The F Word- How The Today Show Fixed My Debt

Yesterday, I shared with you how I got into debt and when I realized I had a problem with it. Today, I will let you in on how I managed to get out of a black hole of debt. Please remember, I am no expert, and I have never taken any sort of financial/debt course. Who knows if what I did was good or not, it just ended up working for me.

First of all, there are two big purchases that I will NEVER regret. In college, I didn't study abroad. I had the opportunity to spend a summer working at camps in Europe for soldier's kids, I didn't do it. The big reason, I had a boyfriend and I didn't want to leave him. BIGGEST MISTAKE OF MY LIFE! I would give anything to go back in time and slap 19 and 20 year old me in the face and tell me to pack my bags. Dumb. We split up during spring term my fourth year of college. I was sad, depressed, angry... you name it, that's what I felt. My BFF was in the Peace Corps in Guatemala and I decided I was going to go visit her after spring term was over. A week later I used my credit card and bought my plane tickets. It was AMAZING. The country was so beautiful, and since I was with someone who was living there, I feel like I really got to experience a lot of what was there. 

Guatemala

The second purchase was another spur of the moment decision. My friend was going to be traveling in Germany during the World Cup in 2006, and I decided to fly over and meet her. I can't even describe how cool it was to know that I was at literally the biggest party in the world.

World Cup 2006

Besides for those two purchases, I have to say I bought a lot of crap. Most of which I don't even have any more. I already shared that I had about $10K in credit card debt and my credit score was in the low 500's. Any score below 580 is a "very poor score. It's doubtful that you may qualify for the loan, and if you qualify, the interest rates will be extremely high." Source I was feeling pretty crappy about the situation, when I came up with a plan.

Yes, The Today Show not only showed me that I had a debt problem, but it also played a role in my debt relieving plan. Another morning (probably a week later) I was watching the Today show and they had someone on and gave a general budget for your finances, using percentages. I knew I needed a budget, so I wrote that shit down.

Housing/Utilities 35%

Food 20%

Transportation 15%

Debt 10%

Savings 10%

Entertainment 10%

I then figured out what I should be spending in each category, and I spent a month writing everything down, in each category to see what I was spending. The good news? I lived in a crappy apartment and was spending way below on housing. BUT some of my utilities were unnecessary. I bit the bullet and got rid of my DVR and cable, and cut back to an $8 a month plan to get the local channels. 

The other thing I looked at was how I was spending. I had heard of people using cash only and an envelope system. (Now I know they were talking about Dave Ramsey.) I decided to take my percentages and spend only cash. At the beginning of each month I would take out enough cash for my gas, groceries and a small amount for entertainment for the entire month. I separated it into envelopes for each week, and I would seal them. On Sundays, I would get to open each of the next week's envelopes. 

The other thing that I did, which most financial experts would probably cringe/choke/be angry with, is that I completely deleted the savings category, and I more than doubled what I was paying towards debt. (I also cut back the entertainment category as well.) I also looked at the credit cards that had balances (two Visas and a couple of store cards) and I decided to pay them off one at a time, and start with the lowest amount first. (I know Suze Orman says to pay off the one with the highest interest rate first, but I wanted to feel like I was accomplishing something.)

I lived this way for about 3 1/2 years. Let me tell you what, for the first 6 months or so, it sucked. I missed going out with my friends. I  missed buying new things. Yes, I had an envelope of "fun money" but I hated checking it to see if I could allow myself a treat. But after awhile, and after I paid off a couple smaller store cards, I started to really like it. It was a challenge to me, and it really made me think about what was important to me and my wallet. My friends got use to me checking my envelopes, and they would even ask me "will your envelopes let you go to the movies/go out to dinner/get coffee etc?"

When things with the Mister got super serious, it was even more important to me to have zero credit card debt before we got married. I am happy to say I made my last payment about 2 or 3 months before our wedding :) That my friends was awesome.

My story isn't over yet. Coming soon... my current thoughts on money.

Do you have a budget? Has the Today show ever changed your life?

The F Word

Finances

I have been thinking a lot about money lately. I don't know why, it's just been on my mind. My relationship with money (that sounds so weird) has changed a lot over my life, and I thought I would share my story with you all. I am NO financial expert, but I have pulled myself out of quite a bit of debt, and I paid for graduate school without a single loan. (Now the undergrad degree, that is a different story...) I realize money is a sensitive subject, but I feel like this story is one that I need to share. 

Growing up, we were poor. At the time, I didn't realize it, because I had everything I needed, but looking back, I realize we were struggling financially. I never worried about food, or where we were going to live. I did however, worry about the shoes I was wearing (didn't mom realize I needed Nikes and Adidas?), the jeans I had on (Mom! I cannot buy my jeans at Target, we need to go to GAP!) and even my back pack (Mom! Everyone is carrying Jansport backpacks.) Like I said, I had everything I needed, but not everything I wanted. (To a middle school student there is a big difference between what mom thinks I need, and what I think I need.) In high school, I started working to fill some of the gaps. 

In college, I discovered credit cards. At first I was very cautious with them, just like mom had warned me, but then I realized I could get discounts at all these stores at the mall if I just applied for their cards. That's when things got a little out of hand. Then after I graduated and got my first real job, and my first real paycheck, things didn't get better. I would actually have to say that they got worse. I thought back to growing up and how I didn't ever have the nicest things, and I went a little crazy at first. I mean, I had to have new work clothes. Thank goodness I was teaching PE, and I basically wore work out clothes to work everyday, or my total debt would have been much higher. I also was getting a new apartment, and I needed all new kitchen things, decorative pieces, and all sorts of fun new things. 

It took a couple more years of spending after college for me to decide to clean up my act. It was in the summer, and I was watching the Today show and some financial expert was on answering questions. They talked about a website you could go to to check your credit score and the importance of that number in things like buying a house, car etc. I went to the website, paid my $9.95 (or whatever it was) and saw that my credit score was in the low 500's and I had some pretty big dings on it. Ouch. At the time, my credit cards had around $10K on them (total) and it was a little overwhelming. I didn't really know what to do about it. I was paying more than the minimum each month (my mom taught me that) but I just couldn't see an end. And now that I was out of college, my school loans were going to need to be paid back.

Tomorrow, the rest of my story. Plus the two purchases (which were also the two single biggest ticket items on the charge card) that I will never regret.

Did you discover credit cards in college??