Time to Spill It
Warning. This is going to be a bit longer than usual. But, if you're interested in hearing about my plight to get out of credit card debt - and the true success I've been experiencing, then this one is for you. This blog post has been on my mind for the past couple of days and I finally am taking my lunch break and actually hammering it out.
I am disciplined in several areas. I'm a hard worker, I am great at planning things, I follow through on time and when promised. That's just me. But when it comes to finances, I've been lame. It's not been something that I've really thought about - or considered - over the past years. The main reason being that I just always have had a job. I've had a credit card since I was 18. I've always been fine. But living in California is not like living in Bloomington, Indiana. People eat out more here, people shop more here, people pay much higher rent here. Anyway - my move to California merited a budgeting strategy that I didn't implement. So, I wound up with a nice chunk of credit card debt.
And as of November 2012, I'm almost out of it. And I want to share with you these last three months of my journey. Because I'm excited. By the end of January, my credit card debt will be gone and I will be able to get a real pulse on what I make, how I can save, and how I should manage my finances. So without further ado, here's my story.
The Breakfast of Champions
It all started in March of this year. I was sitting across from one of my favorite couples having breakfast at Denny's after one of our mutual friends had just gotten married. I was en route to the airport and this was the perfect opportunity to catch up on life.
As we were talking, the issue of finances came up. They had a combination of school loans and a little credit card debt due to a recent move. They had developed a system that gave them a clear vision of how to actually tackle that debt. They had different accounts for different purposes and they were making headway. They spoke with confidence and an air of freedom - they were on the right path. That's when it hit me - I wasn't.
I could never quite figure it out, but for me, over the past two years, money had been stressful, yet something disconnected. I don't spend like crazy, but I had some credit card debt - and it seemed like I always had that extra chunk floating around on my balance - and it kept growing. It's something I always thought about, but didn't actually THINK about. I even remember a journal I wrote at the beginning of grad school - when I was making next to nothing each month - where I commented how I wasn't "bad at money", but I wasn't "great".
My Denny's conversation marinated in my brain for about 4 months and began to take root when I was visiting my parents for a holiday in July. I was over it - done. I want to experience the freedom of financial intelligence - and the call of being a good steward! So, I set out to pay off the debt. I had two cards to think about, but I decided to tackle them one at a time. And I was going to do this without significant lifestyle change. Why? Because I know myself. Too much "change" results in paralysis. I get annoyed and then give up on everything all together. So, I resolved to not focus on my lifestyle (eating out on a semi-regular basis, a gym member, netflix and hulu memberships, an occasional pedicure or massage), but focus on paying off the debt within that current reality. The lifestyle re-evaluation comes later.
Attacking Credit Card #1
I couldn't continue living a month ahead of my income. It made me anxious -and as it should. So how was I going to stop it? I had tried "committing" to not spending money on the card, but failed. So - I got harsh with myself and I left my credit card in a drawer in Connecticut and after vacation ended, flew back to California. I also decided to pay it off over 3 months. Rather than forking over the total balance and having zero cash (part of my immaturity in prior months), I guestimated how much I needed to live on and committed to it being tight at the end of each paycheck. And it was. There were weeks where I wound up with less than $50 in my account. But I did it. And the Lord provided. Randomly in July, I ended up with a music gig that gave me an extra $200 in income each month- a nice cushion that gave me more food money.
I also didn't cancel the card - I know I need credit, so I kept 2 recurring bills on my credit card, bringing my monthly expenses on that card to just $230 a month. But the card is still in Connecticut - and it'll probably stay there.
On to Credit Card #2
Once I finished getting ahead on #1, I moved onto #2, but applied some learning. This credit card was a little tricky too. It's my "Business expense" credit card - but over the course of the year since I've had it, I have used it for some personal expenses and got lazy with paying it back - that's resulted in just over $3K of a balance. The tricky part is I had to actually dig into the expenses and separate out the business stuff from the personal stuff (the reason that I got the card in the first place!).
Then, I decided to get a little more calculated with my payment plan. After figuring out how much I was going to have to pay to cut this down over the next 3 months (my last "payment" will be in January), I calculated the cash I would need in order to live - to see if my payment plan was feasible. And I decided to do this all in excel.
The spreadsheet has 3 tabs. The first is the debt repay plan, which includes how much reimbursement income I can apply to the balance. The second is a 2-week break down of the next three months, setting budgets for food, rent, utilities and expenses, and "extra" money (money that I can spend on Christmas presents, gifts for parties, etc). The final tab is a budget tracker. That's right, I have to just commit to inputting my expenses and keeping receipts.
Moving Forward to Freedom Brings Change
So here's the kicker. Remember how I said I wasn't paying attention to my lifestyle just yet? Well, something kinda cool has happened. By focusing on paying off my debt, setting budgets for food and other expenses, my lifestyle IS actually changing. Lunches are less expensive, I budget when I'm going to pay for someone (something I really enjoy) and I'm not going shopping. I'm planning for trips, saying "no" to things, and saying YES to things because I know I can. I am sure this sounds SO basic, but taking the time to pay attention, praying for wisdom and self control and trusting that your diligence pleases God - it brings joy. Like a lot of it.
So why do I spill my guts on this? I'm sharing because I know that debt can be daunting, finances can be confusing, but I hope you're encouraged. I'm taking steps that work for me - a reluctant learner. Today, I was looking on my Mint account and just took a moment to celebrate the graph that showed my spending and my debt over the past year. The downward trend is a blessing.
Throwing off the Things that Hinder
Let me make something super super clear- it is a CHOICE to get out of this whole thing. I had to get over myself and commit to figuring out my context. There wasn't a "perfect time", I had weddings, an event, a couple of trips, and a conference ticket I had to buy. I just had to commit to it. For the weddings, it meant eating cheap (when possible), staying with a friend (not a hotel), and setting the max I could spend that weekend. You just make it work, because being in debt or not getting out debt just isn't an option.
Stay tuned for my update next month - I'll let you know how it's going. And let me know if you have some tips and tricks that work for you!