Debt $ense

Once today’s payment clears, my CC balance will be down below $8,000. Only a few dollars above $7,900, actually, since the lower interest rate meant I paid less then $14 this month, not the usual $105. That’s $90 right there. (Go me!) As I mentioned before, this is a few weeks ahead of schedule, and a milestone that encourages me to continue killing this debt.

It also had me thinking about when I told Aleta a few years ago that by March 2006, I planned to have paid off the credit card. I had a vague plan. But I never really attacked it, so while it declined, it didn’t drop the way it has now. And it was because, let’s face it, vague plans don’t work on something like this. I had to roll up my sleeves, run the numbers, automate the payments and keep myself strictly within my budgeted spending money. Now I check my CC spreadsheet a couple times a week, stay on top of my 401(k) and know exactly where my spending money goes.

The result?

My debt plan is not only working, it’s ahead of schedule. When I started two months ago, the numbers showed a June 2007 payoff. Little changes here and there have paid off, and now I’m looking at late January or early February. If I can aggressively increase my income during the next few months, I might even be able to make it by December 31, something I once only thought possible if I got a promotion at work.

Not really. But I filled out a new W4 today to adjust my withholding from 0 to 2. It won’t show up on Friday’s paycheck - that’s already been processed. But our HR lady said it would take effect for the next one. I did a rough estimate based on my refund the last couple years, and the change should add about $32 to each paycheck.

That will let me bump up my payments again, bringing my monthly total to $644. Once I get my annual raise, I should be able to bump it to just over $700 a month. Those two adjustments, which won’t pinch my standard of living at all, get my payoff date to February.

I can easily make it to January if I cut internet at home, but I’m not sure the few weeks difference (three, I think) is worth it. Instead, I’m going to try and negotiate them down to a lower level for at least four to six months.

The good news is that the changes I’ve made just since I started this blog have taken my payoff date from late May 2007 to mid-February 2007. That’s a huge confidence booster! Now to see if I can turn enough of my clutter into cash to get that date comfortably into January.

This week, both my CC balance and my 401(k) balance should cross the $8,000 mark — going in opposite directions, of course. And both are a couple of weeks ahead of schedule!

The success with both of those goals is a great confidence booster, and makes me even more determined to hit the rest of my goals. Since my CC payment increase by $8 a week this week, about three weeks earlier than I had planned, I think I’m in good shape. Now I just have my fingers crossed that my annual raise is on the high end of what I normally get to reflect the additional responsibilities I’ve taken on this year. Our department head is fair, so I think that’s a reasonable expectation. Once I get word of what the raise will be - in about three weeks - I can re-run my numbers and see how it adjusts my repayment schedule. I’ll post new goals then.

My annual review is in a month, which is when I find out what my annual raise is. One thing I need to work on is my self-evaluation. But more importantly (at least for this blog) is figuring out what impact that will have on my CC payments. Last night I did some math and figured out about how much more I would get a paycheck for every half-point increase in the range that’s typical, plus a point or two above and below.

Worst case scenario would allow me to increase weekly payments by $11; best case would increase them $22. My guess is either $15 or $19, though if it’s $19, I’ll probably round up to $20.

I’ll know the difference about a month before it kicks in (reviews are a bit early to allow time for the increase to process through payroll), and at that point, I’ll decide what I’m doing about Internet.

I still haven’t gotten this month’s bill, which will reflect the lower amount since I dropped cable, so I’m not sure exactly what it will be. Probably more than I’m willing to pay, given that I have access several other places for free. But I’m going to see, then call them to see if I can get them to cut me a deal if I agree to stay.

My next step is stopping by my insurance agent to increase my car insurance deductible to $1,000 for the rest of this year (until the end of July) and next year. I’m hoping that, plus no moving violations in the last three years, will drop next year’s premium down below $250 for auto and renter’s insurance. (Can you tell I drive an old, not-terribly expensive car?)

I’m getting checks this week and next from work expense reports, and the company CC bill won’t be due until the end of May, so I’m hoping that will help my temporary cash flow pinch because of the root canals and I won’t have to skip a weekly CC payment. (Especially not Tuesday’s, since that will drop my balance below $8,000 for the first time in about two years!)

I’m off to the insurance agent…

I called my CC company today, was very polite, and got my rate droppped from 12.9 to 1.99 for nine months! (After that it’s prime plus 2.9.) It’s not 0 percent, but this way I’m not worrying about getting tripped up over fine print on another offer.

The only thing not good is my Excel spreadsheet figuring out my payments is at work so I can’t run this to figure out the effect. Maybe I’ll head in and save it to my computer before my dentist appointment. *VEG*

On that note, I’m off to the endodontist to get the first of two root canals and find out how much money I’ll be spending on that. *sigh*

… on getting the magic FICO score.

Last week, I went to the library one morning and read Suze Orman’s YF&B. (Yes, in one sitting. I’m a freakishly fast reader.) I also copied down the access code for her YF&B Web site. I didn’t really think it would work, but it did!

I filled out her action planner. The first recommendation she had was to continue contributing enough to my 401(k) to get my full company match. That was a no-brainer. Once I clicked that to indicate I was done, her second step was to find out my FICO score and improve on it.

The only other time I got my FICO score was about a year ago when I met with a mortgage counsultant at my bank to see what kind of shape I was in. At the time, my score was about 675. Not bad, but well below the magic 720.

I briefly thought about setting up an appointment to see her so I could again get the scores for free, but decided against it. Instead, I went to MyFICO and bought all three of mine. It’s normally $45, but I googled for promotion codes and found one for 20 percent off. So I actually paid about $36. I figured it was worth using some of the $68 I just deposited to see where I was, especially since I’m planning to call my credit card company Monday morning and ask them to lower my rate.

All three of my scores are within six points of 720! The average of the three scores is 717, hence the post title. And since the biggest ding they mention is my high credit card debt, I should be able to get above 720 in the next few months. I didn’t think I was anywhere near that point. Talk about a positive motivator!

Not only that, I’m much more confident about my chances with the CC company tomorrow. I’m close enough to that top bracket, and I have such a good payment history, that I’m sure they’ll knock my rate (now 12.9 percent) down. I was hoping for 7.99 percent, but now I’m beginning to think I might be able to do better, especially after hearing about other PF bloggers who have gotten it down further, even as low as 0 percent.

Normally I don’t like spending money that could go toward my CC, but for a lot of reasons, I think that $36 was money well spent. (Especially since a lower CC rate would probably cover the cost in a month or two.)

As my friend Susan would say, “Go me!”

My local used book store doesn’t buy books, except for store credit, so I’m planning on sorting and boxing the best of the ones I want to get rid of, then take them up to the store in my hometown in August and sell them there. I figure I might get enough to offset the gas for the trip, which will be a nice plus.

I’m also tracking community yard sales in the area to find one with a good date. I’m sorting my stuff into keep, sell and donate piles so I’ll have boxes ready when I do find a good one. Since I can’t have a yard sale at my apartment, this is a good way for me to convert some of my clutter into cash to help pay off my CC. Getting a table spot costs $5-$15 depending on the group organizing it, and I should be able to clear more than that with all the stuff I have to get rid of.

The donate stuff will go to Goodwill, but I won’t bother getting a receipt. I don’t have enough deductions to itemize, so I can’t get any tax break for it.

Best of all, when I’m done, my apartment won’t seem nearly so crowded!

I deposited $67 in the bank today, but I’m not going to send off an extra CC payment just yet. I have a root canal scheduled for Monday and I don’t know what the payment schedule for that will be like, so I want a bit of a cushion above my pinch-point account, just to be on the safe side.

Also, I was scheduled to go on vacation later this month, but had forgotten about a prior commitment. I was going to go in late June - and still have those days scheduled for vacation at work - but instead of moving the reservation, I canceled it. That means I’ll get a $160 credit on my CC this week, since I wasn’t really thinking and used that instead of my debit card. I might decide to go in June, or I might wait until the fall when the leaves are turning. Either way, if I can’t pay from my checking account, I won’t go.

So that’s $227 “extra” this week toward my CC. I also have $20 stashed for running sneakers, and $5 for yarn for a project I want to work on later this year over and above that amount. It’s amazing how much money you can find when you start looking for it.

I was checking my various accounts online last night and realized I’m just a few weeks away from getting my CC balance under $8,000. In the grand scheme of things, this is still a lot of debt, but it means I’ve managed to knock about a third of my balance off in the last few months. It’s been a long time since that balance has started with a 7, and I’m looking forward to the day when it does. It will be a day to celebrate.

Why?

Not because it means I’m done, or I’m in good shape. But because it’s a milestone, a point at which I’ve made noticeable progress. Round numbers are good for marking progress because they’re “pretty.” So even though it’s no more progress than any other month, it’s something I can point to. Dropping below $10,000 and staying there was one milestone for me, as was $9,000.

Breaking $5,000 on my 401(k) was a milestone. I’m about to break $8,000 (going to other way) on that account, and I’ll be ready to celebrate that too. Not only will it mean I’ve passed a round number, but also that I will have saved more than I owe.

$7,750 on my CC is another milestone because it means I’m below the 50 percent mark against my CC limit. I’m on track to hit that in early June.

Other milestones I hope to celebrate this year:

mid-July: less than $7K on my CC
late August: more than $9K on my 401(k)
early September: less than $6K on my CC
late November: less than $4K on my CC and more than $10K on my 401(k)
Year-end: My net worth finally becomes positive!

I don’t know what I’m going to do for these milestones to celebrate. It might be as simple as giving myself a free day without work or chores or any responsibility. Maybe a trip to the coffee shop instead of making my own tea. Or maybe a ball of the cool yarn I’ve wanted to try. As long as it doesn’t undo the progress I’m celebrating, the sky’s the limit. All that matters is I reward myself in some small way for taking enough bites to swallow a noticeable portion of that elephant so I remember I’m that much closer to the day I can make that last CC payment and celebrate my freedom from “bad” debt.

Now that will be a milestone worth noting!

Sooner or later, everybody in debt realizes they need to cut back on expenses to find money to pay down the debt. During the last two years, I’ve made several lifestyle changes to free up money for debt repayment. My goal is to keep several of those changes once the debt’s paid off so that I continue to live below my means and end up in better financial shape than your average journalist. (If you’re not one, assume that reporters at your local paper make less than a public school teacher with similar experience. If it’s a small paper, assume it’s at least a few thousand less. This is not a profession anybody picks for the money.)

But I digress.

To not only live on a journalist’s salary, but repay all the debt I racked up when I was trying to live beyond my means, I needed to get serious about finding money. Some of these are things you might be able to adapt to your own situation; others are only feasible because of my particular situation.

1. Move to less-expensive apartment. I still have a two-bedroom, and have resisted moving to a one-bedroom because of all my books, but I now pay $100 a month less.

2. Cut utility costs. Moving to the apartment cut my utility costs from about $100 a month to about $40 a month right off the top. I also keep the apartment at 56 degrees in the winter (sweaters and heavy socks are good) and resist turning on the AC as late as possible in the summer. Since I live in Virginia and have a low tolerance for heat when I sleep, the AC is still something I spend more on than I would like. I’m trying a new arrangement for my fan this year and hoping I can leave the AC off most of the summer. We shall see… I also keep my desktop computer off most of the time. My next step is to unplug the VCR, DVD player and TV, since I use them so rarely. That will save a small amount of electricity, and won’t be much hassle.

3. Look for extras. I used to belong to the Y, which is a good deal because work pays almost half my monthly membership. But since I’m a runner and prefer road running to track work, I usually run in the park. I have a hard time finding yoga classes that fit my schedule, so I usually practice at home. So I dropped the membership. I miss having access to the weight room, but I couldn’t justify the cost just for that. (I’ll probably add it back in when my debt’s gone.)
I also dropped cable earlier this month after realizing I’d only turned the TV on twice in the previous two months. I can buy one or two seasons of a TV show for a month of cable, plus skip the commercials. Since I’m at work when most sports are on, it didn’t seem to be a big sacrifice. (This is one of those cuts that’s possible because of my peculiar situation, and may not be palatable for everyone.)

4. Be a grocery cheapskate. Discovering the dented bin at Kroger was the biggest money-saver. I don’t remember the last time I paid more than $1.50 for cereal. Canned fruit? I’ve got plenty. Same with soup stock and other staples. I also discovered that the cereal most often is on sale the weeks it ends up in the bin, which means even bigger savings. I also have a list of staples that I watch for sales on. When they’re on sale, I buy as much as possible. I almost always buy store brands, and only buy produce on sale. Oh, and those staples I buy? I use them to make soups or other freezable meals I can grab on the way out the door, saving me time when life gets crazy, not to mention the money from skipping takeout.

5. Skip the land line. This probably isn’t a great idea if you have children or a health condition that makes access to 911 important, since emergencies do happen. But if neither of those is true, you can save a bundle by skipping the landline. I pay $43 a month for cell service, which covers all my local calling, long-distance calls to my family and calling outside the area. I need a cell given my job, so dropping that’s not an option. Just a basic land line would set me back about $30, without even considering long-distance. All of a sudden, that $43 sounds pretty reasonable. And it comes with plenty of minutes. I figured out a few months ago that my late-night, two-hour phone calls with my sweetie would have to happen every night for the entire month for me to use up my night and weekend minutes.

6. Drive smart. I don’t go faster than 65 on the highway, less if I’m going over the mountain. When I have errands to run, I plan them so I won’t need to make multiple trips. And where I used to hit the grocery store three or four times a week after work, now I only go once or twice every two weeks. That’s all gas saved, which really adds up at $2.83 a gallon. If you can, try public transit or a bike. I don’t use either for my two-mile commute, since our city’s trolley bus only runs until 6 p.m. and I work until after midnight. The late hours also make riding a bike not a great idea. Once gas gets to $3.50 a gallon, I might reconsider. Until then, I’ll be driving.

Other suggestions? One I would love to try is shopping at Goodwill or one of the many thrift stores in town, but trying to find clothes in my size is almost impossible. I’m hoping my running will make that more feasible in a few months. (Hey, maybe that will offset the cost of replacing my running sneakers three times a year!)