Six Figure Debt

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.

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.

Its been almost a year since I made the LAST payment on my car and it feels great.  I doubt I will ever own a new car in my life again unless I can pay cash for it.  I simply have no interest in having a car payment again, EVER.  I may continue to buy a newer used car for my wife, but we don’t want the cost of owning a car.  Think about the payment and insurance for a second.

The other day I was wandering Wal-Mart picking up a few things for my wife’s business when I came upon the iphone in the electronics department.  I need a new phone as my two year old Motorola Q for some reason isn’t downloading my e-mail anymore.  I really rely on my Q for business and personal e-mail so I started to think I should look for a new phone.  Wal-Mart started selling the Apple iphone for $197 this month so I figured I would take a look at the phone.  The one at Wal-Mart for $197 is a 4 gig, which is likely just fine for me, the 8 gig model is $297.