Steps forward and back

I canceled a credit card today.

 I had intellectually made the decision to do it a while ago, but didn't for what I thought was a practical reason. I had chopped up the card and could not find the account number, which I thought I would need. Today, a new card for the account came in the mail, so I placed the call.

I learned during the call I would not have needed the number.

On the front of the card, it told me that I had the account since the year I graduated from college. It had to be one of the first credit cards I ever got.

It was harder to pick up the phone than it should have been. I haven't used the card in months. It was the third debt I paid off, following another gas company card and some money I owed a family member. But I've kept the card around "for emergencies." Well, I have taken a long road trip, and a few shorter trips since the card was paid of and haven't "needed" the card. I have been buying fuel with cash and doing fine.

I know it's just that it was a 20-plus year habit. I've relied on credit cards for most of my fuel purchases for years. It started when I moved to California. I liked the convenience of paying at the pump when I moved to California at the self-service gas stations.

The process of closing the account may have been harder than it needed to be because, in spite of my confident recent posts, I've been slipping on my budget of late. The food budget has been blown. I've cut into my fuel/car expense budget and been eating a lot of fast food. Not as much as I once did, but I was eating fast food several days each week.

I've just been so bored, living like a hermit in my apartment, eating cheap grocery store food.

It's a good reminder of how I got in this mess in the first place. Periodically, a few times a year, I would go on spending binges, often or always when I was feeling the most financially strapped. I'd pull out a credit card and splurge on something, like a nice meal, or gifts for family or friends, or some crap that I thought I really wanted/needed but didn't.

This time has been different. While I have blown my food budget, I have financed my misbehavior with cash out of other parts of my budget.

Now, the Labor Day weekend is here, and I'm looking forward to getting out of town for a few days. It's not really a budgeted expense, but I can do it, with cash, so I'm going. I shouldn't go, but yet I need to go in the worst way. I am profoundly bored and need something resembling a life.

I still have a long ways to go and it's going to take quite a bit more time. More time than I want it to take. I'm confident I can make it. Dave Ramsey would not approve, but I'm taking a weekend and spending time with an old friend. And I will be paying with cash. So maybe Ramsey can give me a pass on that.

Learning to bank on myself

The credit card companies, once a source of endless hours of stress, now merely amuse me. A few weeks ago I got notification from one of the banks with which I still have a card with a balance. The letter informed me that they were lowering my credit limit, due to information they had seen on my credit report.

I admit, I was briefly disappointed by the news, until I remembered I am no longer charging to that account and have no intention to in the future. So, oh well. No biggie.

Then this week, I get a notification from a different credit card issuer that tells me they are raising my credit limit.

I had to laugh. How can two different financial institutions look at the same financial information and come to two opposing conclusions?

Periodically, I still look for logic from these institutions. I still hold out some faint hope that a couple of the account holders will take note that I am paying down my accounts in pretty big chunks. The debt snowball is rolling and it is moving a little bit faster all the time. It sure wouldn't hurt my feeling is the interest rates on a couple of those accounts were reduced. But I now see that the best way to lower the interest I will eventually pay is to pay all the accounts off, one by one, as quickly as I can.

I still wish I could get the debt paid off immediately, which I can't. But I have increasing confidence I will get it all paid off. It will still take a while, but I've kept to the plan for more than a year. Just need to stick with it.

I am breathing easier. I now feel like I have options. For example, I've been putting off buying new clothes for work for more than a year. When the weather turns cooler this fall I am going to need some new long-sleeved shirts. Now, I know I can pay all the minimums on all my accounts and use part of the extra I pay for just one month's payment on my smallest account and buy a whole new wardrobe if I choose to do so. It won't be a fancy wardrobe, but it would be several shirts, a couple pairs of pants and a new pair of shoes, all of which I sorely need.

While I am at it, I should also get an eye exam and some new glasses. My current pair is several years old. I can afford to do that now if I wish to do so.

The thing holding me back on the new clothes and the new eye glasses is that I don't want to slow down my progress. I am reluctant to spend money on myself. In years past, I would have used credit cards for such purposes and not blinked. Now, I can, and will, spend cash.

Technology closes the book on pages

I didn't know this was even possible, but here is proof the federal government can actually close a program this is no longer needed. It was announced today that the House of Representatives will end it's page program.

Here is a link to the Los Angeles Times' version of the story.

But, of course, the Senate page program will remain.

Uncle Sam, are you feeling Standard and Poorer?

Uncle Sam is going through the same thing many of the rest of us have already experienced. His credit score has been downgraded and financial experts are saying he may be at higher risk of not paying off his credit card bills.

Oh, sure, he was still paying his debt. He hadn't missed a payment. Shouldn't Standard and Poor's cut him some slack? Yea, I said the same thing to Chase and the other credit card issuers who jacked up my interest rates and dropped my credit limit. It didn't go me any good. It's some small consolation that Uncle Sam didn't get much better treatment either.

Now, we will see if he learns the same lesson some of rest of us have had to learn. Will he figure out that some of the things he thought were necessities are really luxuries?

I don't know about you, but I'm not holding my breath.

Less is more and enough is enough

I'm fed up with this political game of financial chicken taking place in Washington, D.C. If these idiots that the rest of us idiots elected to represent us can't prevent the federal government from defaulting on its debt, I'm not sure what we are paying those morons for.

However, it is equally infuriating is the simplistic language being used to describe the debt problem, the proposed deals and the language of who will "pay" or who will feel "pain" pisses me off to no end. And perhaps worst of all is the press lets these idiots get away with it.

If you only pay half-assed attention to this crisis, you could easily assume that the solution is simple. One side wants to cut benefits to the old and poor and the other side want to increase taxes on the rich, and it would be possible to assume that either idea would net the same amount of money. It would not. As I pointed out in a previous post, our government couldn't tax the rich enough to fix our debt for this year, let alone the total national debt. So, I won't belabor the point here. Can't someone just speak the plain truth?

Apparently not. Just look at the language of the proposed debt reduction packages. The truth of the matter is the "debt reduction" plans won't reduce the current debt at all, it will only reduce the amount of future debt our government will obligate us to pay. So, if the "big plan" would reduce the deficit $4 trillion dollars over 10 years, that means, if we are currently overspending at a clip of $1.5 trillion, we would only at another $11 trillion to the $14 trillion we already owe. Do you think that's going to make your social security benefits any more secure 5 or 10 years from now? Or your Medicare? Or your food stamps? Or your community development block grants? Or the funds for whatever pet federal project you absolutely think Uncle Sam should pay for?

The most urgent priority is that the government needs to prevent a default next week. However, we have to stop putting this problem off for future Congresses and presidents to deal with, and future generations to pay for. It is completely true that the government needs to learn to do what many of us have already had to figure out in this recession, which is to live within our means and only spend money on essential needs. Not wants. Just needs. And for those of us in the public who haven't learned the lesson, it is time to learn about personal responsibility. Pay as you go. You are responsible for yourself and your family's welfare. The lottery jackpot isn't coming to bail you out. The financial settlement is not coming to give you something for nothing. Uncle Sam is not our mommy and daddy, here to powder our butts and wipe our noses.

Millions and billions of dollars sound like lots of money. And it is. But what both Democrats and Republicans are telling us all is that they fully intend to keep spending trillions more than comes in to Washington on an ongoing basis. It's basic government math, where a reduction is actually an increase.

Goodbye cards of summer

A new Discover card came in the mail today.

I didn't realized the old one was about to expire because it had been shredded months ago. I'm not sure it really was about to expire, because the expiration date on the new card is only about 18 months out.

So, I activated the card, which seems strange to do, since this one will just be shredded too. But I find myself just letting the card sit here, its new baseball-themed design staring up at me from the table.

According to my debt payoff plan, this card should be paid off in sometime around the time this card is set to expire.

Maybe I should just close this account to new charges. I had been keeping the accounts active, in the hopes that as my debt is paid down it will actually help me get a lower interest rate on the couple of cards that are charging insane interest based on their formulas that seem to think I will default, even though I haven't had a late payments in more than 4 years according to my latest credit report. But the Discover card actually has my lowest interest rate, and I don't have any reason to think it will get any better before the card gets paid off.

So, I don't know what's the best thing to do or the right thing to do on issues like this in my debt payoff journey. But I know if the cards are shredded they can't be used.

So, the pretty new baseball-themed Discover card has been processed through the shredder. Bye, bye baseball Discover.

I only cheated a little bit

I have not been faithful to my budget. I've been cheating.

Fortunately, I have not been using any credit cards. All my financial indiscretions have been committed with cash.   I haven't busted the budget completely, or burned through any funds needed for bills, but I've slipped up.

This month, I have had some extra money in the bank. And I've been eating out at restaurants and spending some money that I know I should be devoting to my debt payoff plan. The wasted funds don't add up to big cash, but it's allowing some old, bad habits to creep back in to my life.

I know a lot of the reason is that I'm bored. I'm just tired of not having a life in order to stick to the budget. I am seeing the progress of the last year of work. I no longer have to spend every penny I bring home just to make minimum payments and afford food. Now, if I only paid the minimums on all my accounts I would actually have some money left over to play with. And it's tempting to play.

Maybe it's because the weather has been getting better. I've felt cooped up for a long, long winter.

Perhaps in this next phase, in order to get all the way through the debt payoff plan, I need to find a no-cost hobby that gets me out and about a bit more. Or, maybe, if I'm going to stay cooped up, I could spend more of the time I spend in front of a computer writing more rather than staring at numbers in a spreadsheet. I know the number, though they are changing a bit more rapidly each month, don't change when I just stare at them.

Yes, I've cheated, and I'm not proud of that. But I haven't pulled out the plastic, in spite of the urge to splurge.  If I keep it up, in one year I should be less than 2 years from being out of debt.

Sometimes that seems so close. But far too often it all feels so far away.

Year 1 in my war on debt

It was one year ago this month that I finally sat down to figure out just how much debt I had accumulated and try to figure out if there was a way out. One year ago, I wasn't sure there was, but I knew I needed to do something. Figuring out how much I owed was the first step. The second step was trying to learn how to do a personal budget and live on it.

There have been ups and downs, and there is still a long ways to go. I figure it will still be about 3 years before I am debt free, depending on what twists and turns life takes between now and then. That still seems like an awfully long time, and it gets frustrating, but it is good to have a year's worth of numbers to see that I have made progress. It's the one, solid thing that keeps me going and keeps me working the plan.

Today, I just paid off my 5th debt. The first four were all small, under $1,000 each. But this one was my first significant debt paid completely. I thought I would feel much more excited about it than I do, but the truth is, having just sent off the biggest chunk of money I have paid at once on a bill has left me feeling a little big sick to my stomach. It hurt to pay that much.

This one is on a credit card account that has actually been closed for years. I don't remember why I closed it for sure, just that I was feeling abused by the company at the time. Yet I have been sending them monthly payments for years now anyway. But not after today. Today that debt is paid.

Over the last year, I've reduced my debt by about $11,000, nearly $4,000 of that on the debt paid off today.

My debt snowball is growing, and that's good. It's going to take a while to pay off the next lowest debt on the list though. It's this next stretch that may be the one that test my resolve to keep as aggressive on my payment plan. The next 6 debts are all bigger. My goal is to try to pay off one more by about the end of the year if I can.

I got a check in the mail this week from sale of some stock that I had. That's what allowed me to pay off the one debt and will allow me to pay a chunk toward the next debt on the list. But I have to admit, that having the most money I've had in the bank, perhaps ever in my adult life, makes it awfully tempting to go spend some money on something fun or buy some things that I could use, like some new clothes. I also don't know yet, what the tax implications of the stock sale will mean yet.

One year into this, I now realize the year went pretty fast and I'm proud of how well I've been able to remain focused on the plan. I've got a confidence now that I can get through this and can actually be debt free. But it's still hard to fathom how I can continue to live like this for three more years. It's not that I feel a need to use credit cards again. But the lifestyle dial back has certainly been painful. There hasn't been much "fun" over the last several years, even before I really had a plan I just knew I was in trouble and needed to cut expenses.

The Federal Reserve reported this week that consumers increased their credit spending in March and that credit card spending increased for only the second time since August 2008. I'm glad I'm not one of those increasing their personal debt. But I understand the desire to spend some money.

One year ago, I was still hoping for a miracle. I was still hoping someone or something would step in and save me financially. Now, I know, that this process of learning to manage my money, live on a budget and sacrifice over a long haul should all serve me well in making sure I never get myself back into a mess like this again.

Now that's recycling

I learned something interesting today. My ex, from the failed engagement that was a regular theme earlier in this blog's history, got married.

I wasn't sure how to feel about that. There was no twinge of pain, but I must admit I was curious, so I tried to learn a little more. All I really knew at the beginning of the search was that the ex's last name had changed. What I learned was that she and her new husband got married last month.

They apparently got married the same place we were going to get married. That didn't really surprise me. The ex told me that's where she always dreamed of getting married.

What did surprise me was that the ex and her new husband tied the knot the same month of the year we were going to get married. To be honest, I forgot what our wedding date was supposed to be, but I found the date documented in an old post on this blog.

Then I learned the date of her wedding. There it was, exactly 6 years to the day from the date we were going to get married. It cracked me up. I seriously laughed out loud. That was just too funny.

Perhaps the date had some other significance to her for which I am not aware or have since forgotten. I thought we picked that date because it was close to the date we had started dating. Now, I'm thinking something else may have been at play. But, regardless, I can't help but wonder if her husband knows the something borrowed may very well have been the wedding date.

Way to recycle! Sorry I didn't get you a gift. I wouldn't have, actually, even if I knew about the wedding beforehand. But thank you for the gift. You made me smile and gave me a helluva laugh.

Our economic tsunami

I heard on the Today Show this morning that the current estimate on the damage caused by the Japanese earthquake and tsunami is $300 billion.

The amount of money the U.S. government is overspending this year is 4 times that much.

That's a massive tidal wave of economic destruction caused by Congress and the president.

Are you starting to get a feel for the enormity of our financial problem?

Politicians arguing over pennies on the debt dollar

The more time I spend agonizing over my own budget, and my own debt, the more I get irritated with governments' handling of public money.

We are hearing a lot about government spending in recent weeks and we will hear a lot more about it now through the end of next year's presidential election. Sadly, what we are hearing is a lot of slogan-like sound bites, but little of substance. The two major parties are doing a lot of finger pointing and arguing over tiny chunks of the budget that won't do a damn thing to get the federal government any closer to merely spending the money the government takes in each year.

All the chatter about whether or not to fund OPB, Planned Parenthood, the Obama healthcare plan, farm subsidies, or whether to raise taxes on the rich or corporate taxes amount to spit in the ocean. Billions here or there won't fix the massive problem. The deal the parties made to cut $38 billion to avoid a government shutdown is 1/35th of the deficit the feds have already overdrawn the bank account this year. There is a $1.35 trillion deficit so far this budget year.

Millions and billions are hard enough for most of us to fathom, but a trillion-plus for just this year's deficit and a $14 trillion total deficit? That's $14,000,000,000,000. That's way too many digits. So let's look at it another way.

Let's say you earn $21,820 this year. However, you spent $35,825 for the year. So you put some of that on a credit card. So you added $13,504 to your debt this year. That would be a little scary, since the debt you incurred was more than half your income. So, soon, you will have to either get a huge raise, or seriously cut your lifestyle to deal with this year's credit card bill. But the really scary part is, the total credit card bill is already $143,125. Do you know anyone that makes $22,000 a year with a $143,000 credit card limit? So, if you spent all your earnings on your credit card bill, it would take you 6 and a half years of earnings to pay that off, not counting interest. And there is always interest. And, of course you still have to eat and pay the bills somehow.

Using that ratio, the deal to cut the budget that Congress reached early this month to avoid a government shut down would cut spending by $380 for the year out of our $38,000-plus spending.

The only way to get a raise would be to raise taxes. And of course those big meanies in corporate America should be the ones to pay, right? I see lots of people sharing stories on Facebook and other sites about how little corporations pay in income taxes (and they all seem to ignore all the other taxes corporations pay). So let's just make the Exxons and GEs of the world pay higher income taxes.

Well, according to USDebtClock.org, where I'm drawing all these budget numbers from, puts total corporate assets at $13 trillion. The current debt is $14 trillion. So even if the federal government liquidated everything corporations owned, it wouldn't pay off the existing debt, and of course there would be no corporations left to pay any taxes next year.

The total value of all goods and services produced in the country would be barely enough to pay existing debt. The current debt is 97.5 percent of the total Gross Domestic Product. There is no amount of tax on corporations or the rich that can cut the debt without some dramatic cuts in spending too.

As those of us working to get ourselves out of debt have learned, the first step is to quit digging a deeper hole. I realize that the government is going to need to raise taxes to get out of this hole. But even that won't stop the bleeding. Massive spending cuts will have to happen too. And we will have to do major surgery on some sacred cows to get it done, namely social security, Medicare and defense, not to mention a lot of other welfare-type programs.

I don't relish the thought of people who have suffered  having to suffer more, but I also realize that we all have to take more personal responsibility for ourselves and our own families financially. Everyone will need to pitch in on this deal.

It's time to get radical. Raise the retirement age immediately. Freeze or reduce social security benefits going out each much. Freeze or reduce Medicare and Medicaid benefits. Raise the retirement age for government workers (at all levels of government). End fixed pension benefit levels for government workers (at all levels of government). Reduce government payrolls at all levels of government and since taxpayers are fully funding public employees pensions, then government workers can help bolster social security and Medicare even though they, theoretically, won't ever tab into it. If it's a societal benefit, everyone, Congress included, should pay into it. Put an end to never-ending unemployment benefits. Reduce food stamp spending and other government assistance. Reduce/eliminate tax credits, tax deductions and subsidies for all manner of social engineering projects that benefit the poor and the wealthy, individuals and companies.

Oh, and there is speculation that Obama will raise and spend $1 billion or more for his re-election campaign next year. State, and even some local races, raise and spend millions. How about we tax political campaigns too. That's something Democrats and Republicans would both have to pay and its funds that would come, in large part, from wealthy individual and corporate donors. And maybe if the tax rate was high enough there would actually be some incentive to keep campaign budgets from getting ridiculously out of control. Maybe we can get some of these aspiring candidates used to frugal financial management before they get into office.

If we do some of these radical things, to cut spending and increase government revenue, then, maybe we can start getting the governments' spending more in line with what it brings in. At the state and local level, we can't continue to give government employees raises, cost of living increases and step increases and guaranteeing benefits they will receive regardless of whether the pension funds or state revenues can afford it.

We should also decline an increase in the debt limit, the limit on the federal credit card. But we won't.

We may want to help everyone, but we can't. We, at the very least have to help everyone we are helping  less. We all need to get our own financial houses in order, pay our own bills and expect our governments to do the same.

If nothing else, at least when you hear the ongoing political rhetoric about tax increases or budget cuts at the federal level, I hope you realize that if the amounts discussed don't top a trillion dollars, the windbags spouting off are only talking about a small fraction of the problem. If they aren't talking about at least hundreds of billions, then they are talking about pennies on the dollar of our current debt. This is not about paying for Big Bird vs. tax breaks for the rich. It's far more complex and far more serious than all that. And it will cost us all far more than we care to admit.

Measurable progress seen in debt payoff plan

I'm beginning to understand what Dave Ramsey talks about when he says you need to get "gazelle intense" at attacking debt. I paid off Debt No. 4 this month, and now I can't wait to get rid of the rest of them.

Of course, the first 4 debts were pretty small. The ones that are left are going to take a while to polish off. Based on all the number crunching I've done, the next debt should get paid off late this year, unless I can figure out a way to increase my income somehow.

It feels good to be making progress. The amount of money I have to contribute to my debt snowball is slowly creeping up as the minimum payments on the remaining debts slowly inch downward.

But I'm getting impatient too. As my confidence grows at living on a budget, and living within my means, I am tired of living under the specter of debt that is now years old. It was May 2010 when I finally took the time to add up all my debts to get a clear picture of the financial mess I got myself into. Since then, I've paid the debt down by more than $7,100 in about 9 months.

I don't know if I've ever confessed this on here before or not, but I actually went to talk to someone at the local Consumer Credit Counseling Service a few years ago. Because I wasn't behind on any of my bills, they didn't offer any help. I knew I was in trouble, but didn't know what to do at the time. I had yet to discover Dave Ramsey back then. In searching through some paperwork recently, I found the snapshot of my debt back when I went to CCC in the fall of 2007. From fall 2007 to spring 2010, I managed to pay down my debt by a little less than $5,500. So, I've managed to make more progress in 9 months than I made in the previous 2 and three-quarters years.

What a difference a plan makes. That, and the willpower to stick with it.

Credit card borrowing down for 27th month is news our budgets can live with

The Federal Reserve reported on Friday that consumer borrowing rose in November for things like cars and college loans. However, the Fed also reported that people are actually saving more and spending less on unsecured credit, meaning credit cards.

We, the people, borrowed 6.3 percent less in November on our credit cards. It's the 27th straight month that consumer borrowing declined.

An economist the the Bank of Tokyo-Mitsubish said consumer borrowing was down 2.2 percent in November, from November 2009.

"Household attitudes toward the use of credit cards soured during the Great Recession and it's going to take time before many people get comfortable with using them again," Ellen Beeson Zentner told the Associated Press in a story release Friday.

"We have a long way to go before credit normalizes," she said.

For me, putting the brakes on consumer credit IS the new normal. For one thing, the credit card issuing banks have not returned the interest rates they charge to "normal" either. Whether it's their intention or not, they taught me that I had far too much credit and had tapped far too deeply into it, and when the banks increased interest rates, it wiped out any discretionary income. So, when I get out of this mess, I don't ever want to get back into it again.

So, don't count on me, and people like me, to do more to fuel the economy. The available funds I have are not increasing.

Sure, some of us will undoubtedly start using credit cards again. But not all of us. For those of us committed to paying only for things we can afford now, this is the new normal, and the banks better get used to it.

Celebrated a credit-free holiday

I got through the holidays without tapping into any credit cards. It's the first time since I've had credit cards that that has happened. It was an all-cash holiday.

I am proud of myself for that.

I wish I could just accept that and move on, but I can't resist the urge to beat myself up a bit.

I didn't go a very good job of planning for the holiday spending in advance. I didn't budget for it in advance at all actually. So that meant I ended up tapping into my savings account -- my emergency fund if you will -- to cover some of my holiday and monthly expenses. So far I've depleted the account by about $150, which isn't too bad. But there are still a few more days until pay day, and I've run out of supplies. The cupboards are getting pretty empty and there may not be enough meals left to take me through to pay day. The menus have already got pretty unbalanced.

So, it appears my effort to tackle my debt may have to get set aside for a month or so until I can rebuild my savings account. It may only be the delay of a month or two, but it's still a disappointment.

I've learned a lot about budgeting in recent months, but I still have to learn about how to budget for things outside the regular monthly bills like holidays, birthdays, car insurance, etc.

I should be paying off one small debt this month. I'm tempted to just pay it off anyway and work on rebuilding the savings account next month. But as I am also learning, the Dave Ramsey plan works quite well for me if I stick to it. Even parts of the plan I was skeptical about, like using cash envelopes for things like groceries, car expenses, entertainments, have helped keep me focused on my goals. Although, I'm sure Mr. Ramsey would not consider Christmas an emergency, I also know I should rebuild that fund before I tackle the debt again. I'm just so close to paying one more debt off. I want to be done with that one and move on.

Back to the plan. If I can get aggressive enough this year and can get a few months ahead of schedule, I may be able to pay off a credit card debt this year too in addition to the small debt I'm close to finishing off.

The next two years are going to be a long, hard slog before I can really start knocking these debts down -- and out -- in the two years after that. I would either need to up my income, reduce expenses even more -- or both -- to get on a faster track.

There's still much to do and much to learn and a whole lot of work to do. But maybe the corner was turned in 2010. Here's to continuing progress in 2011.