Six Figure Debt

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.

I guess I should consider this good news, but it is odd how we got to this.

Today I received a call from Bank of America, remember, we just decided last month not to pay our credit card, instead we decided to save the money and attempt to settle our debt with the credit card companies.  Well, today BOA call to see why our bill wasn’t paid on time and we informed them of our plan to seek a settlement with them to pay the cards off in full.

We are taking the advice of Dave Ramsey and we have stopped paying our credit card payments, except for American Express because they were willing to drop the interest rate on our credit card.

As I said in the previous post, none of the credit card were willing to provide and help with our current situation so we have simply started saving our money and not paying the credit cards.

Last week I ran into a woman who was using the “envelope” system to budget her money.  I asked her if she listened to Dave Ramsey and she laughed and said “yes, he’s saved our financial lives.”  We chatted for a while and she told me how she took Ramsey’s advice and called her credit card companies to “settle” her debt.  She said she had great success and was able to trim $50,000 off her balances by simply calling the credit card companies.

My situation is a little different because when I married and had kids I had a good job, a healthy 401k and equity in my house.  Through a series of poor decisions and  a major job loss I ended up with over $140k in secured and unsecured debt.  The normal signs of trouble weren’t there because almost half the debt is housing losses and business start-up capital that I used on my home equity line.

Many of us do however see the signs of financial trouble before they hit, and either ignore or don’t recognize them, here are 8 signs that you may be in financial trouble.

I touched on this last week when I posted about Bank Of America lowering my credit lines even though I was not past due and wasn’t missing payments.

The New York Times confirmed the rumors that I’d heard concerning the reasons banks were cutting credit lines.  The article explains that many issues in your personal life like where you shop, the industry you work in and the housing prices in your area are effecting how your credit card companies view you.

Yesterday I received a notice from Bank of America that two of my credit card limits had been lowered.  I have no problem with them lowering my limit, but I don’t understand why they decided to lower it.  I’ve made all my payments and haven’t used the card in months, I would have thought I was one of their better customers.

I caught ABC’s Nightline last night on reducing credit card debt.  The featured a woman in Detroit who was swimming in credit card debt.  It was a fascinating segment on how to call the credit card companies to get your APR reduced.  I was aware of this technique but wasn’t sure how easy it would be to actually get the credit card interest rates reduced.  Check out the video, it didn’t seem that difficult.

You will notice that all the debt bars on the right side of the blog have been updated.  I have put together a spread sheet of all our non-secured debt and you can see it in all its glory on the right side of the blog.   In the past I hadn’t included all the damage as I wasn’t serious about eliminating the debt.  The past two months have seen me and my wife get on the same page and get serious about debt elimination.  I think it took me contemplating personal bankruptcy for my wife to really understand the dire financial straights we were facing.

Even though I am still not working, I’m unemployed for the first time in my life and can’t believe how difficult it has been to even get a call back on a resume’, I am continuing to service the sizable debt that we have built up over the last few years.  Click here to read how we got where we are and how we are going to return the family to profitability.