Debt Hater

My 2nd Quarterly Report

    Aye carumba!

    June was a bad month. I spent a boatload of money! I could blame it all on the move, which was the primary factor, but the main reason things went bad was because I simply stopped paying attention to my budget and kept whipping out the debit card.

   For the quarter (April thru June) I spent $2,381.87 more money than I made.

   My credit card debt increased from $11,643.40 to $16,397.16.

   But I did start attacking it right away. I made a $1,091.62 payment at the end of June. So, as of July 3 my new credit card debt is $15,305.54.

    Did I meet my quarterly goals?

    Read a personal finance book each month and put what I've learned into practice. Didn't do this one.

    Build a $1,000 "baby emergency fund" in a high yield savings account. DONE!

    Cut my budget and spend no more than I make. Uh, nope.

    Identify other sources of income. Not exactly. I get paid for some online surveys, but that brings in about $20 a month.

    Try the envelope method of budgeting. Nope, but if I had done this, it would have saved me a lot of trouble.

    Open a high yield savings account for annual purchases. No, but I do have three HSBC accounts (with 5.05% interest), one for my BDAY stash, one for my emergency fund and one for Christmas shopping. 

    Use my time more effectively. Unfortunately, I didn't do this either.

This new quarter (July through September) requires new goals and new strategies:

  My Budget
    Toward the end of the quarter, I slipped into bad habits and started using fuzzy math again. I filled in the budget blanks with what I thought I was paying or could afford to pay. It's no wonder that at the end of the month I was coming up short.
    I went back and did basic math: What do I earn each month? From that I subtracted money to pay myself first (as explained below) and then subtracted money for bills I must pay such as the rent and utilities, my car note and insurance. From that, I deducted things I need but could cut costs on, such as the cell phone and groceries. Then, from what was left over I divided up among non-essential expenses, such as eating out or going to the movies.
    From now on, my budget must be dyamic. Rather than fill in the blanks each month and see how I did, I have to check it throughout the month and see what I have left to spend.
    I am going to accomplish that two ways:

• Cash only transactions -- I overspend when I use my debit card. That's crystal clear to me now. For regular, weekly expenses such as gas for the car and groceries, I will take my weekly allotment out of the bank and use the cash. When the cash is gone, I can't spend any more.
• Do it old school with a CHECKBOOK -- I'll record what I have to spend each month after all the essentials are paid and subtract it from the remaining amount. If I can see exactly what I have left in my account, not what I think is left, it will stop me from overspending (I hope!). 

 Paying Myself First

• The Big 3-0 -- I'll keep putting away $30 a month until my 30th birthday. By then I should have about $1,100, plus interest.
• Bigger emergency fund -- I'll continue to add $50 a month to my emergency fund.
• Christmas shopping -- This sneaks up on me every year. So I started saving about $70 a month so I have money for the holiday.
•  401k and IRA -- I will roll my old 401k into a traditional IRA of my choosing. As Leigh Ann suggested, my first stop will be with my own bank. I've gotten some suggestion from Orman's "Young, Fabulous and Broke" and I will check on the Motley Fool for some IRA suggestions as well. After that, I'll contribute to my 401k at work up to the company match.
• Pay down debt -- I consider this paying myself first too. The interest rate on the credit cards will eat up any investments or money I save, so it's imperative to eliminate it. The only trouble is, I can only afford $525 a month, about half what it would take to pay of the cards by my 30th birthday...

   

So that's the plan for now, but it's fluid because my life has a tendency to change big very quickly.

    DH

My Quarterly Report

I finally got the money ball rolling in January and March is over now. Time to take stock of how I'm doing and what my goals are for next quarter. I'm doing better than last year, but I need a lot of work.

First, I paid down $3,125.17 from my credit card debt total. At the beginning of the year, I carried $15,670.28.
My total now is $12,545.11 -- a 20% reduction. That's very encouraging considering I paid off about $500 total in all of 2005, but sent more than $1,000 in payments to the credit card companies.
I stayed on track this quarter taking the cards out of my wallet and sticking them in a drawer. I didn't use them. I also settled on a set amount for debt repayment (not sending a little here and there if I had the cash) and adding money when I got a little extra income or added up loose change. I also hired a professional to do my taxes (at a cost of $85) to find any deductions I missed. I then used my income tax returns to pay off one card and put a big dent in another.
Lesson: It takes discipline to pay down debt. Every extra penny has to contribute or you'll never get ahead.

Second, I wrecked my budget in the month of March. I had developed a small, but helpful cash cushion in checking, but blew it all and then some. My checking account was down to $15 for a week. The biggest purchases in March were for clothes, eating out and medical expenses.
I realized that simply adding up my spending every month was not going to stop me from spending too much. I sucked it up and created a budget.
But I also noticed that my budget still shows that I spend between $50 and $90 more than I earn each month, so there will be a lot of tweaking in the next quarter to bring that difference to zero.
Lesson: Shucks, I guess you really do need a budget. It's the best way to see where you're bleeding money or what's not getting taken care of.

In summary, I hit my debt hard and my debt reduction plan shows that I can be debt free by May 2008. My goal is to beat that by more than 9 months and be debt free by my 30th birthday -- Sept. 25, 2007.

I've also attached a template of my budget, spending record and debt repayment plan in Excel files so you can see what I'm working with. Try them if you're looking for some budget tools. Download worksheet_templates.xls If you've got something better, I'd love to try it.

My goals for second quarter (April - June):
Read a personal finance book each month and put what I've learned into practice.

Build a $1,000 "baby emergency fund" in a high yield savings account.

Cut my budget and spend no more than I make. In the following quarter, I need to figure out how to tip the scale in the opposite direction and spend LESS than what I make.

Identify other sources of income. I've signed up for some consumer survey sites that pay. I'll also look for more freelance writing opportunities. I'll try selling some of my good, used books at Amazon.com. Maybe I'll stop considering it and just GET the second job.

Try the envelope method of budgeting. For certain things, especially clothes and food, I'll put my allotted amount of cash into an enevelope and NOT use the debit card. Once the cash is gone, no more spending in that category.

Open a high yield savings account for annual purchases. Professional association fees, Typepad registration, magazine subscriptions and other things I only pay once a year (or quarterly, etc). I will divide those into 12 month payments and each month put that amount into savings so the cash is already there when the time comes to pay up.
Question: I have an HSBC account, but a lot of bloggers seem to use ING. Which would you guys suggest?

Use my time more effectively. Time is money. I'll try a daily and weekly schedule to make sure everything gets done on time AND to find hours just for me. I'd like to start reading just for fun again and get back to writing fiction for fun. I miss that!

That should do it for now. Any other suggestions are welcome. Thanks for reading! We're pressing along!

DH