December 2010 Progress Report

I seem to have picked up one or two new followers. Hello! And thanks for following my humble blog.

On to the progress report: All is well, I'm happy to say. I had allowed a small balance to carry over to December -- just to have a little activity on the card -- but I paid that off today.

2011 will be the first year in 20 years (or more) that I've started the year off without credit card debt. Allow me to reflect on that for a moment.

* * * * *

OK, I'm back. Anyway, I've been able to maintain debt freedom for four months. I have, unfortunately, been spending quite a bit, and that needs to stop come January. For one thing, I had several physical therapy appointments to help me recover from a neck injury. And in addition to a few purchases -- including my dream Christmas tree -- I'm about to shop for a holiday party I'm hosting later this month. It will be the first party I've thrown on my own, and I want things to be as close to perfect as I can make them. I've got a lot of stuff to get from the grocery store. And I'm serving glogg, so I've got some booze to buy. Thankfully I have only one "real" gift to get my mom, and a small item for my dad (he received his Christmas present back in July). Still, it will be a tight December. Ho, ho, ho.

But in that "tightness" I'm maintaining my savings. In fact, I recently upped my 401(k) contribution at the recommendation of my financial planner. I'm maintaining my monthly deposit to my savings, and in fact will be increasing that as well, at least temporarily. So things are going well.

I also completed another freelance job this week and will be submitting that invoice once I know for sure they're not sending me anything else this year. That's a nice way to end the year.

Have I mentioned lately how grateful I am? 'Cause I am. So very.

November 2010 Progress Report

Though I've paid off my debt, my financial health is still very much a work in progress. To chart my evolution I've decided to check in at least once a month with a progress report.

So what's been going on since last month:

I've met with my financial planner a few times. We had our initial session in October, during which he collected all my paperwork -- the mortgage papers, insurance papers, bank statements, payroll statements ... the works. We didn't talk about much during that session, but we had a teleconference almost two weeks later, after he had a chance to analyze everything. We used GoTo Meeting and he was able to show me my spreadsheets. He thinks I'm doing OK but he thinks I can (and should) save more per month than I'm saving. He wants me to save at least another $150 per month.

We met yet again a few days after the teleconference so that he could review in person everything we had talked about and tell me his plan for the next year. I left feeling good about things, and that's how you want to feel after these things.

We have one more meeting this year so that we can redistribute some of my 401(k) investments, and at some point we'll probably talk about my employee benefits. (He's thinking that I would benefit from the high-deductible health plan if I use a health savings account, which my employer will be offering for the first time this coming year.)

Another change is that I've lost my monthly freelance gig. They've decided to cut back and try to do more stuff in-house. To be frank, I debated last year and recently whether I wanted to continue doing it. While I appreciate the extra money, it's not that much, and by the time the taxes come out of it, I have to question whether it's really worth it. So I wasn't too upset about it. Besides, as three separate people reminded me that day, it will give me more time to write. (More on that in the day in the life blog.)

As for the debt, I'm still doing very well at staying debt free. I do have one outstanding balance -- for about $60. It was for about $112, and I was about to pay it all off. But then I remembered that it's good to have some activity on your account to keep banks from slashing your credit limit or canceling your card altogether. So I paid off part and will pay of the rest next month.

But I have to say how relieved I am to still be debt free. I came across this article today on how much debt actually costs thanks to interest. A few years ago -- heck, just one year ago! -- I would've felt such anxiety from reading it. Now it just serves as a nice reminder of where I came from and what not to do again.

So that's how things are these days. See you next month!

10-10-10

Today was to have been my big debt-free day. I worried earlier this year that I wouldn't make it, what with the condo purchase. Amazingly -- blessedly -- I paid it off almost two months early.

I had wanted to have $10,000 in savings in addition to being debt free. I didn't manage to do that -- what would've gone into savings actually went toward the purchase of the condo. But I do have savings, and that's a good thing.

I am happy to report that I remain debt free. I have used the credit card for various purchases (like my outrageously expensive new progressive eyeglass lenses), but I paid them off immediately. I am afraid to have even the smallest amount revolve. Debt always starts with that first purchase.

I have made one costly mistake. So vain was I about getting progressive lenses in my glasses that I had a distance-only prescription put in instead. I lasted all of a month before throwing in the towel and having the optometrist send me the prescription for progressives. And I splurged on the latest technology -- something called individual progressives. They were not cheap. Oh, no, they were not.

Of course, this mistake means I spent an extra couple hundred dollars on lenses that ended up being worthless. I'm calling it my Stupidity Surcharge. Or Vanity Fee.

Tomorrow I meet with the financial planner. I think our meeting will last a couple of hours. I'm eager to hear what he suggests and to get things started. I can't see using him beyond one year -- unless I benefit from some unexpected financial windfall. But as I've said, it will be good to get a foundation in place.

In other news, my wardrobe is pitiful. I am going to try to buy something at least once a month, but we'll see how that goes. It depends on the budget. That I hate shopping isn't going to help.

Next month is a three-paycheck month, so I'll have some wiggle room. I plan to put most of that "extra" check in savings. Also coming is a freelance check for work completed in September, and a check for work that I will start in November. That money will also go into savings.

And so that's where I am on this day, 10-10-10. How are you doing with your debt?

Debt and Relationships

The New York Times published an interesting article in today's edition. "How Debt Can Destroy a Budding Relationship" examines the consequences of having a significant amount of debt and what couples should consider before getting married. In the first example a woman told her boyfriend early in the relationship that she owed $100,000. When he found that she instead owed $170,000, he walked.

She didn't lie about the number. She just didn't know what the real number was.

I mention this because it's virtually the same as my first two tips. I was charging here and there. But because I was able to make my minimum payments, I could stay blissfully unaware of the extent. But like the woman in the story, one day the real number caught up with me. In her case, her real number was an extra $70,000 -- almost twice what she thought. While my situation was nothing close to that, it was still a rude awakening.

It's scary, I know. I've been there. But you can't keep going with your head in the sand. If you haven't already, get a piece a paper, pull out your statements, and if you're like me and suck at math, grab a calculator. Meet your number -- and conquer it.

What Worked for Me

I'm happy -- and thankful -- to report that I am still debt free. It hasn't been a month yet; I'm still a newbie. I don't know what to do with myself, to tell the truth. For so long I defined myself according to my debt. All of my actions were driven by my credit card balance.

I am working hard to overcome it. In fact, I bought myself a present this evening. Nothing huge, but something to reward myself for my hard work. And it was hard work.

Which brings me to the point of this post. I thought I would share the tips that worked for me the last three-plus years. Please keep in mind that I am not a financial adviser. (If I were, I wouldn't have hired one myself recently.) What worked for me might not be doable for you. I'm single and I don't have any children, so I was able to forgo a lot of things that many people may not be able to do without.

Without further ado, I present Veronica's Top 10 Tips:

1. Realize the problem. You know the saying that ignorance is bliss? It is. As long as you don't know the exact number of your debt, you can convince yourself that it is inconsequential. You might know it's high, but not how high. Eventually, though, that number will catch up with you, and when it does, it won't be pretty. I have a clear memory of lying in bed one night and doing some quick math. I'd been charging a little here, a little there. It never seemed like a lot, and I was current on all my payments. But when I did some quick math, I estimated I owed nearly $30,000 between my car loan and credit cards.
   
2. Get acquainted with the true number. This one is closely related to #1, but it's a little more involved. You will refuse to get acquainted with the actual balance unless you realize the problem. But once you have realized it, sit yourself down with a calculator and your credit card statements. Who knows -- maybe you won't owe as much as you thought you did. For some of us, though, that number is a rude awakening. You may feel like throwing up afterward. Or you might have trouble sleeping a night or two (or three). But you can't tackle the problem if you don't know what the problem is and its extent. Which brings me to ...
3. Commit to tackling your debt. This goes beyond just telling yourself, "I want to be debt free." Well duh! Of course you want to be debt free. Who doesn't! No, the mindset you need here is, "I will be debt free." It's a shift in your thinking -- it means that you plan to work to do it. My commitment included starting this blog so that I would feel accountable for my progress. How you make the commitment is up to you, but you must do it if you're going to succeed.
4. Come up with a plan. People have different methods of tackling their debt. What worked for me was this handy debt reduction calculator, which allows you to plug in your balances and interest rates, as well as when you want to be debt free. The calculator spits out what you'll have to pay per month to achieve your goal. A word of caution: You must be realistic about your goal pay-off debt. Sure, I would've liked to have paid off my $21,000 credit card debt in a year, but do you know how much I would've had to pay per month? (Actually, I don't either, but I know it would've been a lot.) If you're going to do this successfully, you have to be realistic about your circumstances. If you try to pay more than you can realistically afford, you are going to burn out and quickly.
   
5. Stick to the plan. Yeah, I know that sounds like a no-brainer, but you'd be surprised how hard it is. It's the holiday season ... maybe I'll skip a payment. No. That is not allowed. Unless it is, say, a medical emergency, if you've set up a realistic plan, there is no excuse not to stick to it. In fact, challenge yourself: Instead of sometimes skipping a payment or paying less, try to pay more when you can afford to.
6. Do not forgo everything pleasurable in your life. Again, if you've been realistic about your payment plan, you will not have to eat beans and rice every night. You will be able to occasionally enjoy a dinner out with friends, buy a new item of clothing, get those cute shoes. This does not, however, mean that you can live beyond your means. Living beyond your means is what got you in this position in the first place. (And haven't you had enough of that?) But it does mean that you are a human being who is allowed some simple pleasures. If you cut out everything, you will get frustrated. And if you're an emotional shopper, getting frustrated is going to trigger your desire to spend.
7. Introduce challenges. Once you've gotten the hang of your routine, try to challenge yourself occasionally. Practice minimalism. See if you can go a week without buying beyond what is necessary. Later, try two weeks. Then maybe a month. This is not as easy as you'd think. You have to plan out your groceries. And forget about those cute shoes. But if you make it a game, it's actually kind of fun when you "win." Have a friend do it with you -- the support is beneficial and the competitiveness might just spur you on to victory.
8. Don't beat yourself up over mistakes. I beat myself up over that ridiculously overpriced haircut I got a few years ago. (Would you believe that "stylist" and her sister were recently profiled in More magazine? I laughed out loud when I saw her in there. People, the emperor is not wearing any clothes! Don't believe the hype.) But mistakes are not the end of the world and are no excuse for throwing in the towel. Learn from your mistake. Grow from it. Move on.
9. Accept that you will have to make tough decisions. This is a fancy way of saying that sometimes, many times, you will have to tell yourself no. There have been some major things over the last few years that I have had to tell myself no about. It sucked every time. But in the end, it turns out those things weren't right for me at the time anyway. Along the same lines, when I've had an influx of cash, I have paid down my debt instead of treating myself to something extravagant. For example, last December when I received my "extra" paycheck, I opted to pay an extra $1,000 on my debt. Sure, I could've deposited it into savings. Or I could've bought myself some much-needed new clothes. Instead, I put it toward the debt. But doing so put me ahead of schedule.
10. Never forget that you are not alone. You are not. You are not. You are not.
    

What the Financial Planner Said

The meeting with the financial planner went well. It was more a discussion of the process and what we would work on together, so no actual advice was given. Still, it was good meet with him and lay the groundwork.

He typically visits with clients three times a year: during tax season to go over deductions and whatnot and discuss what to do differently in the coming year; during the summer to discuss how to achieve long- and short-term goals; and during the fall, to discuss employee benefits. But during the first year, we'll meet four or five times to get a foundation in place.

And, of course, he's available via e-mail and telephone if something comes up that I want his advice on.

His fee is more than I expected, though. My friend who uses him pays a lower fee because he started seeing him a several years ago. And once you hire him at a rate, it stays that rate. So if I hire him at this higher rate, it will stay the same even when his rates increase again. Also, the planner's confident that he'll be able to recoup my money for his fee and save me even more. (And to that I say: He'd better. Otherwise, what would be the point?)

I'm going to do it at least a year. I didn't have to do much thinking the last few years, since my financial "planning" was simply to pay off my credit card. Period. Now that that's done, though, I don't know what to do. It will good to have someone who does know take the reins and help me get some kind of structure in place.

Our first meeting is in October. I've already started completing my profile. So many questions! I'm encouraged; this will be good.