I used to be debt-free
April 21st, 2005 by Bevin LynchIt wasn’t so long ago that I had paid all of my credit cards down to zero. Considering the six months I lived in Europe, financed almost entirely on credit, that was no small task. And yet I am now back in a bit of debt. It’s not nearly as much as it used to be, probably less than a third of my worst debt ever. But still, it’s there, looming over my bank account every time I swipe one of my cards. (One of the first signs of danger is that I have multiple credit cards.) It seems to add up so quickly–groceries, gas, and oh yeah, that iPod purchase probably didn’t help matters. I am envious of my best friend, who doesn’t even have a credit card. But it seems like a necessary evil. When I bought my condo, my real estate agent told me that having credit cards would actually increase my credit score and help me get my loan. Of course, it only helps your credit score if you pay them on time every month (which I do) and don’t carry too high of a balance (which, obviously, I am working on.)
I thought I would be able to zero my accounts again last month but, much to my horror, I ended up having to pay five times what I expected in taxes. So the minimum balances were paid and not much more. I don’t really have an answer to this quandry I find myself in, other than to follow the advice of one of the funnier commercials I’ve seen about this and literally freeze my credit cards in a block of ice. Judging from my lack of self-control when it comes to luxuries such as that ever-important-iPod, maybe that’s not such a bad idea.
Bevin Lynch wrote this on April 21st, 2005 and filed it under Credit Card Debt, Fix My Finances |
April 21st, 2005 at 8:22 am
I used to be in a lot of debt from working as a freelancer, and I found that if I took all of the statements and placed them side by side, I could clearly see how self destructive and foolish I was being by spending way beyond my incoming income (which, at that point was non-existent since my boss was struggling to pay me). It was time to get real. The bf sent me on a one-day seminar on debt relief, and what I learned there is what I still use today, only instead of spending, I’m saving for house with the money that would have been going to cards.
I took the smallest balance statement and set it aside. I paid the minimum balance on all the rest of the cards and them looked at what I had left over to pay on that one small balance. What I did was this: I paid as much as I could on that statement above the min. balance and continued to do this till it was all paid off over the months it took to kill it down. In the meantime, I called all of the credit card companies and told them I wanted my credit limit decreased significantly to something managable like a few hundred dollars. They may question you on this, but don’t worry. This shows any and all financial institutions you are rational, savvy and serious about debt. You will be taking the bull by the horns, so to speak. And don’t worry, in no time at all, they will increase your credit limit whether you want them to or not. And of don’t, keep calling to have them bring it down.
Now, back to the payments. As you kill off the smallest balance by throwing as much at it each month as you can and by cutting down expenditures by at least 10% each month and using that for your payments, you will see that eventually the rest of the balances will start to decrease as you pay them off, too. That will bring down your minimum payments across the board and allow you take that extra you don’t have to pay and snowball it into what you were paying to the card you paid off and apply that to your second lowest balance to pay it down like a wild person each month while still maintaining all payments to all cards.
Keep doing this till you eventually pay off all your cards and keep your debt load at the smallest amount you can live with each month. If you are serious about staying debt free, you will continue this snowball effect even after your all paid off and use that free money not for spending but for saving. We are currently saving for a house and we haven’t been at the saving long, but we already have a nice size downpayment in the bank, sitting there collecting and compounding interest while we continue to throw more into it till we are ready to start looking at houses seriously.
Good luck, and I hope this helps. I know you didn’t ask for this advice, but I can’t help myself from spewing this information because I find so many people don’t know how to cope with debt and credit cards in a very realistic and workable way.
April 21st, 2005 at 9:50 am
That is some really great advice! Coping with credit card debt, especially now that Congress has passed the new less-consumer-friendly bankruptcy laws, is one of the most important steps you can take. Thanks for the tips.
April 22nd, 2005 at 12:28 pm
Not a problem. And I will definitely keep you up to date on the house project, as I like to call it. And I agree with you about everyone and their dog telling us what to do and how we’re wasting our money even though we don’t have a big lifestyle. They can’t see what our bank balances are or what shape our finances are in, so when they bring it up or ask why we don’t own yet, it’s more than insulting, rude and exasperating. I would like to tell them all to fuck off, but I have to be polite. Most of the more “open” questioners will be my in-laws some day, so I have to keep a tight reign on my tongue around them and the boy. But if only they could hear my inner dialogue!