The Weight of Money

I haven’t updated my debt meter in quite some time and it’s no longer in the $13,000-range. In fact, we started off the year at $15,000 in credit card debt, so I’m betting that meter hasn’t been updated since June of last year when we were battling down debt in order to buy a house. The purchase of said house stalled all progress in reducing our credit card debt - something we expected for the first year of home ownership.

We were doing pretty good for a while in keeping things in check, but there were several instances where we chose to increase our credit card debt instead of reducing our emergency fund. The only reassuring thought about this increase is that these are not frivolous purchases - there is no going out to eat on credit or buying unnecessary items. Unnecessary items is an “eye of the beholder” situation; I’m sure that we’ve charged some items that others would not agree are necessary. Our plane tickets to attend my grandmother’s 75th birthday party last year, for instance, could be considered an unnecessary expense. But, I’m comfortable with that charge knowing that my grandmother is getting older and attending this event, that I also organized for her from 1,000+ miles away, was worth the credit increase for us. Not knowing if or when I’ll get back to see her again made the trip worth it.

Today I’ve been filing away papers and bills and have updated our credit card spread sheet. We currently have $17,300 in credit card debt at the moment. This is costing us a little less than $100/month in interest charges and we’re paying a little over $300/month in payments (this is the debt maintenance plan, not a debt reduction plan). Of the $17,000, $7,000 is currently under a balance transfer agreement and we’re not paying interest on that, which is a significant savings - this savings will end in October. The scary thing about our credit balances is that we’re still using less than 30% of our available credit - wow, what a scary thought. The $2,000 increase from January is mostly attributed to my business purchases and two rounds of car repairs.

I’m currently waiting to see what, if any, pay increase the partner gets this year to see where we can start reducing credit card debt. As I’ve mentioned several time, we knew that our first year of home ownership would put all positive financial progress on hold and would be a difficult year in making things meet. However, due to the ongoing financial struggles at the partner’s company, I’m not too confident that this year’s raise, even with a very positive annual review, will do much to alleviative our current finical struggles. But, we’ll take whatever it is in stride as we’ve learned to do this past year and continue to make compromises as we barely make ends meet.

It’s been a little more than 2 months since my last phone call campaign to save money, more than three months since calling my credit card companies. Due to pure failure on my part, I needed to make this call but was a little hesitant. Thanks to Canadian Sadie of Cleaning House’s comment, I finally build up enough courage to call (btw, Canadian Sadie, it’s time for you to take action too!).

I needed to call because I missed a credit card payment by pure fault of my own. I was hesitant because I called this company only a few months before for a missed payment, that time due to mail mix-ups related to moving. Knowing they’d granted the request last time made me very sheepish about abusing that consideration. But, as my mom always said, whats the worst they can say, no?

Call #1: With tail firmly tucked, I made the call and laid out the situation. The agent politely responded that due to my previous (and recent) request, he couldn’t help me at this time. I thanked him for checking and admitted that was the outcome that I expected. And then, for no apparent reason, he said “well, I’ve gone ahead and waived that missed payment and fee, but be aware that we will not be able to do that again.” What? Wow! That was rather unexpected and he got my thanks yet again and then I proceed to ask him about current balance transfer offers. More on that in a moment.

Call #2: In the last two months, our primary use credit card jacked their rate up 6%!!! This was absolutely unacceptable and I went ahead and called them too after resolving the missed payment with the previous call. I politely explained why I was calling, but also firmly commented on how this is unacceptable when my other cards had rates more than 50% less than theirs. I let them know that I was prepared to transfer the full balance to another card, but wanted to give them the chance to keep our business — because after 20 years of good business, that seemed only fair. She looked at the account, commented on how we have a perfect payment record, no late payments, and have been a long time customer, and agreed that recent increase makes no sense to her. But, the best she could do for us was send us some paperwork and make us jump through various hoops just to get our previous rate back. Sure, I’ll jump the hoops to drop our rate, but I’ll also transfer over the balance since that was her best offer.

Call #3: I called the first company back and processed the balance transfer based on the rates I was provided earlier (which improved once the late payment was waived). The rates were comparable with other offers we’ve received, but the biggest plus was that in terms of credit utilization, that card could absorb the entire balance of the other without flinching. I’ve been wanting to make this transfer for a while and am happy it’s done. We’ll save more than $1,000 in interest this year and I get the satisfaction of a silent ‘ha!’ to call #2 who didn’t think 20 years of service was worth more prompt attention.

Previous Make the Call Posts:
• Save Money: Make the Call
• Save Money: Make the Call II
• Save Money: Make the call III

Just make the call - whats the worst they can say? Whats the best they can say?

well… I’m really dragging my feet on making the call. The procrastination I’ve posted about led to a missed debt payment that was all my fault. I’ve been to embarrassed to call them up to waive the fee. Especially because I’m sure it is the same company that I’ve called twice within the last 2 years, but those were due to lost mail and moving — so I didn’t mind so much then. Now, knowing that it was my fault, I’ve been afraid to call them. What is the worst that they could say, “no”? The chance that they could say “sure” is worth making the call - hopefully this post will be the motivation and accountability I need to finally give them a call.

Last year started out nice and slow and ramped up to an almost unimaginable pace. There are so many things that I was going to work towards that got pushed aside by minor emergencies and new obligations striving for my attention. Before I get started planning for 2008, I wanted to see just how we finished out the year. After some major procrastination, I finally closed out our November and December budgets and the picture ain’t pretty - more on that in a bit. First, lets look at our 2007 goals:

• Goal: Increase Savings for Home Purchase to $20,000 by July 2007. Meeting this goal was my biggest financial-ego boost for the year. We dropped about $8,000 - $9,000 on all the costs with buying and closing on the house and we still had another $10,000 sitting in savings after the fact. This was a major stretch for us and I’m proud that we made it happen.
• Goal: Reduce Credit Card Debt to $10,000 by December 2007. We’re about $5,000 short of this goal for the year. $2,000 of this total is my fault since I replaced my laptop when it died on credit instead of pulling from savings. Also, we’ve taken a 6-9 month break on beating back debt as we do what we can to keep our heads above water.
• Goal: Buy a house in July 2007 Success! We are the proud home owners of an old (137 years) farm house with just an acre of property. It was less house and land than we wanted at a pricer higher than we really wanted to pay. Despite those things, it is working out and we managed to stay within a reasonable commuting distance for the partner. The majority of the houses we were considering were much further out and now, having lived with the commute, we are very appreciative of the house we have.
• Goal: Increase retirement investments to 15% of income by December 2007. I’m a little embarrassed to say that I’m not sure where we are at with this goal. I think that the partner is still contributing only 6% of his income to retirement. I expanded my home business to be my only income source but did not put anything into an individual retirement account. This is something we need to get a handle on for 2008.
• Goal: Increase Passive Income to $200/month. We’ve managed to accumulate about $50-$75/month in passive income. I don’t see this increasing anytime soon.

Overall, I think we did a pretty good job in 2007. The last 6 months have been a serious stretch as we started to resonate with those crying “house poor” from time to time. But, even though our budget has been hit pretty hard with the new housing costs, we’re still well fed and clothed and not standing on a corner with a tin cup in hand.

Here are some numbers on our total spending for 2007:

• Credit Card Debt: $4,951 or 9.3% of spending
• Student Loan Debt: $3,805 or 5.7% of spending
• Utilities: $3,829 or 7.1% of spending
• Housing: $20,803 or 38.8% of spending
• Groceries: $4,098 or 7.7% of spending
• Eating Out: $2,933 or 5.5% of spending
• Transportation*: $6,401 or 11.9% of spending

*Transportation includes gasoline (about 8% of total spending), insurance, repairs, and fees.

The above numbers only reflect spending from our personal account. Items that are automatically deducted from income, such as retirement and health insurance, are not included.

Reviewing last years goals’ progress and our annual spending (especially the percentages) prepares accurate and reasonable numbers for spending and savings for 2008. As I emerge from several months of serious financial neglect, I have a lot of work ahead of me to get us back on track to be in a position to pursue goals of any type. As I mentioned, November and December were ugly months, fiscally speaking. I chose to continue spending without considering the impact it would have on our budget, and didn’t follow through with the partner to mange his spending as well. As it turns out, we closed out the year $3,000 short - which is almost an entire month’s worth of bills and spending. I’m frantically working to correct this and get our numbers in order for 2008.

Since the move into our new house, finding time to manage budget items has been difficult. It’s not so much the lack of time, but a lack of motivation and prioritization. When things are not going well, we’re often reluctant to face and deal with those problems. Hiding from problems and letting them slide is so much easier than facing reality and taking action to solve them. Unfortunately, most problems escalate and what would have been solved by just a little attention and dedication in the beginning becomes a giant ordeal when left alone to fester for too long. Luckily, I don’t think we’ve reached that point yet.

Back in June, I discussed quitting my job, a difficult and unpopular idea for most readers. The idea of signing on a house on day and leaving your job the next isn’t all that logical. But, for mostly emotional health reasons, I made that leap with personal faith that I’d figure out how to make it work. Now it’s time to face the reality of how I’m making it work, or not.

First, I’ll be honest and upfront - I have not tried to solve the jobless situation and the more it worries me, the more I stick my head in the sand and ignore it. Obviously, this isn’t the solution to the financial stress this decision has cause. Hopefully looking at the number will light a new fire to take care of things.

Because of of our budgeting methods (YNAB), we didn’t feel the loss of income until August. We had a loss of almost $2,000/month in income, leaving us with an earned income almost $3,000 - a pretty serious reduction of funds. The move adjusted certain expenses as well: Housing increased $300/month, Gasoline: increased $250/month, Utilities: decreased $220/month, personal spending has been mostly eliminated, everything else remained fairly constant.

Even though the numbers are pushing back against this decision, we’ve still been able to make ends meet. So far, for the year, here is how we’ve done staying within budget:

• Jan: under $90.28
• Feb: over $812.23
• Mar: over $355.90
• Apr: over $507.50
• May: over $646.96
• Jun: over $533.29
• Jul: over $310.71
• Aug: over $73.95

This actually shows that we’ve been improving in the past two months of staying within budget. It’s important to note that because we do zero-balance budgeting, anything over budget means we spent more than we had to spend. Because we spend last month’s income during the current month, there is always extra in the bank to cover these overages (though it is a bad habit). Of course, that means that we start out the next month short, a snowball effect of overages that takes a lot of work to correct.

We’ve been doing account transfers, mostly from the partner’s personal account to our joint account to add more available funds. These are mostly ebay funds that we’re just accumulating in his paypal account. I’m very happy to see that money enter the budget because it was something I had tried to count on earlier this year.

My personal business expenses took quite a chunk out of August’s budget, so much so that I decided to pull out cash from my personal savings to cover for it. At times it seems like a cash shuffling game, but it is helping us stay on track even without my previous income. The partner also received a raise in July which has helped ease the loss of my income.

Some issues we’re still facing: limited cash for emergencies, constant repairs being justified, and a honest need to get a workshop built asap, The workshop would will kill our cash reserves, something we’re not comfortable doing.

Other numbers for us to keep in mind:

Joint Savings: $6,500
Personal Savings: $5,000
Credit Card Debt: $16,000 (arg, it went up $3,000 in July)
Child Support Tax Intercept: $4,000 (this probably won’t be released until Oct/Nov)

Honestly, I still need to get a job. I’ve been offered one and have tried, unsuccessfully, to turn it down so far. However, seeing how hard it will be for us to take care of debt and house repairs - I think I need to rethink that decision. Also, I’ve been making more through my business, but mostly it’s just enough to cover all of our farmers/butcher market needs. I either need to get serious about making this work or find a job — right now, finding a job seems like a better option except that I’ve moved to the land of low-wage workers. I discussed getting a job with the partner and putting all but $200/month toward debt reduction. Perhaps, instead, we could deplete savings to eliminate debt and then use income from a job to rebuild savings. Options, options, options.

The 30-day window has passed since my last round of action - time to take stock and plan my next steps. Part One and Part Two gave a basic overview of my credit correction challenge and outlined the first five steps:

• Step One: Get a copy of all three credit reports.
• Step Two: Get all three credit scores.
• Step Three: Challenge all past addresses with CRAs.
• Step Four: Submit blanket disputes to CRAs.
• Step Five: Request Validation from creditors.

Step four is partially completed. I submitted blanket dispute letters stating that certain accounts were “not mine.” Each of these accounts had some element of incorrect information and I was attacking “low hanging fruit” to see what would get deleted with the least amount of effort. I’ve received responses from all three credit reporting agencies (CRA).

Experian Results
My blanket dispute with Experian listed five accounts, including one judgment, that I wanted deleted. Of the five disputes, three accounts were deleted. I’m excited about one deletion in particular: a store credit account with very negative information (multiple 30-90-120-days late payment reporting). The balance was paid in full a couple years ago, but it was still wrecking havoc on my credit score. Aside from the judgment, it was the worst entry on my credit report.

Equifax Results
I disputed eight accounts, including one judgment, with the “not mine” letter. Four negative trade lines, including the judgment, were deleted. The amusing part is that two of the trade lines that Experian deleted, were marked “verified” by Equifax and remain on my report. Equifax also deleted the store credit account; my two worst entries are now gone from my Equifax report.

Trans Union Results
TU requested more information to verify my identity before processing my disputes. This really annoyed me because they didn’t need more information for the first round of address disputes. I still need to respond to this request.

Next Steps: Step Five
I need to draft letters to each individual Collection Agencies (CA). The CAs will be required to validate my debt or they must have the information deleted from my credit report. Validation includes:

• Proof that the CA owns the debt or has been assigned the debt.

• Proof that I owe the money: account statements from the original creditor, payment histories with original creditor, etc.
• Copy of the original signed loan/payment agreement (original statements can fulfill this requirement).

One CA has already contacted me with a very lame attempt at validation, they’ll have to try again or delete. Once I contact the CAs, they will have only 30 days to respond. They can be fined and sued if they refuse to respond, respond incorrectly, or fail to delete an item. I will follow-up validation requests with an Intent to Sue letter as needed, and I’m willing to file suit in smalls claim court if it’s what I need to do to get this information off my credit report.

Stay tuned for more…

Disclaimer: I’m taking these steps in accordance with the research that I did at creditboards.com. The forums there are amazing for getting information and figuring out what you need to do to help shape up your credit. This is not advice of any kind, just my personal experience. If you want to give some of these ideas a try, you should read, read, read the forums, legal documents, and anything else you can before you get started. Failing to do so can have very negative affects on your credit and you may even get sued. Know what you’re doing before you start.

Every time I turn around, I’m reading about someone playing the debt shuffle game - 0% balance transfers. I’m starting to wonder if it is something that’ll help or hurt our situation.

I’ve avoided trying this tactic for a while now because I’m always worried that I’ll miss something in the fine print and it’ll turn around and bite us. Of course, I’m sure there are positive reasons for taking the leap, but I’m still pretty nervous about moving debt from one card to another. Additionally, since we are trying to get a house, lower utilization on each card is important to us. We don’t want to end up getting hurt by a high balanced (low interest) card.

But, some of the offers are very tempting. Especially the 0% for 6-12 months and then 3.99% fixed thereafter. When our lowest rate card is at 8% and highest is above 13%, 3.99% looks pretty good. Of course, we must also factor in the transfer fee (usually 3%, some with/without a fee limit) into the interest rate.

What has your experience been? Is it easy to make the transfers? Was it worth taking that step?

I have not always been this upstanding model of fiscal responsibility (ha!). About seven years ago I started a two-three year crash course in credit destruction. And now, it is time to face the music of all those transaction transgressions and time to get straight in the eyes of creditors.

Around this time last year, a friend responded to my poor credit woes and pointed me towards creditboards.com. CreditBoards has to be one of the greatest gifts to the credit-impaired and I devoured everything on the site. And then… I let life distract me and did nothing.

Not this time! I want to sign away the next 15-30 years of my life. I’m not going to be able to do that, at least not on preferable terms, if I don’t do something about my credit. So, I’ll be sharing with you all my Credit Correction Challenge. I’ll be following the information from creditboards.com.

Step One: I got a copy of my credit report from each of the three major Credit Reporting Agencies (CRA). (Go to annualcreditreport.com to get your free credit report.)

• Equifax Summary: 15 accounts, 3 negative accounts, 4 collections, 1 judgment
• Experian Summary: 13 accounts, 2 negative accounts, 2 collections, 1 judgment
• TransUnion Summary: 15 accounts, 5 negative accounts, 4 collections, 1 judgment

Step Two: I got a copy of my credit scores from myFICO.com. I signed up for their free trial and was disappointed to learn that it only include the Equifax score. I purchased my scores from TransUnion and Experian and ended up with copies of my report too. I should have ordered my scores when I pulled my free credit report, it would have been cheaper — live and learn.

Not the greatest scores. If fact, myFICOis rubbing my nose in the fact that, supposedly, 75% of the U.S. population has a better score than me and that I’m in the almost lowest of the low scores. Okay — this isn’t a news flash for me, I knew I needed to do some work. I’ll use these scores as a baseline for what to work up from and I’ve got some work to do.

Step Three: Challenge all past addresses listed with the CRA (Equifax, Experian, TransUnion) to get them removed. This will help with disputing negative entries later. I mailed my letters of on March 8, 2007 and they have 30 days to act.

To be continued…: And now, I wait. Once I have a response from the CRAs, I’ll start challenging the negatives on my account.

I often get turned around with simple math problems and I used to think this meant I’d never be able to manage my finances. However, lots of patience, double-checking, and perseverance pays off and I’m proud of how far I’ve come in the past 5 years in terms of managing cash flow.

When I added the Credit Card Debt Reduction meter to my sidebar, I made a mistake in my calculations. Our debt goal is to move from $30,500 in credit card debt to $0 and when I went to update it today, my calculations were telling me that we were doing worse even though our debt had reduced by $5,000 – obviously there was a problem. I realized that I had failed to factor in the fact that I was counting down to zero (not up from) and that inverted the percentages.

The problem is fixed and I’m proud to announce that we’ve accomplished 53% of our goal and now have a credit card debt of only $14,336. I’ll update the numbers every other month or so, because the monthly reductions usually are not great enough to recalculate the numbers for each time. November was a special reduction month because of the special found money that was put 100% to debt reduction.

Also, I’ve updated our home savings and the percentage has gone down. We’ve not touched the money; it was never $2,500 to begin with. The partner and I each have individual savings accounts that equal about $10,000 and we will certainly make use of those funds, as needed, for a house purchase. However, since our joint savings account is starting from the ground up and I want to start tracking its actual progress and not factor in any dedicated contributions from our individual accounts. I’ll also be updating this meter every other month since, unfortunately, it too moves at a snails pace.

These are all just small steps to help shape our personal and financial plan for 2007. This is a great week to get all of those ducks lined up and accounted for.

These are real numbers that served up a does of reality-shock. Maybe others will think of these numbers when they are planning to carry a putchase on credit.

Relevant Factors: the numbers start with a ‘beginning’ balance of $34,340.20 and an average interest rate of 16.65% in January 2000. Purchases were continually made throughout this time. 9 months of data, including payments and balances, are missing from these records.

* six months of data missing
** three months of data missing

Important: These numbers are not representative of a debt reduction plan. New purchases were continually made – about $48,000 in new purchases if my math is right – and this is simply a record of overall activity.

In 6 years, the credit card companies have made $28,063 in interest – ouch. Imagine if the partner had only paid the minimum payment required.

Kudos: In light of these numbers (or to break out of the shadow of them), I want to point out the recent strides the partner has been making toward debt reduction. When we first started getting serious about the long term potential of the relationships, his credit card debt was $30,503.71 – a number I almost decided was too high for long term partner potential. However, he was taking action to reduce that number and continually increased those efforts. As of the month of the wedding, the debt was down to $20,835.39. As of October, the credit card debt is at $18.861.

The chart above is just for reflection and consideration. It is also evidence that you can’t hide from the numbers and long term debt relationships are financially draining.