Credit Card

As we near the end of the year, it makes it easier and easier to compare this year with last — and leaves time to make any end of the year attempts at besting last year’s numbers.

I use Microsoft Money to track my finances. Back in 1997, for unknown reasons (it probably had a nicer box than Quicken), I bought the program and started maintaining my checking account transactions.

After a few years of seeing how cool it was, once I had enough data, I expanded to keeping track of my credit cards. At first it was just the monthly balances, but eventually I started tracking every transaction and categorizing things accurately.

It took a few years to get things categorized to my liking, and by 2005, I had a pretty good system down. I’d added my 401k to the mix, my auto loans, basically everything financial.

The numbers this year look, well, okay I guess. I made more, which is always a good thing, but I also spent more.

While the original goal of 2007 was to increase my net worth to 6 figures, I think the main target in reaching that goal (which I won’t reach this year) was to curb my credit card use. And I think I’ve done that.

In 2006, I ran up $24,572 in credit card charges — $8k more than ever before. That’s a huge number. That’s an embarrassing number.

So far, in 2007, I’ve spent $22,305 on the credit cards. When you average it out over the past 11 months, that works out to around $2k per month, so adding in December, it will appear as though I’ve spent just shy of $25k this year too.

So why am I happy about that?

Well, though there’s a essentially no difference in the amount charged each year, there is a HUGE difference on where the money went.

In 2006, I spent all $24.5k on, well, stuff. The big expenses that year were a camera, a computer, a ring, a big car repair, and who could forget the hockey jerseys… Just stuff really. But that’s a lot of stuff.

Between July and August of this year, I charged $16k towards our home improvement projects. That’s something that isn’t going to happen again with any frequency. Take that out of the equation and I’ve really only spent $6305 so far in 2007.

I’ve cut my “stuff” expenses by 75%. And you know what? I still have plenty of stuff.

My habits have changed for the better and, at the same time, I can’t say my “quality of life” has declined any. At this rate, I’ll be credit card debt free this summer.

But it’s not all good news. While I spent less “technically” on the credit cards this year, I also paid less back.

In 2006, I sent $29,966 in payments towards three credit cards. This year, I only paid back $25,719. This is due in part to the aggressive repayment of the $12k bank loan we took out at the end of 2006 — and wasn’t a part of my “credit card” plan, but even still, that’s the only place I regressed.

Here’s the chart:

Credit Card Totals
That’s the great thing about tracking your finances in MS Money, or even Quicken if you choose that route. You can visualize your progress, and that’s a huge motivator.Look at the drop in Finance Charges!? That’s not something I would have noticed if not for this program keeping track of everything and all of its built in reports.

It just goes to show that, even when you charge like a madman, choosing the right card to use makes a big difference. And choosing when (and what) to refinance with a lower rate promo offer can save you tons. Look at that — that’s over a $2000 difference between 2005 and 2007. And the total balance hasn’t really moved more than $5k.

And to end on an even higher note, it’s truly reassuring to see that, even just taking into account the the credit cards on their own, I spend less than I pay back.

Even with these obscene totals, I can’t imagine how deep I’d be if that hadn’t been the case all along.

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Gobble, gobble…With my paycheck coming in today, a day early, because of the holiday, I just fired off another $800 towards my Bank of America credit card allowing me to cross November off on my debt snowball payment chart.

In total, I ended up paying back $2075 total towards that card (around $550 extra); partly because I want it finished off a month earlier than the chart indicates, but mostly because I ended up charging just over $420 (!?) on it this month.

The big expense was a $220 upgrade for Adobe Illustrator, which gets chalked up as a necessary business expense. It is, afterall, a business card.

$420 – $220 = $200

Where’d the additional $200 go? I thought you were trying to cut back expenses and get rid of these cards?! You’re more flippy-floppy than any of the pf bloggers… I’m never reading pantsinacan.com again.

Well, $100 of it went towards a new mailbox. Since we had the house sided over the summer (they finally finished the job a couple of weeks ago?!), we haven’t had a mailbox on the house — just the old one sitting on the floor of the front porch. It had to be done sooner or later and the business card is the only card that I carry so that’s what paid for it.

The remaining $100 went towards gas. Perhaps it’s my age, but I’ve only paid for gas inside a gas station maybe twice in my life. And even then, it was with a credit card. Pay-at-the-Pump is the only way to go. I’ve even pulled out of gas stations with the indicator on E without filling up because the pumps didn’t have a credit card slot — it’s that much of a convenience for me.

Anyhow, across the entire snowball plan, this morning I’m sitting at a total balance of $20825. That’s $337 ahead of schedule.

Obviously, I’ll have to pick up the pace some in the remaining weeks to get the business card paid off in full, but I’m not against dipping into my ING Savings to make that happen.

Happy Thanksgiving!

(and for those in Canada and elsewhere — have a nice, um, Thursday.)

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Mmm… Credit Crunch Bar!With all of the persistent news lately about how it will be harder and harder to borrow money, I’ve been really content with the fact that I’m well on my way to being out of debt and never really “borrowing” again.

But the deals from the various credit card companies that I hold accounts with have been getting sweeter and sweeter by the week.

Wait, I thought it was supposed to be harder to borrow money now? But the fed cut rates, so money should actually be cheaper to borrow, right?

Huh?

I’m not going to try to figure it out — I don’t really care.

But with teaser rates of 0% through December 2008 already arriving in my mailbox, well, it makes my mouth water.

But then I look at my little chart and realize I’ll be debt free by then anyway and into the trash they go…

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Debt SnowballWow!

Through Happy Rock‘s blog, I found a debt calculator that actually peaks my interest.

It’s based on the Ramsey snowball method, which I’ve sort of done in the past, but not really. I tend to try to pay down all of the debts at the same time. Sometimes it works, sometimes it doesn’t.

Eitherway, it’s a lot easier to just punch the numbers into this calculator from What’s the Cost than it is to set up your own cryptic spreadsheet. That’s the route I’ve always taken… until now.

The one feature regarding introductory rates doesn’t seem to work correctly, but that’s really not an issue in the grand scheme of things. Finally… a calculator that isn’t just the same old recycled drivel…

My Debt Snowball Chart I plugged in my numbers and things look good. I’m motivated to get things rolling on the fast track again. Even printed it out and taped it to my desk at work right in front of my keyboard.

I think I’ll stick to this schedule, with one exception. I’m still planning to pay off the Bank of America card in full by the end of the year. This schedule has it being paid off in January.

And, just think, this way I’ll be done even sooner!

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Ben BernankeWith the monthly net worth update looming in the next few days, I’ve got a pretty good idea of what it’s going to look like — granted Bernanke’s rate cut on Wednesday (Already? Why???) could sway the results.

Either way, October will end up being another month headed in the right direction. Problem is, most of the “gains” are coming in my 401k.

I guess that’s not a problem — it’s just not helping the debt reduction any. Untouchable income which, yes, is a good thing, is also like invisible imaginary income.

I look at the bottom line and see that I went up, say, $5k in the grand scheme of things. Hey, at that rate, I could wipe out all of my credit card debt in 3 months time. But my debt total hardly moved. And that’s frustrating.

I know I said that was going to be the new plan last week, but I haven’t implemented that plan yet.

But enough complaining about an increasing net worth… (Seriously, why am I moaning about that?)

The good news is that, by delaying the plan to boost my cash resources for another pay period, I’m ahead on my mortgage again. Next payment is due in January 2008, and that’s a load off of my shoulders. I generally like to have a buffer like that and there have been a few months where it’s been a little tight.

In other mortgage news, Countrywide did their annual Escrow Analysis on my account a bit earlier than usual this year and my payment has gone down around $40/month. While I’m not going to change my payment amount (I like to write checks for nice round numbers), it’s an additional $40 that will go towards the principal each month. Added to the $25/week I’m still throwing that way, that’s $140/month extra towards the principal, which according to Countrywide’s amortization schedule calendar will put me on pace to pay off the mortgage nearly 10 years early. No complaints there.

Anyway, the goals for November are to aggressively pay down the Bank of America Business credit card like I mentioned in the “Goal for the 4th Quarter” posting and increase my cash pile by paying the minimum on all of my other bills.

I guess that’s the Dave Ramsey method. Well, we’ll see how that goes…

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Fork in the RoadSeems I come to this intersection every few months. I look left. I look right. But usually I just proceed through and just keep on going straight.

What am I talking about, you ask?

Well, I “feel” broke. Basically, I’m cash poor. At least I feel like I’m cash poor. Right now, like last month, I don’t have the funds available in my checking account to pay the mortgage. (Tomorrow is pay day, though, so no worries!)

So, what’s to the right?

A simple way to increase my cash reserve while keeping my debt balances relatively steady.

Over the past 36 months, I’ve sent a whopping $82,336.27 in payments to credit card companies. That works out to an average of $2287.12 per month.

Currently, my minimum monthly payment total is around $260. Finance charges work out to $50 each month. I also charge around $400 per month. Together, that’s $710 deeper into debt each month.

Now, let’s say I start repaying the credit card companies $710 per month instead of $2287 like I have been for the past 3 years…

That would mean my credit card balance would stay relatively flat, but my checking account would swell by the difference, $1577, every month!

That, my friends, is more than a mortgage payment. And right now, in my current situation, I really like the sound of that.

To the left?

Well, I guess I hadn’t thought enough about the left. I guess it’s an awful lot like going straight. In hindsight, I should have called it a fork in the road rather than an intersection.

Anyway, this side of the fork involves paying down the debts aggressively to the point that I’m essentially living paycheck to paycheck.

I don’t really have a problem with that, I should be used to it by now, but it just hurts (mentally) when something like the hard drive failure comes up and all of the money sent to the credit card company doesn’t move the balance at all.

I’m broke *and* my credit card balance didn’t move. It’s like treading water — but paying to do it. It’s tiring.

So, in a nut shell, it’s just a decision I need to make about where I allocate my income.

The smarter thing to do is turn left and pay down the debt, but the more comfortable thing to do is turn right.

Decisions, decisions…

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Credit Card Balances Over TimeEliminating credit card debt has certainly been a journey. An ongoing one.

I’ve been keeping track of my individual credit card balances since June of 2005. Previously, I was just interested in what I had in my checking account — before I knew it, and because I wasn’t looking for it, I was $20k in the hole.

Not the greatest position to be in.

It was about that time that I decided to do something about it. Looking at the graph pictured, well, from June 2005 to June 2006, I went from $20k in debt to… $20k in debt. It didn’t move at all. My “snowball” had gotten stuck it seemed.

And that’s when it became apparent to me; there is a point where you just can’t dig out of debt.

Thankfully, I wasn’t paying the cards down as diligently as I could have. Since then, it’s been a yo-yo battle. I knock it down a few thousand, then, like everyone says, something comes up.

That “something” for us was the new roof at the tail end of 2006. The loan we took out — which was essentially a $12k convenience check from a credit card — skyrocketed my debt to depths I’d never seen before. Ouch.

At the time, I kinda thought all was lost. I’ll just coast along from here like that guy in the commercial who’s in debt up to his eyeballs.

Combined with my wife, we had some pretty nice income in December 2006 and January 2007, and we applied most of that towards the debt. In just over a month, we’d knocked nearly $10k off of our total balance. Talk about a roller coaster of emotions…

But now we were motivated and, better still, on a roll. We kept at it, at a ridiculous pace, through April of 2007. By month’s end, the total balance was just over $9k. That’s a $20k swing in the span of 6 months. That… will make anybody a little cocky.

And it did. I guess ‘cocky’ isn’t the right term, but it made the idea of expensive home improvements seem possible and that’s when we decided to get the house sided as well.

Just like that, in June of 2007, we were hovering around the $20k mark. Again. Just like June of 2006. And June of 2005. So much for the wind in our sails.

But there was a difference. See, this time, the debt had gotten us something. We brought the exterior of our house into this century. Everyday when I pull into the driveway after work, I see a house that isn’t an eyesore. Two years ago — even one year ago — that just wasn’t the case. And I was still $20k in debt.

All was not lost.

As you can see, the balances are falling again. Not at the great speed they did earlier this year, but still falling roughly $1k per month. The current balance, as of today, is $14981.

I’m not proud of that. But it is manageable. And just knowing that we are capable of paying off sums larger than that in relatively short periods of time, well, it makes me that much more excited about the future.

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Bank of AmericaAs the siding project over the summer, which is still ongoing, I might add, squashed any chance of me reaching my original financial goal for 2007, I’ve had to scale back my lofty goal, for now anyway, and revisit things.

(I’ll save you the time — the original goal was to reach a net worth of $100k by the end of the year.)

The new goal is to have my Bank of America Business credit card paid off by the end of the year.

As of this morning (when I just made a payment of $600), the balance is $4000 at a 9.9% rate. There are two and a half months remaning in the year — roughly 11 weeks. That works out to about $375 that I have to knock off the balance per week.

Ouch. That sounds a bit worse than I’d originally thought when I starting writing this post.

Nevertheless, I’m going to stick to this goal — while also paying down my other debts aggressively.

It might be a struggle, but hopefully the incoming cash flow gets a kick start now that the hockey team we work for is in season — they are chronically months behind in payments to us. Really, last night, my wife informed me that they owe us in excess of $2k, but that’s a whole other story… and one I don’t really want to get in to…

Can You Dig It?

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