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Hi Guys! The next challenge is:

FIND OUT WHAT YOUR DEBT IS.

Do you know off the top of your head what your debt is? In spite of my anal-retentiveness about tracking my money, I actually don't. I mean, the credit card, yes, but then I thought about it.

I have two other debts. My HELP debt (higher education loans program debt. I'm not going to worry about this one at this stage. It doesn't affect your credit rating and is garnished automatically from your salary when you reach a certain threshhold. Maybe after I've gotten rid of the other sorts of debt.)

The other debt is the rent for my computer. This is a stupid debt.

Look, at the time I had no money and no prospect of ever getting a computer otherwise. And they said "It's only $111.56 a month!"

What they don't stress (it was there in the small print but I was taken in by the advertising) is that the loan period is 4 years. Making it so that by the time I have paid it out, I will have paid TWICE the cost of the computer in interest. It's barefaced robbery--I would have been far better off going to the bank and getting a loan. Also, I'm still paying for a laptop that's increasingly unreliable and will be worth NOTHING by the time I've paid it off. I broke one of the cardinal rules of finance: If you can possibly avoid it, NEVER TAKE A LOAN FOR SOMETHING THAT DECLINES IN VALUE. (I think the word I'm looking for is depreciates, but I'm not sure so declines it is for now). This includes cars, stereos and any of the other kind of consumable ephemera that seems to control our lives these days.

So: by the end of next week I will have called the company that I pay the money to. I'll find out how much the debt is worth, when I will have paid it off, if there is anything I can do to speed that up and if I have to pay a fee to keep the laptop on settlement.

So. I know this is hard. I know that facing up to your debt is really, really anxiety making. I had panic attacks when I first looked at the balance of my credit card. But I did it, and I made better decisions which corrected earlier bad decisions and I kept at it and now in 1 weeks time, I will be out of credit card debt.

What do you say. Who's with me? Who's going to make the commitment to finding out what their debts are and having that information all in one place to build a bigger picture?

Please, don't share any details you're not comfortable with complete strangers knowing on the internet. A comment of "I did it!" without discussing finances is enough unless you're comfortable with sharing that much.

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I actually use Mint to track these things (oh hearts for Mint), and the only debt I have beyond the cards is my car loan. In my defense, I bought it used and it's a Toyota, so it will either last me ten years (thus fully recouping the money I spent and how) or when I go to sell it, it will have depreciated only a small amount, since freaking everyone seems to want a Toyota based on how hard I had to look for a used one three years ago.

I also just got made permanent at my job (hurrah hurrah oh glory be), so there will be extra monies every month to kill off the cards.

\o/

Oh, if you need something (if my computer breaks down before I get my savings back up I will be borrowing. I need my computer or I will go insane.) borrowing is essential.

CONGRATS on the job! Let us know how killing the cards goes!

Thank you!

It looks like the job will give me an extra $300-400 a month toward the cards (and I'm moving in with the paladin, which from combined expenses should net another $100), so I have very high hopes that after the initial outlay for moving (new furniture and such, since the bookshelves are, er, very old and somewhat wobbly, for example), I should be able to get that $20K of credit card debt good and beaten. :)

Ooh! If you can act like you never got the raise, live like you're on your old salary, you're LAUGHING.

I was living pretty comfortably (and making small progress, even) before I got the raise, so I think that shouldn't be a problem.

Honestly what I'm proudest of is that even though I had to tap my retirement account to do it, I lived while I was unemployed for 5 months without upping the credit cards at all. I could pay them off really fast if I went back to living like that, but it was much too stressful to worry about literally every cent I spent, so I'll go on like this and be comfortable, I think. It'll take longer, but I'll be happier.

*nods* Everything's a balance. I'm quite probably going to get a bit back on this tax return, but I'm spending it on electronics and the rest is going in savings, not in the housefund where I can't access it. I need an iPod. Music is such an important part of my life, it's how I relax and get some privacy and also what I run to. My little shuffle is PISSING ME OFF (the headphones are awful). So I'm going to buy a nano for running and a classic so I've got something with all my music when I'm out and about. And then I will buy a 1TB hard-drive for computer backups and anything left over gets put into savings. And I'm not going to regret it or feel guilty. I have worked damn hard to get my credit card down and without going into debt, I deserve a little fun.

Grats on not upping the card limit when you were unemployed! It's such a trap, and then you get into this situation where it only requires ONE THING to go wrong for it to fall apart (it's what happened to me. Unemployment and then the card balance never went down and then I had to move. Ugh)

That was pretty much my reaction to my backpay, yeah. I'm getting a new phone (smartphone! LJ/DW ANYWHERE! eeeee!) and replacing my 6.5 year old iPod, but those are my treats and things I've had in mind for quite a while now.

I have the ballpark figure in my head. I have two kinds: credit card debt and student loan debt. My student loan debt I don't worry about. I hate that I have to write those checks each month, but the interest is relatively low and it's not worth getting upset about.

My credit card debt kills me. It's about...$10,000 all told. There's one credit card with a relatively low balance that I'd love to pay off, more for the psychological boost than the effect on my balance sheet. Lately I've been considering a balance transfer to another card and paying that one off entirely. It would be nice to have one less bill to worry about, though I wouldn't get the boost of having really paid it off.

Lately my mantra when shopping has been "if you spend $10 on that, that's $10 less that you can send to your credit card companies". It's what I told myself today to stop myself from buying two very nice but not necessary pictures at Goodwill. I really, really want to be free of these things.

Yeah. The hardest thing to learn for myself was "Stop digging." Balance transfers are great (I wouldn't have been able to do anything to my debt without one) but the important thing is to stop adding to your debt. If you get it, do you think you can put the card away and not put anything on it, or only use debit?

Right now, I'm in the same situation where I could easily put a bit on the card. It's a week until I get paid again. It would be really nice to have a bottle of wine, etc on the weekend.

But I don't have to. It's not an emergency, so I'm just plain not going to. Because being debt free has been such a hard struggle for me and the "Oh, I'll pay it off next paycheck" attitude was how it got so bad in the first place.

It does require a shift in thinking. But it's absolutely worth it. Good luck on your journey! Keep us updated!

the important thing is to stop adding to your debt.

Tell me about it. I'm so tempted to take all of my cards out of my wallet except for my debit and my American Express, but I don't like the idea of not having a credit card in case of emergency. Unfortunately, once it's in my wallet, "emergency" becomes "but I need those shoes". *sigh* I'm getting better since I started paying really close attention to where I'm spending my money at least.

What I really need to work on is my eating expenses. I need to start taking my lunch to work so that I can eliminate the $4-$7 per day lunch expense.

What I did to break the cycle of pulling out my credit card to pay for things was to give it to my boyfriend with strict instructions that he was to give it to me if I ever asked for it, no questions asked. Which means that I had to actually take the effort to go to him and ask, which was a tiny little thing, but enough to break the cycle. It's partly that even though my boyfriend's attitude is "It's your money, you can do what you want with it," I felt just that much more responsible for it, and that little effort of getting up, going to him, asking for it, and going back to the computer (he left it at home when we were out, so we'd have to go home for it) was just a little more than I wanted to do to purchase that thing, whatever it was.

I don't know exactly off the top of my head, but I know approximately:

CC - A bit over $6000
Car loan - Somewhere between $12-13K (I'm actually not bothered about the car loan: I got a pretty good interest rate, it's used, it's a Honda, and I should get another 15 years out of it if I'm careful)
Student loans - About $27K (not the best interest rate, but I'm waiting to consolidate until I have a long-term job).

So I'm fairly aware of what my debts are, and all together they're daunting, although I'm pretty sure that if I can stay employed, I can pay them off within 5 (maybe longer for the student loans) years. But since right now I'm still doing temp and contract work, thinking about them and throwing extra money at them is still counterproductive, since I need to save that extra money for the inevitable periods of unemployment.

I'm really hoping by next fall things will be more stable for me. :/

Oh honey, I'm sorry. Still, if you live frugally for now you've got great habits for later and then you can kill that sucker when you have a stable job.

Yeah, well, that's the price of coming out of grad school into this job market. :/ It could be a lot worse--I have a good summer job lined up that will give me a little bit of a cushion for fall, a deferral on the student loans until January, and I know I could be a LOT worse off as far as student loans go.

Just trying not to freak out about the job market constantly!

May I ask why you're waiting to consolidate your loans, if you're willing to discuss it with a stranger on the intartubes? :)

When I consolidated, and switched to the 25-year repayment plan, it brought my payments down by close to half (from $500/month to $275/month), which I desperately needed at the time as I had much other debt (car, credit card) that had higher interest rates than the student loans, so I needed to push any extra money towards them instead. I'm just wondering how your circumstances differ from mine at the time. I'd just gotten a "real" job when I did consolidated, and wish I'd done so earlier, as I discovered my interest rate would have been a little bit lower if I'd consolidated two months earlier, argh!.

My loans are currently in deferral (or forebearance; I'm not entirely clear on the difference--anyway, I had to request it because I was still in school and had used up the grace period) until January, and I really don't want to start repaying them until I have a steady job and know I can keep repaying them. My understanding (at least from the labyrinthine website) is that consolidation makes them no longer eligible for deferral/forebearance.

Basically, I'm not currently in a financial state where I can make payments yet.

That makes sense! Thanks!

Great goal. I'm working on getting these numbers, so I'll definitely work on this.

Good luck! Let us know if you run into any roadblocks!

My debt:

Auto loan: about $13k, but I got my 2008 Mazda used and I have %5.25 interest rate.
CC: Furniture card, about $200 left, no interest until Jan. 2011, should have that paid off by September at the latest.

Ironically, I don't have any active credit cards right now, but I'm going to get one this month. I'm teaching summer school to build up my savings (spent about $2k this winter to help get my sister settled in the States and am still helping her to the tune of $100 a month, plus a pace to stay. She should start being able to contribute to the monthly expenses soon though). But I won't get the extra money until end of June, and I want to be able to buy my plane ticket to see my Mom August before flight prices go much higher. Also, I think having a credit card for emergency purposes is important. But I'm planning to only use it for the big things that would wipe out my savings (like if my computer died or I needed extensive dental work) and pay off the balance soon as possible. We'll see how it goes!

Good luck!

I started doing something a few months ago that is kind of similar but a bit different. I keep track of where things are at monthly, but because I have it written down (yes, pencil and all!) then I can't see the trends (ie--if we've spent more on our cards or if our savings has gone up). I think I'll start an EXCEL sheet just to get an idea of my debt levels and how they change over the year. I think this will encourage me to see things start to go down instead of blindly letting them go up!

On the other hand I had a wake-up face slap. I had a severe toothache with infection. I have a lot of dental work I have historically avoided getting (1) for $$ reasons and (2) for fear reasons. I had to get an emergency extraction and wasn't sure if I should take it out of the savings (which is low) or my credit card. And my face slap was that I'd been contemplating ordering something I really need the night before and hadn't thought twice about putting it on the card!

So I've decided against the order (of course!) unless I can sell a few things and put money into my Paypal account.

On another note, we had a change of companies that takes care of our retirement funds. It was a good opportunity to check where it's at. I need to think about upping mine. It's not as much as I'd like and I'm about 25? 30? years from retirement. I can add a tab to my sheet to track this too.

... heh. WEll, I think you know about my relationship with my excel spreadsheet. And well done for rethinking the purchase. Deciding that your finances are more important than getting something you want is hard.

I hope your tooth gets better soon. Tooth infections are no fun :(

Thank you. It is something that I've spent money (on credit card--online purchase) before and I have a habit of spending about $50 to $100US when I do order. I do still have another purchase planned for something totally different, but it's for a book I'm putting together and self-publishing. I'll be ordering a copy for me, a copy for a Christmas gift for my step mom and paying a fee to enter it in a contest ($25,000US first prize?? fingers crossed). So I figure that is more worthy for a purchase than the other frivolous one.

And thank you. The tooth was pulled & I'm feeling better. It was an old root canal I never got capped (because I couldn't afford it at the time) years ago and it broke down and became infected. It was excrutiating! I'm going to break one of my "no more hire purchase" goals though. I have a lot of other work that I need done. It's past time and if I don't take care of a few more things I'll be in the same boat. We don't have the money in the savings so I'm going to take advantage of the dentist's 12 months interest free financing. The alternative is wait for them to get infected again and have to put more on my credit card to fix them. Not ideal at all, especially when I learned it takes far more anaesthetic to numb an infected tooth than a non-infected one (yeah, don't realllllly want another set of 4 shots just to numb for one tooth to be extracted!).

My credit card is a pay it off monthly thing. It's hooked up with Upromise so I get a little bit of money from it each month towards my student loan.

I only have one student loan left to the tune of US$1800. (Actually, I made a payment a few days ago so it is more like $1750.) I was planning on paying it off this year but I've had to reapportion my budget slightly which means it won't be paid off until 2011. I'm ok with that.

My last loan is my car loan. I need to call them to figure out why I haven't gotten a statement lately and find out the balance. It's a Toyota and only 3 years old so once it is paid off, I will be able to save that payment amount for my next vehicle for quite a few years so that when I feel the need to replace my car, I can pay for it with cash. \o/

My credit card was paid off and closed two years ago. I confess to not understanding this thing called 'credit rating', which I am told might make it an irresponsible decision to not have a credit card, but from where I stand getting involved in a system of invisible money with rules and consequences that one doesn't understand is more irresponsible.

I have two student loans. One is... not something I want to discuss in detail, but if I say that it paid for four years of UK higher education and has been accumulating interest for five, that should cover it nicely. I tend not to worry about that one too much: it's too big for anything I can do right now to make a dent, and I'm better off concentrating on qualifying/getting and keeping a job/generally maintaining a standard of living. Besides, there's every chance my employer will help out with that one (there are certain advantages to working in education).

The other is smaller - paid for my Masters and is eating £110 a month for another two years. Not perfect, but not too horrible, and it could have been much worse if it had had to cover accommodation as well.

I might make a stab at a simple explanation of credit ratings...
Basically, the credit rating is an estimate of how responsible you are with money, and so how risky it would be for someone to give you credit or a loan. It's a numerical way of estimating how likely you are to pay it back, based on what your history indicates about your habits and resources. Because of that, it's useful to have (and use responsibly) a credit card, so that you *have* some relevant (positive) history. (Unless you know that you don't do well with credit cards and are likely to get into trouble if you have one--then better not.) Because it's a "credit" rating, it's weighted to pay most attention to how you deal with credit. Though it takes into account other stuff like your employment and bill-paying history and I don't know whatall else, the most telling thing is whether you pay off your debts in a timely manner. For a lot of people, having a credit card, and using it occasionally for purchases that they would otherwise pay cash for, then promptly paying off the balance with that cash, is an easy way to develop some good credit history and/or partially balance a not-so-good credit history and rating (due to past or present late or unpaid debts).

Does that help at all?
BTW, that's my US-centric understanding, there are possibly some differences in how it's done in the UK though I can only imagine that the basic idea is the same.

Hm. Well, I never missed a card repayment when I had one, but it was running at max for about two years, so not too timely. I am paying off my Career Development Loan on time, though, so that's probably counting in my favour...

Perhaps a more important thing to concern myself with would be "what, if anything, do I foresee myself needing a loan for?", along with "is it irresponsible to have qualms about the necessity of home ownership?"

A credit rating is more a measure of how much money you will make for lenders. Part of that has to do with responsibility (they don't want you to default)--but they also don't want you to pay off everything immediately and in full. If you never pay interest, you don't make them money. So being very responsible will actually drop your credit rating slightly (of course, it's still better to be very responsible).

I (or properly, my partner and I) owe about $87K on our mortgage.

Despite the very large number, I think of myself as being nearly debt-free. If we sold the house we could easily clear the remainder of the mortgage, and if we keep living in it, the monthly payment is less than rent and there are a lot of hidden savings in it (like, the location is good enough to save us about $20 in gas money weekly.

I'm in a similar situation. My husband and I owe about $118k on our mortgage, which is about 78% of the value of our home. We are paying less on our monthly mortgage bill than we did to rent.

Apart from that, our only debt is my husband's college loan, which is just shy of $15k. He will probably need a new car in the next couple of years, but we should have enough cash in savings to cover most if not all of that cost. We pay off our credit cards in full every month.

The nice thing about mortgage and student loan debt (at least in the USA) is that the interest is tax deductible. Other forms of interest are generally not.

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