Tuesday, April 21, 2009

How Bad Is It?

Answer: truly awful.

You won't believe it, but it's true. I wouldn't believe it myself if I hadn't just added the numbers up myself, three times in a row.

I checked.

I double-checked.

And then I checked again.

So I know it's true: $88,271.63 in credit card debt. Plus a $23,418.41 car loan. That comes to $111,690.04 in loans.

The minimum payments on that debt are $3705.07 every month.

That's $44,460.84 per year, just for the minimum payments on my credit cards and car loan.

And I made only $24,000 in income last year from my business, before operating expenses were deducted. My net income from the business was closer to $10,000. I also earned about $6,000 in wage income from a part time job.

No wonder I ended up deeper in debt over the course of the year. The $111,000 figure isn't even counting my basic living expenses, such as the mortgage, the utility bills, and food. Well, some of those expenses got paid with credit and are included in that amount, since I wasn't making enough money to pay it all. But to climb out of the hole, I am going to have to make enough money to pay the debt and my monthly expensess.

It has hit me. Hard. I have to fix this. I have to climb out of this hole.

The sad thing is, that is $44,460.84 per year, that, if I didn't owe it to my creditors, I could put toward my living expenses. Or my kids' education. Or my retirement fund. Or charity. Or anything else but lining the pockets of Citibank and Chase and MasterCard and Visa.

The interest rates range from temporary 0%, scheduled to rise to 8% in a few months, all the way up to 29% interest. On $111,690.04, at an average of, say, 15% interest, that comes to $16,753.50 I am paying each year, just in interest.

That's all of my net earnings last year, going to pay just the interest on my debt. And three times my net earnings to make the payments. I had to borrow more money last year just to make the minimum payments on my existing debts.

If I were to pay only the minimum amounts due each month, it would be *years* before the debt is paid. (How many years? I don't know. It's one of the things I'll have to look up.) And of course if I keep borrowing money to make the minimum payments and pay living expenses, it will never get paid. Plus, eventually my creditors will "wise up" and quit loaning me more money.... and then what?

I do not want to file bankruptcy. I just want to get out from under this debt.

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So, to summarize:

Total outstanding credit and loan debt: $111,690.04
Total monthly payments due: $3,705.07


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This blog will be devoted to erasing that debt, hopefully without filing for bankruptcy. In the next posts, I'll explore how it got this bad, strategies for debt reduction (which debts should I pay first?), ways to make more money, and ways to spend less money. In other words, I'll start by analyzing and figuring out a course of action. Then, I'll post about things I try and about what works and what doesn't.

You can watch me try. I hope you'll offer your prayers and send good wishes my way.

I hope I'll succeed, and not fail.

I'll also post an update around the same day each month regarding the total outstanding debt.

Forgive me for "monetizing" this blog. I am not asking you to click on the ads (unless, of course, something catches your interest and you just want to). I am assuming it won't earn anything at all, or not much anyway, but maybe it will help a little if some good ads come my way and people are interested in what is advertised. I've got to try whatever I can to make some extra money.

And the accountability of a public blog is the main thing I am looking for, here. (Well, sort of public. I'm keeping my identity private, as I don't want my friends and family to know just how bad this is. It's pretty embarrassing. I just want to climb out of the debt hole and start living again.)

All I'm asking for is your encouragement, support, suggestions for ways to improve my finances, and accountability.

Oh, and if you happen to win millions in the lottery and are feeling happy and generous and want to send me $10 or so, just email me. I'll let you know where to send it!
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1 comment:

  1. I wish I could offer you some advice, but I can't other than you definitely have to cut out any eating out! I remember working a summer job one time where I realized that after daycare and taxes my take-home pay was $2/hour. My colleagues were all into the $5 lattes - and so was I until I did the math and realized just how little I was making per hour.

    Thanks for dropping by my blog.

    ReplyDelete