So it is Tuesday, sue me. I’m playing catch up and trying to get my “life” back in order after living out of my car for the past 5 weeks. And so here is long overdue next episode of Monday Monday$, errr, Tue$day. …
In January 2010, I had $49,567.28 in debt. Smallest to largest they were as follows
Wells Fargo Credit Card - $2,213.20
Honda Loan - $7,967.00
Citibank Credit Card - $9,944.36
Sallie Mae Student Loans - $12,358.08
Airstream Loan - $17,084.64
If I didn’t get aggressive and merely made my minimum payments on everything, like originally planned, I would end up paying over $65,000 on everything. ACK! I knew it all had to go and had to go fast, but how? In the past, I had read various books by financial “experts” including Suze Orman, Jean Chatzky and a Personal Finance for Dummies book; all have different advice on paying off debt. Highest interest first, largest debt first, smallest debt first, hold onto the student loans to better leverage your money, consolidate it all and pay one payment, etc. Even with this knowledge, I was making big mistakes with my money and had not changed my behaviors. It wasn’t until I was introduced to Dave Ramsey and “The Ramsey Plan” last year that I really changed my spending behavior. My BFF and her fiancé at the time were taking his course before they got hitched and they kindly shared everything they learned (and the DVDs) with me. You can read about his plan on his website, but basically he teaches simple “baby steps.” Save a small emergency fund, get out of debt using the “debt snowball” method of paying debts off in order of smallest to largest, save more, invest, save for college and pay off house if applicable, and give. He advocates simple methods of using cash, spending only what you have, never taking out auto loans or credit cards and other methods that we (I) have forgotten in times of easy access to “free” money. Live like no one else now (frugally while paying off debt) so you can live like no one else later (spending and giving whatever you want). Sounds cheesy, but it works.
So I started the baby steps. I had a little savings built up for the lean times between film projects (probably around $1500). I decided that January to stop using credit cards once and for all. Previously, my unemployment M.O. was to put everything I could on credit cards, use my savings for rent and things that didn't take plastic, and then pay off the cards once I got a paying gig again. As you can see, I never quite got the "paying it off" part down and owed over $12k on two cards. When I started working again and got actual paychecks, I knocked out the Wells Fargo credit card in a couple months and canceled that card.
Next up was to assess the Airstream situation. As much as I loved that thing, I made a bad choice by taking out a loan for it. It was well "within my budget" and I was paying slightly less than I was when I was paying rent in an apartment. But as my perspective on debt changed, the Airstream turned from a symbol of freedom (hello, a home on wheels! can't get much freer than that!) to a burden. It would take me at least 4 years to pay it off and in that time, it would probably depreciate at a much more rapid rate than I anticipated, considering the wear and tear I (and my cats) put on it. So it had to go. Luckily a coworker happened to be in the market for one, she happened to mention it to me one day at work and it just snowballed from there (pun intended.) I sold it in June, which meant I paid off the loan (down to around $16k by that time) and essentially got back what I put into it (I paid $19,600 for it and had put at least $2000 worth of repairs on my credit cards in 2009). I put the profit into my new "hills and valleys" savings account and oh my God did I breathe a sigh of sweet, glorious relief. I had not had that much money in my account at one time since working on location on a film in 2005 (turns out that per diem and 6th day extra pay was pretty awesome). I decided on my "safety number" for the H&V account and threw every extra dollar I could into it. Then I paid extra on my car when I could, while maintaining minimum payments on the other debts. Two down, three more to go.
At this same time, I cash flowed the summer of weddings all over the country (and Dominican Republic). It was important to me to spend time with the lovely ladies in my life and to be there for their big days. This is where I deviated somewhat from the true Ramsey plan, as he is all about sacrifice, including vacations, travel, etc. This would be one of my "weaknesses" - travel with or to see friends. I know this, so I try to plan for it and pay for it in cash so it doesn't follow me home. At least half of that $10k on the Citibank credit card was from the last summer of weddings I had......in 2007. Ugh.
Next up was to assess the Airstream situation. As much as I loved that thing, I made a bad choice by taking out a loan for it. It was well "within my budget" and I was paying slightly less than I was when I was paying rent in an apartment. But as my perspective on debt changed, the Airstream turned from a symbol of freedom (hello, a home on wheels! can't get much freer than that!) to a burden. It would take me at least 4 years to pay it off and in that time, it would probably depreciate at a much more rapid rate than I anticipated, considering the wear and tear I (and my cats) put on it. So it had to go. Luckily a coworker happened to be in the market for one, she happened to mention it to me one day at work and it just snowballed from there (pun intended.) I sold it in June, which meant I paid off the loan (down to around $16k by that time) and essentially got back what I put into it (I paid $19,600 for it and had put at least $2000 worth of repairs on my credit cards in 2009). I put the profit into my new "hills and valleys" savings account and oh my God did I breathe a sigh of sweet, glorious relief. I had not had that much money in my account at one time since working on location on a film in 2005 (turns out that per diem and 6th day extra pay was pretty awesome). I decided on my "safety number" for the H&V account and threw every extra dollar I could into it. Then I paid extra on my car when I could, while maintaining minimum payments on the other debts. Two down, three more to go.
At this same time, I cash flowed the summer of weddings all over the country (and Dominican Republic). It was important to me to spend time with the lovely ladies in my life and to be there for their big days. This is where I deviated somewhat from the true Ramsey plan, as he is all about sacrifice, including vacations, travel, etc. This would be one of my "weaknesses" - travel with or to see friends. I know this, so I try to plan for it and pay for it in cash so it doesn't follow me home. At least half of that $10k on the Citibank credit card was from the last summer of weddings I had......in 2007. Ugh.
Which brings me to today. The Airstream is gone and the Wells Fargo card is paid off and closed. Currently, I owe $10,489.44 on my student loans, $8,831.50 on the Citibank credit card (10% interest on a $10k balance is $1000/year, which is why it looks like I didn't pay shit, when I did, it just is not yet enough) and $2,292.77 on the Honda for a total of $21,613.71. It is still a lot and frustrating at times, but it is a hell of a lot better than where I was a year ago. When I focus on the fact that I got rid of $26,561.88 in a year, I feel pretty darn good about it! Now, how long will it take me to pay off the rest of the debt? What will I do after that?
As Dave says: Cash is King,
Po$$
I am totally impressed! Nice work :)
ReplyDelete