Along

So, even though I only started this blog a few weeks ago, I have been paying down my debt for about 5 months. I’m actually pretty proud to report how much progress I’ve made since my earlier post, which listed all of my debts. Before I started on Dave’s plan, I was just spreading out my money and making payments to everyone. AD (after Dave!), I have gotten myself rolling along on a big debt snowball. Here is where my credit cards stand:
Banana Republic – $0.00
American Express - $0.00
Nordstrom - $0.00
Citibank - $21,700

I know I still have a pretty high balance, but I’m so happy to have paid off almost $12,000.

I was pretty lucky in that a came into 2 small “windfalls” of money that I were outside of my salary and I was not counting on. First, I got a bonus from work in February, which came out to about $3000 after taxes. Then I found out I was owed quite a bit of overtime back pay for all the time I’ve spent traveling for work. After taxes, that came out to about $2500. So that means I have been able to find an extra $6500 to actually pay down debt in the past 5 months!

I’ve been trying to do a lot of extra work to use for debt repayment outside of my normal salary. I currently have a full time job, and THREE part time jobs (luckily, they are all quite flexible). I tutor high school students after work or on the weekends; I house sit for a few different friends who have pets; and I have a pretty sweet gig working at High School College Fairs every so often to talk about tests and pass out information. That last one is obviously pretty seasonal, but it pays $150 per gig for only about 2-3 hours of work. Only a few of those things make a nice size dent in my debt.

Now is where I start to get on a slightly different page than Mr. Ramsey. I still owe just over $4,000 on my car and, as I mentioned, I still owe $21,000 on my last credit card. (Plus, I have $19,000 in student loans). If I were strictly following the debt snowball plan, I would pay off my car, then student loans, then credit card, however the difference in interest rates has me wanting to pay off my credit card first. Here are the interest rates for each:

Car - ~6% (I can’t find the exact rate)
Credit card: 18.99% (Already tried to reduce the rate, no luck)
Student loans: 2% (No way am I going to pay this off before my credit cards)

I have actually excluded my student loan debt from this goal of being Debt Free by 30 since the interest is sooo low and I could always defer the payments if an emergency came up. My car is scheduled to be paid off the same month I’m hoping to end this project, so I thought I would just keep paying the regular monthly payment and funnel all the extra cash into the credit card payment.