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Motivation

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I’m in debt up to my eyeballs…During this lull in my finances, instead of looking ahead one month at a time, I’ve been extrapolating the data out farther and farther to try to set a plan for the future.

I used to think there would always be bills to pay. No end in sight. That’s just the way it was — and I think a lot of people think that way.

I have to admit, that sort of feeling really sinks in when you grow accustomed to carrying a $20k credit card balance from month to month. It almost became, dare I say it, comfortable?

There was no end in sight, but you know what? That was okay.

Keyword being *was*.

Though I find myself broke today, and a little uncomfortable as a result, I’m not carrying a 5 figure balance anymore. That feels good.

That’s better than comfortable.

It’s been a, for lack of a better term, crappy 3-4 years trying to get rid of my credit card debt, but now that I’m on the last leg, well, things feel great.

The line, “I’d rather live for a few years like most people won’t, to live the rest of my life like most people can’t,” really applies here.

I look at some of the things I’ve put up with over the last few years, and while I’m not struggling, compared to those around me and those with similar income, I’m practically camping in comparison.

Last week, I saw CleverDude’s photo of the inside of his home and laughed out loud at the comment where someone called it “ghetto”. I was thinking the same exact thing.

The funny thing is, he’s a guy who’s got his finances totally in order and is headed in the right direction — someone to look up to really.

So then I go home and see that I’ve got cheap shower curtains hanging in my doorways and think, “You know, this looks bad but I’m just a couple of steps behind CleverDude. I’ll get there.”

Side note: while his “doorways” are to prevent heating unused parts of his house, mine are for dust control. Adding insult to injury, my living room has piles of crumbled plaster all over the shredded and unfinished hard wood floor and exposed knob-and-tube wiring all over the place. You could say we’re in the midst of a construction project, but it’s looked this way for nearly six months.

See, told you it was ghetto. ;0)

I truly have been living the life most people won’t. Thankfully my wife has gone along with it.

But that’s the thing, I’m *that* close to being able to start living the life most people can’t.

Some may interpret that quote differently than me, thinking the “good life” is the one where you buy your own tropical island, but I tend to think things through on more realistic level.

As I said earlier, it’s almost the norm to carry huge amounts of debt these days. Finance everything. Enjoy now, pay later. The premise of the good old Lending Tree “I’m in debt up to my eyeballs” commercial.

Now that I’m on pace to be debt free in a matter of months (excluding the mortgage), I’ll already be living the life most people can’t. That’s exciting. I mean, I’ve almost grown accustomed to piles of broken plaster right inside my front door but I certainly wouldn’t mind a whole nice new room instead.

Pretty soon, I’ll be able to do it. And be able to afford it.

For real.

That’s the good life.

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Al BundyAt the risk of sounding like Al Bundy bragging about days gone by, not to mention scoring 4 touchdowns in 1 game for Polk High, my glory moment in high school was running a mile in 4 minutes and 18 seconds.

I can play it off like I don’t remember the exact circumstances leading up to the personal best, but I actually do remember them. Like I said, it was a glory moment.

The mile, or 1600 meter, wasn’t my best event while running on the track team. I was more of a distance runner, with the 5000 meter being my specialty. Didn’t lose a single race my junior year. Not one.

I wasn’t blessed with blazing speed. In fact, I wasn’t going to out sprint anyone.

What I did have was a rather fast pace and the ability to maintain it lap after lap after lap after lap almost indefinitely.

But now, 15 years have passed…

And there’s that additional 60 pounds around my mid section that’s kinda tough to miss…

But, deep down, I know that I can still do it.

No, I don’t think I’ll ever be able to run a 4:18 mile again.

I think it may even be a stretch to think I could get one mile under 5 minutes these days (though I used to be able to do 3 consecutive miles under 5 mintues).

My goal is to complete a marathon this fall. That’s not such a hard goal to achieve.

The difficult part is that I don’t want to embarass myself.

I’ll have to finish in under 4 hours. That works out to around around a 9 minute mile which, right now, sounds like a walk in the park.

The stretch goal will be under 3 hours, averaging around 7 minutes per mile. That’s a pretty quick pace, but something I think I can work myself up to over the next 5-6 months…

Even if I don’t make it, just being in somewhat better shape will make me feel better all around.

It’s cold out today though, so I think I’ll start working on this next week or, perhaps, the week after that… ;0)

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Mmm...money...It’s like the line, “it’s not what you make, it’s what you save” quote that’s thrown around so often has finally sunk in.

I used to think that to be “rich” required having a high paying job. But now, I’m realizing that that isn’t necessarily true.

Back in November I stopped working for my highest paying client. The choice was 100% mine and I knew that the lack sudden lack of income could be a problem.

But you know what?

Now nearly 4 months later, it hasn’t been a problem. And it’s not going to be a problem either.

I was always under the impression that my day-to-day finances were what kept things pointed in the right direction but, boy, was I mistaken…

My day-to-day finances are such a tiny percentage of my net worth, and that’s something I never really realized. Investments (and property) are what make up nearly all of the monthly gains (or losses) now..

Most months, the gains in these two categories far exceed my take home pay. By far.

I spend less than I make. That’s the key. And that’s something that I didn’t do in the past (obviously) as I dug myself into $30k worth of credit card debt.

I used to lunch at McDonalds or Burger King every single day during the week. Combined with the change lost in the seats of the car, that was costing me in excess of $40 per week. Now, I don’t eat lunch at all (yes, a problem of it’s own.)

I cancelled my cell phone service with Verizon saving me at least $30/month.

As I’ve watched my monthly finance charges drop from over $400 to under $20 on my credit card debt, I’ve seen the snowball at work — even though I didn’t actually use the snowball method for much of the way. That’s saved me, well, $380/month.

My standard of living hasn’t dropped one bit.

It hasn’t really improved either, now that I think about it, but in the future it will most certainly improve — because I’ll have the money in the bank to do it.

I’d say I was just breaking even when I still had all of those expenses. Now, with just those limited examples, I’ve shaved nearly $600 off of my expenses. That’s HUGE and I hardly even notice it.

Now that the credit card debt is almost eliminated, I’m on the verge of finding myself with that extra $600/month in my pocket! The possibilities?!

It just drives home the point that how much I make isn’t all that important anymore, it’s more about what I do with the amount that I make. Now that I’m doing that wisely, the rest kind of takes care of itself. Kinda like autopilot.

Building wealth is actually a lot easier than I ever expected.

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Brainy SmurfWith all remaining bills for 2007 paid already, it’s time to start looking ahead to 2008. This will be my official “Goals for 2008” posting. Earlier this month, I had a preliminary version, but as I’ve thought about it some more over the past few weeks, there were a few things I felt I should add.

In no particular order:

  • Eliminate all credit card debt by the end of June 2008. Current credit card debt is $10318. I’m aiming to achieve this goal slightly ahead of schedule, by about a month, according to the snowball plan I started in November. Achieved 03-27-2008
  • Eliminate PMI from the Mortgage by the end of December 2008. Right now, it’s costing me over $1000 per year. For what? Nothing. To meet this goal, I’ll have to contribute an additional $160 per month towards my mortgage. Achieved 07-08-2008
  • Pay off my auto loan by the end of December 2008. Current balance is $7418. This is also included in my snowball plan and it’s scheduled to be paid off in October if all goes as planned. I’m not looking to speed this up — just finish it off. Achieved 09-25-2008
  • Increase my 401k contributions to 15%. This way I’ll receive the maximum match allowed from my employer. Right now, I’m contributing just under 10%. I’ll plan to make this move once the credit card debt is eliminated. Achieved 12-27-2007
  • Increase my passive income. Now that I’ve dumped my largest client, the hockey team, I’ll soon find myself bringing in a lot less income. But, I also find myself with a lot more free time. Free time that I should use to optimize my other ventures to make up the difference — except now I’ll focus on more passive income streams because, in all honesty, I’m tired of working so much. Right now my 100% passive income hovers around $50/month. With the least effort possible, I’m looking to triple that in 2008 and pick-up a few low maintenance clients as well.
  • $10k in savings. This is my lofty goal. I’m not sure it’s even possible. Right now my ING account is holding a mere $1k. No matter how far rates fall, with a 5-figure balance working in my favor I’ll have to be making atleast $1/day in interest and for whatever reason, I like that. I’d also like to pay for some still needed interior renovations in 2008 with cash and this is where I’ll draw from.

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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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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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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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From BankRate today:

It’s easy to fritter away money on little daily expenses. If you fall into these money traps, learn to avoid them and pocket the savings.

Coffee: According to the National Coffee Association, the average price for a cup of brewed coffee is $1.38. There are roughly 260 weekdays per year, so buying one coffee every weekday morning costs almost $360 per year.

Cigarettes: The Campaign for Tobacco-Free Kids reports that the average price for a pack of cigarettes in the United States is $4.54. Pack-a-day smokers fork out $1,650 a year. Weekend smoker? Buying a pack once a week adds up, too: $236.

Alcohol: Drink prices vary based on the location. But assuming an average of $5 per beer including tip, buying two beers per day adds up to $3,650 per year. Figure twice that for two mixed drinks a day at the local bar. That’s not chump change.

Bottled water from convenience stores: A 20-ounce bottle of Aquafina bottled water costs about $1. One bottle of water per day costs $365 per year. It costs the environment plenty, too.

Manicures: The Day Spa Magazine Price Survey of 2004 found that the average cost of a manicure is $20.53. A weekly manicure sets you back about $1,068 per year.

Car washes: The average cost for a basic auto detailing package is $58, according to Costhelper.com. The tab for getting your car detailed every two months: $348 per year.

Weekday lunches out: $9 will generally cover a decent lunch most workdays. If you buy, rather than pack, a lunch five days a week for one year, you shell out about $2,340 a year.

Vending-machines snacks: The average vending machine snack costs $1. Buy a pack of cookies every afternoon at work and pay $260 per year.

Interest charges on credit card bills: According to a survey released at the end of May, the median amount of credit card debt carried by Americans is $6,600. The average interest rate on a standard card is about 13%. Making the minimum payment each month, it will take 250 months (almost 21 years) to pay off the debt and cost $4,868 in interest. Ouch!

Unused gym memberships: Costhelper.com reports that the monthly service fee at gyms averages between $35 and $40. At $40 per month, an unused gym membership runs $480 per year.

Lists like this always make me feel good about how I’m doing…

The only coffee I drink is the free stuff at work, I don’t smoke, I don’t drink alcohol, I think the whole concept of bottled water is stupid, I’ve never had a manicure, I’ve washed my car once in the past year, I don’t each out for lunch, I never use vending machines, and I’ve never had a gym membership.

The interest charges, well, we know I’ve got some of those in my closet…

The only downside to lists like these is that they don’t give me any sneak peeks on areas that I can cut my own spending…

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