Six Figure Debt

I recently received an e-mail from my friend who runs a charity through her church that it was time for an annual $1000 donation to a charity that we have been working with for many years. 

Through this group we have “adopted” young children in developing countries and paid for their annual tuition to the schools in their village.  Every year we get pictures and letters from the kids updating and thanking us for sponsoring their education.

This year, however, I simply don’t have the money to donate.  I will do something, but I can’t do the whole $1000 at the moment because I am looking for a new job, starting a business and paying down my debt with the money I am currently making.

I do feel badly but I have to take care of my own house before I can even begin to think about giving money to charity. With so much personal and commercial debt I think charity donations are going to have to go on hold for a while.  I will still donate my time and effort in my community but right now cash is important to us as we transition into business ownership.

I am curious how other debt fighters deal with the “giving back” issue.  When I was working, I was able to donate quit well to my favorite causes, now I simply don’t have it.  What strategies do you find helpful in dealing with issue?

I received my large tax return today and am proud to say that we paid off ONE of the credit cards today.  It was the card with the smallest balance, the balance was roughly $4,100.  I sent the payment today and the feeling of accomplishment is awesome.

In addition to the credit card pay off, I have officially paid off my car with just 70k miles, which means I can drive this car for a long time with NO payment.

This web site has been therapeutic for our family as we face down the debt demons and being to build for the future.

Because I was able to pay off the car and the credit card with the smallest balance, I am now able to put that $654 to go use every month tackling our next credit card which has a much higher balance.  The debt snowball is working and we are steaming toward a debt free life.

In addition to the debt payments, we also contributed $3,000 to our emergency fund in out ING direct account. The ING Direct emergency fund is just under $4000.

We held a little bit back in our savings while we gear up for my new job.

Today I really need to ask you for help.  As you know I am currently out of work and trying to start a small business while my wife works part-time.  The problem we have now is we are uninsured for the first time ever, we have no health insurance. 

I started looking around for insurance on Ehealthinsurance.com and found a couple of plans we could afford and offered pretty good coverage.  The plans we choose were right around $450 a month, which we can do, but we were denied coverage and aren’t sure why.

So, my question for you, the reader is, where do you as a self-employed person get health care coverage for you and your family.  We have the money, but United Health didn’t seem to want our business.

I’d appreciate any input you can give me as I’d really like to get coverage for the family.

My taxes were finished today and we were delighted to hear that we will get almost $15,000 back from the Federal government.  This doesn’t include the $1,800 we will receive as part of Bush’s economic stimulus package.

 We got the generous return because of the losses we suffered in the sale of two houses in 2007.  Believe me, we aren’t having too much withheld.

So, here is the plan for the $17000.00 windfall.

1.  Pay off the credit card with the lowest balance, currently $4,100.  This will allow us to snowball an extra $86.00 a month toward our debt reduction.  Combines with my car payment that ends in May, we will have $520 a month to snowball on the next credit card.

2.  $2900 to the Emergency fund.  Balance 4k.

3.  $3,000 to the vacation fund for future use.  Will deposit to the ING Direct account.

4.  $7,000 into the savings account to hold us over until our business opens in July. 

When the business opens and we are able to collect a salary we will put the additional 7k directly to debt reduction.

What are you doing with your tax return.

I was reading a newspaper online the other day and came across an article explaining when and how I was going to receive my “economic stimulus” tax refund.  According to my social security number, my check will be mailed to me on May 9.  We should get $1800, $600 each for my wife and I and $300 each for my two children.  While $1800 is not a huge amount of money, it is a nice chunk of change to throw at our debt.

With the $1800 (tax free) we plan to put $1000 toward our debt reduction and $800 into our emergency fund.  That would raise our emergency fund balance to $2000 and make me sleep a lot  better at night knowing that we have a large cushion to fall back on in case of an unforeseen emergency.

The $1000 is going toward our smalled credit card balance.  The balance is $4000 with a minimum payment of $92.00 a month.  I usually pay $200 every month on this card; after the $1000 payment  I will have under $3000 to pay it, once the card it paid off , it will really begin to snowball as I will have an addition $200 to pay on my other credit cards.

April marks the end of car payments for me, my wife still has a lease but my car will be fully paid off, freeing up another $434 a month to pay off credit cards.  So, $634 a month to pay off $3,000 on the smallest credit card balance get the deal done in 6 months.  Very exciting considering I will have $834 monthly to pay off the next credit card in the debt snowball. 

Because my car will be paid off with only 77,000 miles on it, I anticipate a long period of time without a car payment.  I will also pay less for auto insurance, but I will need to add a small amount to the maintenance budget just in case.

So, I am curious, what are you doing with your “economic stimulus” refund check?  I’d love to read about them in the comments.

Sadly I have been taking my own advice regarding employment and have been looking for it.

I was downsized a couple of weeks ago and have been scrambling to find employment.

The loss of my job was unexpected and obviously my family and I are in no position to take our time looking for work as you can imagine.

I have several really nice offers on the table, but none that would pay me the salary I was making with my last employer.  We aren’t panicing yet as we have several sources of outside income but debt repayment will be severly hampered as I decide what to do with my career next.

I will continue to post to the blog but I fear the majority of the posts will be regarding employment and how one keeps his head above water when one income source dries up.

This is a great post by Trent at “The Simple Dollar.”

The post speaks to bigger issues in our lives.  It is about celebrating what we have and not what we owe. 

I admire Trent and think he is a guy who really knows what is important in our daily lives.

Even though most of us are under tremendous stress, remember, there is no “debtors prison,” no amount of debt can take us away from what is most important to us, family, friends and love.

Do you have a disaster plan?  Don’t worry, most do not have any idea what they would do if they suddenly lost their job, but you can plan to minimize the effects of losing your income.  The economy is in a rough spell right now so having your ducks in a row and planning for the worst case scenario is something you need to make a priority right now.

Have an emergency fund.  Start saving today and make it automatic, like you would a monthly bill.  Save until it hurts, make sure your obligations are met but make sure you make your family a prioprity by saving as much as you can every month.  This is the easiest way to insulate your loved ones from being down-sized. 

Don’t panic, it isn’t as bad as it seems.  When you first realize that your families income is going away it is natural to panic and worry that you will lose everything.  You won’t!  There are plenty of ways to make money, granted you make have to make a career change and your income may shrink temporarily but there are things you can do to keep the lights on while you transition.  You can almost always get a job at a “big box” retailer while you get your career back in order.  The service industry is always hiring; don’t let your pride get in the way of what is best for your family.

Tighten your family budget while you get employment.  Look at your family budget and immediately cut out anything that isn’t necessary. Can you stop day care while you are home, or maybe cut it back to 2 days a week to allow you time to look for a job.  No eating out, no new clothes, no home improvements.  This is just temporary and you can add things back to the budget as you re-establish your career.

Take a long look at your profession and decide if it is right for you.  It is not uncommon to change careers at any point in your life.  We don’t stay at jobs for life anymore life our parents did, so take some time to re-evaluate your careers and decide if a change is needed.  If it is, get the necessary training and go for it.

Take some time to work on you and your family.  Spend some time with your kids.  It is free and is the best therapy when you are hurting. They still love you and don’t care if you have a job.  They automatically take the positive side and are thrilled that mommy or daddy is home.  Enjoy it while you can, you will be back to work soon enough.  Help out around the house, your spouse will appreciate the extra effort and it will help you pass the downtime.  Work out if you can, it doesn’t cost anything to take a walk or to go for a job.  If you are going to be unemployed, why now get some advantage out of the extra time you have at home.

Make a list of everything you can do for entertainment that is FREE.  Trent at The Simple Dollar wrote a nice blurb about this, he suggests that you make a list of everything you can do for nearly nothing.  You will be surprised to see all the great things available to you for the low, low cost of NOTHING.

Polish your skills.  Always try to improve your skills.  You can do this on you own by reading about subjects that are important to your occupation or you can go to the local community college and take a course.  Don’t fear returning to school, there are as many non-traditional students as there are kids fresh out of high school, don’t be intimidated.

Network. Call everybody you know and let them know you are available and looking for work. This is by far the best way to find jobs that may not even be available.  Most jobs aren’t posted in the classifieds, you need to dig them up.

A job loss can be traumatic, but it doesn’t have to be the end of the work, make the best of it and before you know it you will be back in the game and likely happier and more productive.  

–This is an excellant post @ The Simple Dollar about getting yourself prepared to go back to work.  Face it, nobody wanted this day to arrive but the holiday’s are over and some may need a plan to get motivated.

–@ Get Rich Slowly examines it’s most popular posts of 2007.  Browse through the posts, I promise you will find something that you will find interesting.

–@ Gen X Finanace examines the question, Are American’s saving too much for retirement?

– @ Yahoo Finance: This is a good read regarding CEO’s that were out of control in 2007.

–@ My money blog, A list of 5 ways to jump start your financial New Year. 

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Today is the day that most Americans wake up with a feeling of dread wondering “how am I going to pay for Christmas?”  Not me today.  We managed to provide a great Christmas for the kids without swiping the credit card once, we paid cash for everything.

Here is how we did it.

1.  We never shopped without a list.  Whenever we planned to go Christmas shopping we knew specifically what we were looking for and if we found it we bought it, if we didn’t find it, we only purchased items that were LESS than the money we had budgeted.

2.  We focused on the kids and items that would make their day special.  We wanted to strike a balance between the kids receiving “exciting” presents and presents with value.  I won’t go into everything they got from Santa Claus but there were more than a few squeals of joy from at 7 a.m.

3.  Mom and Dad don’t get anything for Christmas.  We have never exchanged presents for Christmas.  We are of the belief that Christmas is about kids and loved ones, we love to send gifts to friends and relatives but we don’t buy for each other.  This is the area that most families get in trouble, they spend far too much money on expensive gifts when they have already spent too much money throughout the year.

4.  Resist the impulse.  Christmas brings out the best in people and it isn’t hard to go overboard during the “giving season.”  It is a good thing to give to charity or to help those less fortunate during the holiday’s but you aren’t obligated to do it for everybody.  We identified a couple of causes and we pitched in, just like buying presents, you need a charity budget as well.

It doesn’t take a lot of money and spending to have a wonderful Christmas season, it takes dicipline and the willingness to embrace the season for what it is, a child’s holiday for gifts and an adult holiday in terms of reflection, family and good wishes.

Because we followed our blue print, we both woke up this morning stress free!

Happy Holiday’s!