7 posts tagged “debt”

Whoa, sorry about the lapse.  Things have been awfully busy.  Work demands had me living in soCal for most of November and a big chunk of December and led to my resigning effective mid-January.  I've since begun consulting again, and that's going well.  Debt pay-off is also going very well - overall debt is down to $93k (from a max of $105k), and I've paid off 3 credit cards (two that were incredibly high interest, the third had a low balance).  The average interest rate on my debt is approximately 18%, and the balance is dropping steadily every month.

Being self-employed means having to find my own health insurance, which wasn't too onerous.  I do still need to talk to a CPA to make sure I've set everything up correctly, but I've found a few on-line resources that have been helpful.  Since I don't have inventory or employees, the business and accounting structure is straightforward.  I have to work on rounding up the necessary self-discipline to actually work at paying work instead of playing Scrabulous all day long, but I'm fairly motivated by the stacks of bills.

I'm also participating a group cooking blog:  Is That...Pie?  We just started last month; come take a look.

One last note before I disappear for another 4 months - one of our cats now has diabetes.  Not fun, but hopefully manageable with a change to high protein food.

After a month of procrastination, the forms for the insurance loan and a partial distribution on the annuity went in the mailbox this morning.  The proceeds will be immediately applied to the $%!$^&! card with the $20k+ balance and 30.24% interest rate (my god, over $500/month interest).  Things are tight until mid-June, but Mr. Jaq is back to paying work once more after 2 months without and that helps tremendously.

Due to having to pay a goodly sum in taxes, needing to rent a car while at the jobsite in CA,  and having a blowout on the way to scatter the ashes of my father-in-law this past weekend and not having enough tread left on the remaining tires to keep them, credit card debt is up this month by approximately $2k.

I have been toting up the assets and assessing liquidity: 

1. Can borrow approx. $9k from 401k at approx. 12% interest (including fees). 
   
2. Can borrow approx. $9k from whole-life policy set up by my paternal grandmother that I now have ownership of, at approx. 9% interest. 
   
3. Can cash out a single pay annuity for approx. $9k, also from paternal grandmother. 
   

The pros and cons of each option:

1. Pro:  All interest paid goes back to my account.  Payments are a direct withdrawal from my paycheck.  I can specify the length of the loan.  Con:  Have to submit all paperwork to my company's HR person who can reject my application and decides on interest rate.  Fees are excessive (>3%).   Amount of paperwork is onerous.
2. Pro:  Policy stays in force as long as the interest and normal yearly payments are up to date.  I can specify the length of the loan.  Interest goes back to my account.  Con:  Paperwork requires my husband to sign at a notary.
3. Pro:  Minimal paperwork.  Con: Once it's gone, it's gone.

My current plan is to exercise options 2 and 3, with the proceeds going to pay down Card E (~$20k @ 30.24%)

Yes, yes - it was certainly like a snowball the way it built up.  Gradually at first, then hitting some sort of critical mass, and then WHAM!  One is trapped in the avalanche, up to one's eyebrows, and breathing hard is not going to melt it all away.

But as it built up, so it can be worn away, until one day it's gone.  Electrasteph, also of the excellent Commonplace Book, pointed me to helpful tool for calculating, visualizing, and playing out payoff scenarios:  The Debt Snowball Spreadsheet.

Download it, fill in your debts from smallest amount to highest, with their respective interest rates.  Fill in the minimum payments for each, but in the payment for the first debt on your list, add whatever additional amount (the "snow") you can scrape together each month.  Change the first month listed to the current month, then scroll down the page to see when, if you never added any more debt to your cards and the interest rates stayed constant and you kept paying that same total amount every month, your current debts can be paid off.

Ever wonder whether you should put your tax return toward this card or that debt?  Play out different scenarios and see which one makes the biggest difference.

For me, with only a tiny amount of extra snow each month ($50), it could take until 2011.  That's only 4 years to pay off a debt that's been building for 15.  If I can scrape up even more snow and apply it judiciously, I might be able to shorten that considerably.

Conventional wisdom says "pay off the highest interest ones first".

I have enough open on Card A to shift the entire balance of Card H.  I called today regarding the possibility of a balance transfer, and was told NO.  I could however use a convenience check from Card A to pay Card H.

The convenience checks are considered a cash advance, and have an interest rate of 23.99%.  Because this would be paid over, say, 10 years, the interest would be horrendous.  So, the better idea is to just figure out how to pay Card H down to nothing without incurring more debt.

Card E - well obviously, that is the mountain to tackle.  The first step (and why is it so difficult?) to phone them up and see if anything can be done about that usurious interest rate.  Undoubtedly, I agreed to it, which - well, what can you say?

In order to start digging ourselves out, it would probably help to know how deeply we are buried.  Here's partial list as a start:

Card A
Current balance:  15,286.00
Interest rate:  20.31%

Card H
Current balance:  2,241.94
Interest rate:  29.99%

Card E
Current balance:  20,144.14
Interest rate:  30.24%

Card EO
Current balance:  14,414.75
Interest rate:  21.24%

So that's the scary start.  Over $50k at a weighted average interest rate approaching 28%.  And, for me, there are still cards AB, D, UMP, BA, BO1, BO2, and BB.  Mr. Jaq has his own scary set, but the majority of the debt (and the highest interest rates) are on the cards in my name.

Editing to add cards:

Card D
Current balance:  $9,332.25
Interest rate:  16.25%

Card BB
Current balance:  $1,017.48
Interest rate:  22.65%

Card AB
Current balance:  $9,050.52
Interest rate:  13.24%

Card UMP
Current balance:  $13,712.06
Interest rate:  14.99%

Card BO
Current balance:  $12,040.21
Interest rate:  ?%

Card BA
Current balance:  $3,169.84
Interest rate:  21.24%

That's it for my unsecured debt.  A heart-stopping $100k at completely ridiculous interest rates for much of it.  A note:  some of these balances are from December - I'm still sorting out paper copies of bills from after our move.

Back to working in S. Cal., trying to save the planet one molecule of methane at a time.  Makes for seriously long days and limited posting energies.

But today, I didn't go up to the site, wasting the day in the confines of the hotel instead.  I did a little work (I'm putting a simulator together in my spare time), did a little laundry, did a little reading, did a slightly larger amount of thinking, scheming, and planning.

Mr. Jaq and I have too much stuff.  We keep talking about that fact.  We also will be moving (again) in September when our lease is up.  I'm okay with that now (I wasn't for several weeks as the reality was sinking in).  In addition to too much stuff, we also have an extreme amount of debt, due to (among other things) divorce, owning a business for awhile, a love of travel coupled with spendthriftness, spates of self-induced unemployment, and a far too generous nature.  If we want to have a secure future in our upcoming dotage, if we want to leave the smallest monetary legacy for our offspring, we need to get this in hand now.

We began laying out the plan today.  The first step - paring down our stuff, consolidating our storage, selling off what we can part with, and using the funds and savings to make some inroads on our debts. 

Then, I went shopping on-line and bought clothes.  This whole exercise is going to be tough.