Saturday, May 07, 2011

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.


Gene said...

Congratulations! You're doing very well.

Allan Morais said...

Keep it up! Just don't lose sight of your end goal, no matter how tempting it is. I think that more importantly, it's not just about paying your debts off, but on learning and instilling in ourselves the discipline necessary to manage our finances so we don't repeat the same mistakes again. So whenever we get tempting choices, like getting a large chunk of money than expected, we commit ourselves to making sensible decisions instead.

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