Archive for September, 2010
So after coming to grips with the realization that I couldn’t afford a vacation for the rest of my life, I was determined to do 2 things:
First: figure out where I went wrong.
Second: figure out how to fix it.
Figuring out where I went wrong meant getting very real with how much debt I actually had. The first thing I did was take my Excel checkbook with 1 year of paychecks forecasted out and add a sheet to that. That 2nd sheet was called “Balances”. I wrote in each and every debt I had (whether consumer or personal), the total balance, the interest rate, and the minimum payment. This, by far, was the most gut-wrenching thing I’ve ever done. Ever.
My birds-eye-view of my financial life looked a little something like this:
As a side note: The above spreadsheet does not include items that my ex was responsible for paying, per our Separation Agreement. At beginning of The Lean Years my FICO credit report showed a total of $240,000 in debt, which included a $165k house and joint-credit cards not listed above. Yes, that’s right… $240,000.
Four years ago, I was living what I considered an average, middle class life. Right out of college, I had a $29,000/year job, a home, a dog, a solid $20k in student loans and a few credit cards. I was working hard to achieve the lifestyle I wanted, and had all the stuff to prove it. If I “needed” a new top, I bought one. If I “needed” a night out with the gals, I took it. And at the end of the month, if I had no money left over to pay my medical bills… well, that’s what Visa was for. Emergencies.
That’s right. At the end of the month, come the due date on the billing statement if I didn’t have any money left in the checking account (many times there was some money in there, but it was “hard-earned” money I preferred to spend on something fun and fab), it’d just get put on a credit card. Groceries. Gas. Electric bill. Medical bill. Lunch. Buy 1 get one 50% off at NY&Co.
I didn’t see anything wrong with putting a little bit on the Visa to make ends meet — I mean, heck! The average American family has $8,000 in credit card debt, so obviously it’s totally acceptable to use the cards to finance the lifestyle I’ve worked so hard for, and so deserve. Right? Right!
Wrong. There came a day when not only was there no money left over in the checking account for my “necessities”, but there also wasn’t enough credit available. And the interest rates, naturally, were in the 20%-30% range. My minimum payments just kept creeping up and creeping up, until the point where the minimum payments on all of my bills exceeded my monthly income. Obviously I needed to make more money, yes?
Ha. With new jobs and more money came more spending. And not on paying down debt, but instead spending towards that lifestyle I deserved. I mean, why shouldn’t I get new shoes? I’ve worn these for an entire year now! And what about that dinner out with friends? Obviously it’s important to be well-rounded and it’s healthy to have social interaction. Obviously. Justification after justification had led me deeper and deeper into a pit of dispair, depression and poverty that I never saw coming…
Until the day I ran out of money and had a problem to solve: how long before I have enough money to pay for my vacation? Seriously, even after running out of money, I still believed it was my God-given American right to go on vacation. Whether I had the money or not, I was going. It was the only acceptable thing for any 20-something, college educated, hard-working woman to do when Expedia.com was offering 50% off deals.
So, to figure out when I’d have enough cash to buy my airfare, I decided to start a checkbook. I’d never actually kept a checkbook up until this point. I had no idea where to start, so I Googled “how to keep a checkbook” and away I went. I built it easily enough in Excel so that it could do all the math for me. I began entering expected paychecks and bills that I knew would need to come out of them.
After forecasting paychecks for 2 months, I realized the minimum payments on my maxed out credit cards were eating away my much-deserved vacation money. So I kept forecasting out: 4 months. 6 months. 1 year. Still didn’t have the cash to go on vacation. Ok, re-group. It suddenly dawned on me that I simply could not afford a vacation that year. And probably not even the next. I was utterly shocked. Who knew that attending a prestigious school, working hard, getting promotions and being diligent would lead to poverty? And yet it did.
Starting that checkbook started a new chapter of my life that I call “The Lean Years”. As a single woman, I was making more money than most couples combined, but I’d worked myself into such a vicious debt deathbed that I couldn’t enjoy even a sliver of my hard-earned paycheck.
So what did I do to turn it around? Keep reading. Future posts will take you along my journey through The Lean Years, and into what I now call “The Age of Reason”.
How many times in your life has there been more month left over than money?