Archives for category: credit cards

July 2008:

Credit card debt $31,000. Before I could start repaying the student loan debt, with its rather modest 7.25% interest, I needed to tackle the $31,000 in personal debt I had. One of the toughest steps was actually determining how much debt I had, what my expenses were each month, and what my income was likely to be. For the longest time I was like many others, people I still run into now, who not only have no idea what the make or how much they spend, they don’t want to know. Let that sink in. There are people in a great amount of debt who actively avoid learning how much they owe to others and how much they spend each month. That’s like taking a road trip and not knowing where your starting point is.

So I created a budget with excel and a budgeting program (it was a free version of Quicken that has now become Mint). I also used a debt pay-down calculator from the web and the debt snowball technique that Dave Ramsey and others advocate for. Below is a screen shot of the budget. I figured I could pay 2504.14 each month towards personal debt and still have a little left over each month.

One method of using the debt snowball is to pay the smallest credit card off first. This gives you a sense of accomplishment and success. To me, it seemed more important to pay off the credit card with the highest interest rate first, so I used this approach to the debt snowball. Each month I would pay $2504.14 to credit cards, and as each one was paid off I would then roll the amount from the paid off card to the next highest credit card. So after one month and Macy’s was done, I added that to Amex. I would then hide the card so I wouldn’t use it.

2008 budget


In the spring of 2008 I found it very easy to refuse to accept where I was with finances. I kept thinking that I was better off in the past–when I was a homeowner and professor in Minnesota–than the present–renting a room, working temporary jobs as document review attorney in the San Francisco area. I would email and call a friend lamenting my life and having a grand pity party. Funny thing was, I was wrong.

In Buddhism and therapeutic approaches (DBT and ACT) there is a concept called Acceptance. The idea is that suffering is alleviated and healing happens when we have a realistic understanding of what is happening and accept this. In Buddhist practice and therapy, understanding can be achieved through mindfulness and meditation (or mindfulness meditation). Once you or I sit in meditation, not judging or evaluating, simply paying attention, we have a clearer picture of ourselves.

A similar principle exists in weight loss and financial responsibility. In weight loss, keeping track of your eating in a food diary allows you to really see what you eat over the course of a day. It is also an incredibly effective (if time consuming) technique. A WebMD article, citing research, states that “people keeping a food diary six days a week lost about twice as much weight as those who kept food records one day a week or less.” Our memories are faulty and we want to protect our ego so we “forget” the 3 samples of banana bread we had while waiting for our Salted Caramel Machiatto. In gaining control of finances and getting out of debt, we need to know what we have, what we make, and what we spend.

We are not mindful and we are attached to our ego so we do not have an accurate picture of our caloric intake or money outflow and we do not accept our starting point.

If we don’t know where we are, we cannot develop a path to where we want to be.

Even as I started to pay down debt, I still thought I my net worth was greater in 2001 than it was in 2008 and 2009, So, at the strong insistence of my friend and financial adviser, I figured out what my net worth was in 2001 versus 2010. Here is what I found:

Taxable Income Jan 1-June 30, 2010: $62,609.11
Highest annual income as professor: $53,403 (2001)
Highest annual income at Barnes and Noble: $15,270 (2005)

In 6 months made 4 times what I did in NC and 17% more than I did as a professor over 12 months.

In fact, using an amortization schedule and an approximate value of $90,000 of my house in 2001, I was wealthier after 6 months in 2010 than I was after 12 as a homeowner and professor in 2001.

Dec 30, 2001:
Equity in House  $      8,149.00
Ford Focus equity  $         500.00
Income  $    53,403.00
Total assets and income:  $    62,502.00
Owed on house  $   (81,851.00)
Credit Card debt  $     (2,000.00)
Student loan balance  $ (108,383.00)
Total liabilities  $ (190,234.00)
2001 Net Worth  $ (127,732.00)
June 30, 2010:
6 months income  $    62,609.11
VW Blue Book  $      4,965.00
Total assets/income:  $    67,574.11
Credit cards (paid off monthly, average monthly total)  $     (1,000.00)
Student loans  $ (112,711.62)
Total liabilities:  $ (113,711.62)
2010 Net Worth  $   (46,137.51)
Difference  $   (81,594.49)

I was better of financially by more than eighty thousand dollars..

Numbers don’t lie–I am better off now than I was during the “hayday” I obsess about.

Once I knew where I really was,and accepted it, I could start planning my finances to get out and stay out of debt..

And I can’t sleep as the numbers are like–kitten bellies.