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Note: This is a post from Joan Concilio, Man Vs. Debt community manager. Read more about Joan here.
$65,876.32 in debt to go, and we just keep on truckin’. (The irony here will become apparent in a moment.)
When I left you in last month’s update, that number was $66,436.50. The only problem is, I found a math error this month in my spreadsheet (which I’m incredibly embarrassed to admit!) and I realized that last month’s total should have been $67,946.02.
So, when I actually do the math correctly, that’s $2,069.70 that we dropped our total debt in the past month.
I’d consider that a win no matter what, but from mid-May to mid-June, that’s even cooler, because we did it while overcoming a significant number of uncommon expenses.
What we faced this month
- New hot-water heater: $869
- Four new tires and significant other work on our car: $783.85
- Travel and other expenses during visit from out-of-state family members: approximately $500
- Exterminator: $137.80
None of these items were specifically on the budget, though we’d prepared for the first two in various ways – and held off on them for as long as possible.
I know I’m not alone in having unexpected expenses. We all have them. The difference comes in how you react.
The fact is, that money has to “come from” somewhere. For some people, that’s a credit card. For some people, it comes from not paying a particular creditor. Maybe it’s borrowing money from family. For others, maybe it comes from savings, and still others will sell their crap to make up the difference. Some will adjust other categories in their budget accordingly.
Here’s the best part in our case: We didn’t have to dip into our emergency fund to cover these purchases – but we did eat up much of the “cushion” in our checking account.
The buffer we keep in our checking account was where this particular “extra expense” was funded. In the past, we would easily have funded all of these things with a credit card. But no more.
The thing is, no matter the source, this money isn’t unlimited. (Don’t you wish!) No matter what method you use to fund unexpected expenses, you’ll eventually have to refill the well.
Think about it.
- Fund your unexpected expenses with credit cards, and eventually you reach the limit.
- Stop paying a particular bill, and you’ll face a consequence – late fees or a loss of service – or you’ll simply run out of places to juggle.
- Borrow from family? That will only take you so far.
- Spend from your savings account? That’s fine – but if it’s not replenished, what happens next time?
- Selling your crap is great – but you probably can’t guarantee you’ll have something of equal value next time you run into a problem.
- Cutting from other categories in your budget is fine – but only if you don’t “create an emergency” in response by not funding a particular necessity.
So many people think the only challenge comes in “finding” the money when the expense happens. I think the bigger challenge is in replenishing the well you draw from!
My challenge to you this month is to take a look back at your most recent unexpected expense. Where did the money to cover that come from?
And have you replenished that source? (For example, paid down the credit card, paid back the family member, found other crap to sell, adjusted your budget long-term, etc.)? Can you find a better plan for your next unexpected expense?
That’s what I’m asking you to do this month. And I’ll do it too.
In addition to working on our debt tsunami for the rest of the summer, in our family, we will again work to get and keep a buffer in the checking account of at least $1,000 – and eventually (and I mean really eventually) of a full month’s worth of expenses.
Now for the good news
As of this weekend, we successfully negotiated an interest-rate drop on the top debt on our tsunami plan, the “hated BoA Mastercard.”
This card has a $42,000 credit limit, and we’ve paid it down from a high of over $40,000 of that to the current balance of $24,697.75.
The hardest part about this balance has always been not just its (immense) size, but the interest rate, which was hanging at 25.24%. We’ve called at least four or five times to try to get it lowered, with no success.
But in five minutes last week, we were able to negotiate it down to 23.99%. Down a percentage point and a quarter, which doesn’t sound like much. But 1.25% of a $25,000 balance works out to about $300 less interest over the year, and that’s certainly worth doing!
That said, the biggest boost from this has been mental.
We hate this account. Hate it. Want it gone. And every single step we make toward that really puts us in gear. We negotiated that rate change – and then we dropped an extra $500 against that card the same day.
It just felt so good to be making progress that we wanted to make some more.
FREAKING. AWESOME.
Updating our Very Next Steps
Amazingly, despite what could have been considered “setbacks,” we hit three of our V.N.S. goals, or Very Next Steps, during the past month – including one on the Hated BoA account.
This, to me, illustrates exactly why the V.N.S. idea is so valuable: There’s always a win to celebrate. Did we hit $25,000 total debt paid off? No, not quite (though it’s coming soon), but we made measurable progress against all of our accounts and hit some milestones on three of them.
- Hated BoA MasterCard: Our goal had been to get this under $25,000. Now, I’d like to get it under $22,500 – and, in our sights after that – we’ll aim for the “teens” instead of the $20K range. THAT will be huge!
- Citi Visa: Our goal had been to get this under $6,300. Next up is under $6,000.
- Discover: Our goal had been to get this under $3,700. Next up is under $3,500.
Don’t forget that we keep track of all of these debts in summary (complete with V.N.S.) on my “Joan’s Finances” page – so you can see how we’re doing at a glance. As we roll through each month’s updates, though, I’ll just hit the ones that change!
· Unautomate Your Finances ebook
· You Vs Debt Sample Lesson
· What to Sell Where Flow Chart
· Debt Payoff Tracker
· 10 Tips for an Effective Craigslist Ad
When will we be debt-free?
Thanks to all the great comments on my earlier update, I realized I never shared with you guys our time frame for paying off this debt.
As of now, if we continue our same payment amounts, we can expect to be debt-free except for our mortgage in March 2015.
But what’s the fun in that? Not only does it seem like, you know, ages away, but also, we truly believe that by hustling, we can cut a significant time off of that. The hard part is deciding just how ambitious to be, so I decided to set a “range” of goals.
- Marathon finisher award medal: Paid off “on time,” or by March 31, 2015
- Bronze medal: Paid off by my 32nd birthday, Nov. 29, 2014 (4 months early, about $13,500 “extra” required, give or take)
- Silver medal: Paid off by July 31, 2014 (8 months early, about $22,500 “extra” required)
- Race-winning, Olympic-qualifying, crazy-awesome gold medal: Paid off by March 31, 2014 (a full year early, about $31,100 “extra” required)
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So what do you think? Can I go for the gold? Honestly, I’ll be proud no matter what – but a little extra challenge never hurt.
How did your May go financially? And how is June shaping up? If setbacks have left your tires spinning, now’s the time to recommit!
Let’s do it!
Joan,
Congrats on making progress despite the extra costs. Two questions/suggestions.
Have you looked at a lower interest loan to payoff that credit card? Could save you quite a bit in the long run. A personal loan of 9% at $25k is fairly typical from many credit unions. Or even try the peer to peer lending route of lending club or prosper.
Also for future reference on your water heater, consider simply replacing the sacrificial anode in your water heater. Typically $85-$100. It is a metal that corrodes before your water heater metal. Eventually it gets used up and your water heater starts corroding. (typically 10 years or so). A water heater can easily last 50 years with that maintenance.
Thanks for the update. Its fun to watch others take back control of their financial life.
Jason
Thanks, Jason! I wish our home’s previous owners would have done that to the water heater, but sadly, that ship had sailed long before we purchased the house! (We actually did that at our former home – so I’m very familiar!)
The idea of a loan or other method to pay back the large debt is actually a subject for a whole future post – we’ve explored that route and I think there’d be a great discussion to have on why we’re doing what we’re doing – but why we might recommend to friends NOT to do what we’re doing 🙂
So stay tuned! And thank you so much for checking in!
I look forward to your take on that. I imagine it will generate some interesting discussion points.
Congrats on lowering your BoA interest rate…it’s still HORRIBLE, though. We too owe them a lot and they are currently our highest-rate credit card debt…but that’s at 17.99%. Why is yours so much more? It’s not fair. While you were probably sweating bullets during the phone call you made to ask for a rate reduction, they were patting themselves on the back at still keeping your rate in the twenties when your neighbors are paying in the teens. Wonder what everybody else is paying? I’d like to call them armed with that info. Or as Jason suggested, pay them off with a lower-interest loan…which would be almost ANY loan! My own BoA story: From a high of over $31,000 in 2009, we’re at $$15,027 today. It feels like a mountain still, but we’ve definitely made headway. Cannot wait to get rid of BoA.
Ruth, your story made me smile – because you’ve made such progress! We’re thrilled with the progress we made too.
Chris and I actually found a website that will show you – if you know your FICO score – what the average interest rate is. Unfortunately, I can’t find it now, but I’ll keep digging and if it is as good as I remember (this was a while ago), I’ll share it in a future post.
KEEP AT IT. We’ll both defeat the aptly-acronymed beast 🙂
Love these updates! Quite inspirational. While my hubz & I do not have any credit debt beyond our mortgage, we have a TON of extended family loans to repay in addition to several years worth of unpaid medical bills which have now gone to collections. We don’t much care that it’ll ruin our credit, since we plan to pay in cash outright for anything we need, but the mental weight is hanging over us, so I well understand your excitement at lowering an interest rate or paying something down to reach a mini-goal. Makes it a bit easier to breathe! Thanks for sharing — keeps me hopeful! 🙂
Andi, that’s our exact point!! We plan to pay cash for everything here on out, including any future dwellings and vehicles (or maybe a dwelling-vehicle, but that’s another story!) The credit isn’t the issue – but the weight of the debt, and how it hinders us from saving, definitely is.
Good for you for repaying the loans and medical bills – when I was younger, I actually had no credit-card debt but significant medical debt that I FINALLY paid off right before Chris and I got married. If I never deal with another collection agency in my life, I’ll die happy. 🙂 Keep up the positive attitude!
Great work Joan. I admire your persistence and being so open about your journey. Getting out of debt can be super hard. But I can tell you are one tough cookie and you have a very smart plan.
It will be fun watching your debt balance on its way down to zero!!
You rock! 🙂
Philip, thanks!! Trust me – not as fun for you to watch as for me to experience it going down to zero! 😉
WOO! Go Joan, congrats on bringing back an extra $300/yr against that evil card! Thanks for continuing on your updates, watching someone else’s progress gives me hope. 🙂
Liz, THANKS!! You can do it too – I know you can – and I can’t wait til we can both celebrate 🙂
I am a business advisor and spend alot of time working with my clients on developing KPI’s and setting short term, long term goals. I love what you are doing with these updates. It is inspirational!
Businesses spend alot of time and resources setting goals, working towards them, tracking them, analyzing them and adjusting. If everyone transferred that mindset into their personal finances, like you have, the mountain of debt can be broken down into manageable, traceable and visible bits.
You get to enjoy the achievements of goals met (like with your B0A CC – congrats!), you have data to see what worked and what didn’t, and you have a visible tracking of your progress. When it takes months and years to achieve the ‘big picture’ goal, it can be a lifesaver to see the forward progress you are making over time.
Kudos to you for sharing!
Thanks – Steve
Steve, I’m so glad to hear you are spreading this mindset through your work! I think the visible bits part is key – we as humans just have an innate need to see progress from our efforts, and it’s such a vital part to long-term success!
I know I’m preaching to the choir, but I’m so excited that you get it. Thank you so much for the kinds words – they mean a lot.
FYI, it’s called a water heater. You wouldn’t need to heat “hot water.”
What if my water is just a little bit hot. And I want it A LOT A BIT HOT. Then wouldn’t that be a Hot Water Heater? 😉
I think I want to coin the term “hot water maker.” That’s accurate – or, uh, in the case of my NEW one it is, the old one not so much.
Congrats! I have to celebrate the small wins, too, otherwise I get bored. Here’s hoping you get at least a bronze! I see my “numbers” goal date the way fast drivers see their “estimated arrival time” on their GPS — as the number to beat.
HA – I do that too. (Hopefully my local law-enforcement friends aren’t reading this too closely.)
Glad to hear I’m not alone! 🙂
Keep up the great work paying down those pesky credit card balances Joan!!! Our family is in the same boat as we are trying to get out of what I like to call “Credit Card Hell” It sickens me to think of how much of my hard earned money I have given to pay interest on our credit cards over the years.
I have a card that had an $11,000 balance a few years back. Missed a payment and they immediately raised the interest rate to 29.99% (ouch!!). I called them and basically told them that now I would not be able to pay them because the interest was now higher than the monthly minimum payment. By telling them that I would not pay ANYTHING on the card they were willing to work with me on better terms. I almost fell off my chair when they said they would close the account and adjust the interest rate to 0% (yes, that’s zero percent!) until the card was paid in off. I had to agree to a $200/month direct debit payment from our checking account to get these terms. We have 18 months to go and this baby is paid off !!!! I recommend calling BofA one more time…what can it hurt? I would also look for some balance transfer offers from other credit card companies. Sometimes you have to play the balance transfer game to get ahead, because at 24% interest you are not going to get ahead too quickly.
I have a recommendation for your “one-car” situation. Sell that Taurus and get a newer, more gas efficient vehicle. We own a 1999 Mercury Sable (same thing as the Taurus) and this thing is a gas guzzler! Not to mention the repairs start to creep up on these cars once they hit that 100k mark. I think for what you spend on gas & repairs you could just make a payment on something newer with better gas mileage. But, I do understand that not having a car payment is a nice thing….guess that’s why we still have our Sable. But, we also have another newer car that gets better gas mileage that we use for a majority of our driving.
Anyhow, best of luck in your efforts!
P.S. If you remember our talk of PA dutch cooking and you mentioned “filling”….well, I used to work at a place called the Village Inn in Allentown, PA and I used to make enough “filling” on Sunday mornings to feed an army!!! Not many people know what you mean when you say “filling”…they are thinking “stuffing”…as you know they are not the same thing. I still whip up a batch of filling on Thanksgiving for the family 🙂 Good stuff!
David, you crack me up! Love hearing from my fellow Dutchies 😉
And I appreciate the feedback on the BoA, too. We’ve played balance-transfer roulette a few times – in fact, if you see that, for instance, our Discover card (on my big finances sheet at http://www.manvsdebt.com/joan-finances) has gone UP in the time we’ve been working on our debt, that’s why. We had actually paid that card off, then transferred close to its limit from BoA onto it at 0% for 18 months, which was awesome. No dice on Discover upping the limit for us to transfer more than that, but, hey, every little bit helps!
I’ll add you to the camp of “people I hope will read our story about why we are where we are with BoA” post – I think you’ll be really interested!
We’re also committed to no car payment ever – yet, trust me when I say it’s a priority to get something newer as soon as we can – but in good news for us, we have such low mileage day-to-day (most days the car is driven a mile, exactly) that we’re at least not killing it on gas!
Joan,
I know you said you are saving it for another post, but really the BOA credit card is killing you. The interest alone on the is $6000.00 that could be used for paying down additional debt. Go work with a local banker and show him what you have done over the last year or two in paying down your debts. You are a good loan risk at even half the interest rate (12%) b/c of your track record. That would drop your interest outlay in half and you could accelerate your payments with the savings on the debt or some other debt. You are an inspiration with what you are doing, be a better one with this smart move.
Matt, I hope you’ll come back and read my future post – you’ll have to see some of the things we’ve tried – and some more details about why you are, uh, a bit kinder than some of our local bankers! 🙂 (And, to be fair, why we haven’t taken some of the “deals” we could have.)
In all seriousness, we’re definitely going to delve into this idea and I think from the comments I will do it sooner rather than later!! I’m so glad you’re reading along and hope you’ll check back!
Kinder than a banker…I am flattered. 🙂 ….As to the loan terms to change, be persistent. Another way to do this would be to stash away some of your cash into a CD. You can use it as security on the loan for the BofA debt. It will help the lender see you mean business, reduce the bank’s risk as well. If you put together a $5000.00 CD as collateral, I might be personally interested in booking the loan at 12%, assuming the interest savings were applied to the loan each month in addition to your normal payments. Good luck, and yes I check out MvD about once week so I will see your other posts.
Joan–thanks so much for this update! You give me hope. You and Baker are such inspirations to me. I had a total breakdown yesterday about money. It was bad, just sobbing. My husband has been semi-laid off from his restaurant job, and we’ve been squeezing our budget to death, depleted our savings to pay bills (we were doing really great for a while–over $1000 in savings, $2000 ahead in our checking, depositing money from stuff we sold straight into savings to get to our one months worth of bills ahead), and we’re at the very bottom now. A couple hundred left in savings, about $487 in bills due now, $800 in bills we’ve been putting off, and car repairs that we now have no buffer for, and I just broke down. Dh came home from work last night, (he had been 4 full days a week, they cut him to 2 half days a week) and he’ll be back on the roster for 4 full days a week. Phew. And then your post, thank you, it really gives me hope that I can get somewhere better too. Thank you.
Leah, I’m VERY glad you’ve gotten into that hopeful mindset – and floored that I might have helped a little! I am so glad things are looking up, and I just know that if you stick with it, you’ll get back to where you were – and then some. I can definitely relate – I’ve been at that sobbing breakdown point before and it sure isn’t pretty, but so far, still hanging in there, and I’m glad you are too.
Keep us posted on how things keep changing – you know we’re here for you!
Thanks Joan! It really does help to read about others making it work. In about a week dh goes back to a better schedule and we sold a guitar today. Things are looking up already.
Woot! Congrats. I had a major score with a Home Depot card. They were advertising if you spend $500 you’ll get interest free financing for 18 months. Well I bought a shower with that deal. The catch, the shower piece came in two parts for over $500, yet when itemized on my card was two parts. I called and mentioned this and they fixed it and applied the deal! Yes!
WAY TO GO! If you’re going to use a card for the benefits like that, then you darn well better get ’em, right?! Good for you for noticing and calling. I bet an awful lot of people wouldn’t!
Replenishing the well is the theme of 2012; and onward for awhile.
My unexpected expenses always seem to be related to visas. Had that this week, too!
Jenny, I can’t even imagine how I would handle unexpected things like that!! Ours are relatively “minor” – in the sense that they don’t determine where I can and cannot live and work!! 🙂
Good for you for replenishing and sticking with it!
Thanks, I need that encouragement.
Especially with as tight as I’m pushing my baht until next pay day.
As a former colleague once said: “You can live on 200 baht a day, but it’s painful.”
I’m at around 250 baht/day for the rest of the month, give or take, plus the planned expenses that are more. I’m getting a windfall in July that pays a lot back; but I have to stretch til then and through then to August.
Bearing in mind, this is my finances in Bangkok; and I’ve relaxed my US spending rule somewhat because I have a friend coming to visit that can bring me things!!!! (This happens so rarely, pay back for these items can come in August. I need things from America. Yes, need.). But I’m trying to stick with it for my baht. Leaving the credit card home and going out with cash only. It’s great when you realize oh, that’s enough for taxi fare and that’s it. I guess I’ll go home now.
But I have to remind myself of the Thai people that have to live off 20 baht or less a day (that’s about 66 cents). And it helps my discipline. Keep going!
Joan, I love your concept of VNS – setting goals for your “next step” and then the one after that and then the one after that.
I seem to break big goals down and make them into smaller steps all the time, although I never really thought it out and conceptualized it like you did. I do that with just about everything that I find difficult. For example, I’m trying to get back to my healthy weight right now, and I have a long way to go. In order not to get discouraged, I have my next step goal as breaking below a certain number, and then after that another one…. and eventually hitting my final goal within 18 months. Will I be thrilled if I can get there sooner? You bet I will – but if I look only at the final goal, I probably will get discouraged. By keeping my eye only on that next goal, I’m always having successes and it keeps me on track.
As far as your getting out of debt timeframe – I absolutely urge you to GO FOR THE GOLD! You may only get the silver or the bronze – but why not try to go as far and as fast as you possibly can?
Martha, you have summed up very well EXACTLY why I think this system works for any large goal – “if I look only at the final goal, I probably will get discouraged.” That’s what was happening to us before, and it literally changed our lives when we changed that thinking!
I definitely agree about doing the same for weight loss, too – good luck on that as well! And thanks for the encouragement!
With your breaking big goals into small ones it reminded me of what we do to reward ourselves. We have a fun way to pat ourselves on the back. We took a picture of the house, heloc, car, debt(okay took a burning money pile picture off the web). We then made those pictures into puzzles (many companies on the web will do this for less than $20). On the back of the puzzle pieces we wrote our rewards. For instance every $500 the car was paid off we might go on a lunch picnic, library date, ice cream date etc etc. Since its written on the back, it is a mystery reward. The big reward was when her car was paid off. We will take what would be the next 2 car payments and buy her diamond earrings. This is how I really got her on board with paying the thing down quicker. Those type rewards might help get other spouses on board.
Now that it is paid off (2 weeks ago) she has been shopping the big stores for the style she likes and will go to the local jewelry show to get them made at half the price (less than 1 car payment). That saved money will go towards the next big ticket item, our heloc. That reward is a train trip in Canada. Sure makes deciding against a $50 purchase to put that money towards debt much more fun.
Jason
Oh, no way – that is REALLY creative!! Super fun!!
I wish there was a way to stay away from maintenance costs with vehicles. It’s unavoidable! Well I guess if I never drove a vehicle but…we are gas consuming crazy people! Great blog article!
I’m still working on our debt $2,000/month only $108,000 to go!
Craig, keep at it! I’m right there with you – and imagine how great it’ll feel when it’s ZERO TO GO!
Good Job paying down your debt. I like the idea of keeping a cushion in the checking account for those unexpected expenses.
Charlotte, we like that too – in large part because it is SUCH a mindset change from the paycheck-to-paycheck mentality, you know? We do also believe in savings/emergency money, but this is kind of its own thing, which I find helpful!
Congrats on making progress. I am going back to the older posts to see how this all started, but good luck on getting your gold metal!
It ain’t pretty, but it’s getting better, is the short version! 😉 Thanks for reading – and for cheering me on!
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