Here is a little history about me and how I have dealt with money and debt.
First off, let me tell you that I do NOT have a degree in finance, I have NOT had any background in the financial world. I am just a woman who tries to keep her family happy, safe and secure the best I can. And this is just MY story and it isn't perfect and it isn't what finacial whiz people would tell you to do. It is simply how I did things.
About 4 years ago, I had finally gotten our life debt free. It was a long hard road, but I did it and it was the most exciting thing to pay off that last final debt! I think I did the best "I'm Debt-free dance" known to mankind!
How did I do it? Here's my story.
First thing was I acknowledged every debt we had. I opened all those "final notices" and sat down and
owned them. They were our debt and we were responsible for them. I gathered every last bill, outstanding loan, every bank statement and laid them out in front of me.
Let me tell you, it wasn't pretty! It was downright frightening. And the sense of being overwhelmed, well almost overwhelmed me again! Then I stepped back and realized how emotionally I had attached myself to all these debts. All these bills staring at me told me I was a failure. They screamed "LOSER" to me! The worst part is I knew I was an intelligent person so, how come I have all this ugliness weighing down my every day? It is absolutely exhausting mentally having to deal with and think about all this debt everyday. It almost freezes you up inside and sends you toward a dark mental hole. You just can't deal with it. It sucks the life blood out of you. It effects you in everything you do. Your self esteem, your pride, your energy, your happiness are all effected by this debt. It turns you into a person that you don't like.
Once I realized all that, I knew I had to deal with it in a completely different mindset. So, for me, I separated myself personally from the debt and looked at it as a business in need (I was in management for almost 20 years). Once I thought of it in terms of coming into a business and cleaning up it's bottom line, it suddenly freed my brain from all the personal aspects that were dragging me down. Things became much "lighter" for me.
So, I separated everything out into different categories ex: credit card bills, medical bills, utility bills, loans, etc. I put things in perspective. First things first, this business absolutely must stay open so the first bills that had to be paid were the necessities : rent, electric, gas, car payment, insurance payment. So, those got paid first. If the phone got turned off, then it got turned off. If the cable got turned off, it got turned off. Those were not
absolute necessities
Although I was fully aware that some bills were accruing more debt due to interest, they still were put on the back burner until the necessities were paid off. I decided not to totally ignore the other debts so, I sent very nominally payments to all the others each week. I am talking $5.00 or $10.00 each. Yup, the credit card minimum payment was $89.00 but, I couldn't fork over that much until I got the absolutes paid off. So, they got a check for $5-10.00 each week along with a note stating I was trying to get caught up and please be patient. And yes, I got tons of collection agency threats, nasty letters explaning how this was not acceptable. I just kept on track and sent them the same small amount with my friendly little note. I knew interest & fees were still building up, but you can only do so much at a time and doing nothing was not an option any more.
Once I got all the necessities current, I figured out how much those reoccurring monthly bills were going to be for the entire month. I divided them up by 4 (weeks per month) and set the money aside each week for those bills. Most of them I was able to set up online and so I just continued to pay them in smaller weekly portions. I really didn't want to have to "hold on" to money until the bill was due. Now I could start to tackle some of the other debt.
I looked at everything still outstanding and separated them into a new set of piles. I looked over what was adding up the most interest and fees and set them in a separate pile. The other debts were put to the side.
I got all our credit cards registered online. And then every week I would pay each of them $25.00 and the largest one, I would pay a little extra. This became clockwork to me. What I discovered was that paying them an amount each week brought my balance down faster than sending a once monthly payment. It was slow going at first because I swore they never went down. But, after a few months, I started noticing the balances really decreasing. Once I got into a bit of a safer zone, I looked at the other outstanding debts that weren't a serious immediate priority (medical bills, past due fees etc) and started sending in little weekly checks to them as I had done with the credit card companies when I was paying off the first necessities.
Slowly I was getting to a point of some of the smaller debts getting completely paid off and it was exciting! once one debt was paid off, I divided the money I had been sending them into the remaining interest accruing debts.
Once I had gotten about 70% of our debt paid off, I added another bill. That bill was an emergency fund. My goal was $500.00 at that time. Since paying my debt online became so easy for me, I decided to opening an ING account to pay the emergency fund bill. It became another debt in a manner of speaking. I put in $25.00 a week to that bill as well as the credit cards. At this point, this was a major boost for me mentally.
I was so focused on the big debts, that I hadn't noticed how many of the little debts that I was sending $5-10.00 to had started to be paid off as well. At this point I felt like the best business manager in the world and eagerly looked forward to every weekly "throw down" with my debts! It really became a game to me at that point. It was me against them and by golly I was winning!
During this whole time, needless to say, I really cut back on any type of spending in our household. We didn't buy anything new. If something broke, we tried to fix it. If we couldn't fixed we asked other people to try to fix it (family and friends). If it still couldn't be fixed, we did without until I could find a replacement free or used super cheap. I was able to pay just a little extra here and there. And sometimes it was only an extra $2.00 on a debt, but I still added it to the weekly payment.
I searched out budget friendly cooking recipes and pretty much cooked everything from scratch. I really looked for bargains at the grocery stores or outlet stores. We ate according to what I could find cheap. I learned how to make my own cleaning products. How to reuse everyday items that normally got thrown out. i was able to start to build a decent pantry of basic food items. I discovered Ebay and started selling things we no longer needed. I subscribed to every money saving e-newsletter I could. I completely immersed myself into the world of living life to the fullest without spending money. Like I said earlier, at some point it became a game and I rode that mentality for everything it was worth!
Besides getting our debts paid off, we knew we were going to need a new vehicle soon. We were nursing our 12 year old car like crazy! And that little car hung in there until we were debt free and were able to take on the debt of a new car. Fortunately Troy was able to do a lot of the fixes on the car and we also got help from my brother who is a mechanic.
After about a year and a half, we were debt free! We also had built our emergency fund up to $1,000 and a savings for a down payment on a new truck. I had also built up our pantry to the point that I knew we could go for about 3 months without buying food if we had to. Not only had I developed a regular routine of paying bills weekly, I also planned our menus weekly and cooked extra meals to always have in the freezer. Over the course of that year and a half, my credit score (and FICO) improved dramatically and so did Troy's. So, not only were we debt free but, we both had ratings of "exceptional" credit scores. We were able to finally buy our first new truck. It was such an exciting and gratifying moment!
Finally! I was in control! Life was good and the future looked bright!
Then a month later, a death and an accident wiped out so much progress!
Next week I will post part two.
