Six Figure Debt

Sorry it has been so long since I’ve updated the web site, I’ve been working furiously on our debt plan and just haven’t had the time to sit down and update the numbers, but they are encouraging.  The emergency fund is fully funded, we are reloading our 401k and both of our jobs are going really well.I won’t lie, it has been an awful journey as we lost everything and are beginning to rebuild.  The toll it has taken on our marriage could have been worse, but we’ve held together and it has made us stronger.  What is amazing and invigorating is that my wife and I have recaptured the “eye of the tiger,” meaning we are doing whatever it takes to regain our financial life.  We are working harder than ever and enjoying it as much as we have since we were 25 year old kids starting out. Redemption can be so sweet.Check out the graphs to the right and you will see just how furiously we have re-payed our debt and rebuilt our financial life, it shows what comittment and dedication to a purpose can do for your financial bottom line.

By now you may already know we are looking for a new car to replace our current vehicle when the lease expires this summer.  We have been looking on Craigs list and Ebay and recently caught an obvious scam on Craigs list.Here is how it works.  The scammer posts a nice vehicle for a ridiculously low price.  The scamee contacts the person about the car and it told it is available, however he is in the military and cannot be reached by telephone but can ship the car at his expense if you simply send him the money.   The scammer then asks that you use E-bay’s “buyer protection” plan as insurance that the deal is legit.  It isn’t.  E-bay’s “buyer protection” program doesn’t apply to deal done on any other web site and certainly doesn’t apply to cars sold on Craigs list.  I attempted to mess around the guy a bit but he simply dropped out of view.This scam has actually worked in some cases and it has left some people without a car and the money to buy a new one. Remember the golden rule, “If it seems to good to be true, it probably is…”If you are looking to buy a new car, I do not suggest Craigs list unless the seller is local and you can see the car in person.

The wife and I are currently stockpiling money to pay debt but we have a small problem on the horizon.  In a few months our lease will expire on one of our cars.  Because we are following the Dave Ramsey model, we are adamant that we will not finance another car, instead we expect to pay cash for our next vehicle.  It poses a problem because we don’t believe we will have the cash, except for our emergency fund) to pay for a car in full with cash before we have to turn in our current family vehicle.  Has anybody else dealt with this dilemma and how did you deal with it?

We have finally funded our emergency fund %100.  With the economy still sluggish we have adopted the “cash is king” philosophy and have fully funded our emergency fund.  I have a 90 day payout in my current employment contract so we are fully funded for 6 months.  It wasn’t easy but my wife’s job and my employment have allowed us to get to this point.Our small business is still a struggling but we believe that the second quarter of 2010 will bring great rewards as we continue to build a future for our family.I will have a more complete update soon…

This Christmas season has been much more enjoyable than last year.  A year ago we were without work and had no money left in our emergency fund, this year we BOTH have great jobs and we are quickly repaying debt and rebuilding our emergency fund.  I know it sounds very basic, but the emergency fund has become an obsession.  We are throwing every extra cent we earn into the emergency fund as we understand that this economy could see one or both of us unemployed in the blink of an eye. We won’t stop funding the fund until we have a solid six months of living expenses in our savings.

Due to our improved financial situation we are able to simultaneously fund the Emergency account as well as work on Debt repayment.As you can see in the graphs in the right side-bar the debt is eroding and the emergency fund is growing. In addition to our debt repayment and EF growth we are also continually squeezing waste from our family budget.In January we will see at least $500. extra dollars taken from our budget and deposited into the debt snowball or the EF.

This is our January budget.  As you can see we will repay $4900. in debt between a small family loan payment, a double payment on our HELOC and a $3800 credit card settlement.  Debt repayment is so gratifying when you realize that following a budget and making better choices is all it takes to get things back on track.  At this rate will will be completely (non-mortgage) debt free in under two years.

Now that Mrs Bad Spender and I are employed and in the process of debt reduction we have put together a budget to accomplish our goals.  Our goals are to be debt free in 12 months, start contributing to our children’s college funds again, save for a vacation and to begin rebuilding our wealth.  This budget is our first attempt to get our finances under control, we actually started budgeting last month but we needed a month to tweak it before we were ready to lock in our figures.So, this is our December budget and we have not strayed.  We even subtracted money from the “entertainment fund” because we really don’t go out that much anyway.  We used the money to purchase Christmas presents for the kids and added some to the Emergency fund.  The budget is a work in progress, we will continue to squeeze more and more money from it to repay debt, but we really need to get the Emergency fund fully funded.

As you can see the debt bars in the right column are starting to move.  We paid off two of our Chase credit cards and have another one ready to go in January.  We will eliminate 13% of our debt in December and January.

Things are rocking along at our jobs, my wife loves being back in the classroom and I certainly don’t mind working in my field. However, the slowdown in the economy has forced us to delay some CC debt repayment so we can invest in our small business.Our Chase CC has approached us with a settlement.  We currently owe $17,000 and they have offered to settle the account for $5,300.  We have accepted and will pay the credit card off with payments of $2,300 and $3,000 in December and January.  It is one less daily call we will have to be stressed about.  The collector was actually very pleasant, understood our situation and made us a better deal than we asked for in the first place.  I’m gaining a little more respect for the CC companies as they appear to understand the current economic plight of most Americans and want to help.Watch the graphs to the right, you will now start to see our debt dissolve quickly.  Things are looking up!

I haven’t written on this site in a while because frankly our financial situation is so depressing that I didn’t even want to acknowledge it all all, it was much less painful to bury my head in the sand and forget about the turmoil in our financial life. However, things are looking up in a big way and my wife and I are counting our blessings that we both landed great and I mean GREAT jobs in our areas of expertise. My wife is a Teacher and she was hired on the eve of the school year starting. It came as quite a surprise to us as we had given up hope that she would get a job.  Needless to say, she took the job and I transitioned into the General Manager role in her small business.  It wasn’t much of a transition as we have spent countless hours working on her business over the last two years. After about a month I received a completely unexpected call about a really great position with a company that I had done work for in the past.  Believe me, I had no idea this position would come up and when I interviewed and was hired it was a pleasant surprise. So….here we are, both with great jobs and a growing small business. What to do next? Between the two of us we are now making about $150,000 annually. I don’t count on any income from our small business as we reinvest everything we make back into the company. We are now in a position to get back to the debt snowball that I started last January.  I’ve decided against seeking settlements with the CC companies as I now have the means to pay down this debt and would like to have a clear credit report when this is all over. The first thing we plan to do is contact all of our creditors and set up a plan to get back on track.  With our current income we should be able to get all the cards current and start eliminating the debt.  We will tweek our debt snowball a bit to account for the current balances and get to work. For the time being we will live on my wife’s salary and use mine to pay down the debt quickly. The credit card companies are getting a tad more aggressive, instead of them making the decision to work with us to get back on track they are starting to threaten litigation.  Suing us isn’t an option as we don’t owe any one card enough to even pay them to sue, I’ve also begun to take a hard-line with the callers.  I simply tell them they will have to wait a couple more weeks until I get paid, I don’t argue, I simply repeat the same things…”I’ll pay you as soon as I get my first paycheck.”  Some don’t like it and try desperately to get some money out of me but it is fruitless as we still haven’t gotten paid.

After I wrote my last post, I received not one but two calls regarding potential employment.

I interviewed with job # 1 on Friday.  The position is within my field, not exactly what I am trained to do, but a position that certainly is within my skill set and one that I am qualified to do.  The interview went great and I am confident that I will get an offer from this company.

Job # 2 comes from out of town.  It is exactly what I have been trained to do and have been successful at for nearly 15 years.  The guy who is doing the hiring is a bit of a flake, but he seemed way more serious than he has in the past.  He says he will call this week about flying me to town to discuss the position.  I have my fingers crossed for me and my family.

On a brighter note, my wife’s business is on fire this week.  For about a month things have been horrible and I felt like we were in danger of not meeting our business obligations.  This week it all changed and we are back on track.

I’ll update you more next week as the situations changes.

This spring has brought no relief to our situation.  Currently we are in default on all credit cards and can’t even seek settlements because our basic living expenses far exceed our income.  I’ve had zero luck even getting a job interview and my wife is getting interviews but so far no offers.

To make matters worse, our small business, which was growing nicely in January, February and March has come to a near dead stop.  I don’t know if it is just a cycle or if our customers have just stopped spending money.  I hope it is a cycle but at this point I am losing hope that our customers will return.

All in all, this is a very depressing time, not much hope, not much opimism.  The debt grows and our income shrinks.

At this rate I fear we will be at absolute zero within months.  Through the hardship, I’m optimistic about new beginnings.