Debt $ense

I’ve increased my net worth by $5,300 since I started tracking it six months ago, and I’m now at -$1,750. My best estimate has me breaking into positive territory by Nov. 1, which would rock!

Part of that is because I’ve increased my emergency fund and 401(k) by about $2,200, and part is because I’ve cut my debt by about $3,500. I’m on track to pay off my CC by late February if an opportunity I’m pursuing pans out, or mid-March if it doesn’t. That’s much better than my original target of August 2007!

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!)

I was reading a post from this week’s Carnival of Debt Reduction about motivation, and I figured I’d mention a few ways I manage to stay motivated.

1. I like seeing progress. When I log into my credit card account online each week and see a lower balance, it reminds me how great I’m going to feel once I’m not putting almost half my salary toward paying off debt.

2. To take advantage of that, I have an Excel spreadsheet set up that has each week’s payments, plus interest charges, new balance and weeks to pay it off. I spend a little time each week considering how I can increase the weekly payment, then running the number to see how much earlier I can pay the balance down. That also helped me decide that eliminating my United Way donation next year isn’t worth it - I’ll be fairly close to paying it off, so the extra $10 a week only cuts a week or two off - but that getting rid of internet at home might be, depending on how a couple things develop at work, including my annual evaluation/raise.

3. I pick up the free real estate section we publish every two weeks and look at houses. Planning to buy a house is ultimately what pushed me to get serious about paying off debt, and window shopping reminds me how good it will feel when I can finally pick up a copy and plan to buy one of the houses inside it. A new(er) car also is on my list, so I try and plan at least one route a week past the dealer.

4. I try and build in little indulgences that make the bigger sacrifices not so painful. For example, my cereal comes out of the dented bin at Kroger (89 cents a box last week!), but I splurge on Republic of Tea for my office tea collection so I’m not tempted to run out to one of the many downtown coffee shops.

5. My 401(k) balance is available online, and when it finally got higher than my student loan balance, I celebrated. It should be higher than my credit card balance by the end of next month, which is another benchmark to celebrate. And I’m looking forward to the end of the year, when my net worth should finally be positive.

6. I blog about my progress and keep one friend up to date. Knowing I have to publicly own up to backsliding makes me much less likely to do it.

Welcome!
During the last few months I’ve become more and more interested in debt and personal finance as I try and pay down my own credit card debt. I started blogging about personal finance (PF) on my regular blog, and finally decided it was taking up enough space to deserve its own home.
My personal situation is that I’m a journalist in my late 20s trying to pay down the credit card debt I ran up while trying to live the lives my higher-paid friends have on a journalist’s salary. At one point, I hit about $11,000 in credit card debt, all on one card, plus about $9,000 in student loans. I don’t worry much about the student loans because I locked them in last year at the lowest possible interest rate and had a low enough balance to start that the monthly payments aren’t choking me.
My parents did all the right things - taught me to budget, gave me a subscription to Consumer Reports’ “Zillions” money magazine for kids, and generally educated me about money and how to handle it. I had great habits in high school, but college life wasn’t quite so compatible and I drifted away from them. Now I’m back in the groove, but need to get rid of the debt I incurred while I was young and foolish. (I’m still young, but hopefully no longer foolish.)
In the last year, I’ve paid down about $3,000 in credit card debt, and am on track to pay off the remaining $8,500 in the next 15 months. Read Debt $ense regularly and follow my progress, as well as pick up some tips I’ve learned along the way.