Monday, June 23, 2008

My Financial Existence Since College

I mentioned a couple months back that I had gotten bitten by the debt reduction bug (speaking of bitten, over the weekend at our shindig for my 30th I managed to acquire 14 mosquito bites, which is really an achievement in southern California where, before this weekend, I had only been bitten maybe 5 times in 8 years. I am struggling not to scratch my right leg off, right now).

I have always been responsible with money. Not overly frugal, but I always understood that money is not free. You have to pay back what you borrow. However, like most other Americans, I have had credit card debt that numbered in the thousands. During college, I had 3 major credit cards and managed to stay debt free because the reality is, when you're in college, providing tuition and room and board are paid for my either parents or low-interest loans (or scholarships, etc), what else do you need aside from books, food, and the occasional hair cut? I managed to finish college credit-card debt free, though 20K in the hole from student loans, which I am still paying down 8 years later.

After graduation, I moved from NYC to Los Angeles for work, and that's when the credit cards came into play. I had a decent amount of money saved, 6 or 7 thousand, but that only goes so far when you have to (1) get an apartment, and pay first and last months' rent, (2) get a car, because public transport is practically non-existent in most of LA, especially back in 2000, (3) get furniture because you have lived in a dorm the last 4 years and haven't needed to get a single thing except maybe a mini fridge and a stereo.

I probably had about 2 or 3 thousand in debt, mostly from furniture, after the first year out of school and that was almost paid off by 2003, when I purchased my first home, a townhouse in Harbor City. Enter credit cards, again. I bought it in 2003 for 232K, putting down 5%. The townhouse was fairly dated, built in 1973, and I got bit by the renovation bug. Flooring, cabinets, furniture, appliances, new patio - at the end of it I was close to 7K in credit card debt. Add on my husband's 3K in debt when we got hitched, and we were at 10k. I sold my townhouse a year later in 2004 for 318K, and newly married, we moved to Lake Elsinore, using the equity from the townhouse for a ginormous, 3000 square foot former model on a 1/2 acre with views of Canyon Lake and snow-capped mountains. And horrendous commutes. 70-mile commutes, each way. During this time, we hacked away at the credit card debt, which was transferred to 2.9% for 2 years. I finally paid that off last year - it took 4 years to pay it off and I never want to go there again. And we haven't. Thankfully.

By some cosmic planet alignment, god-force, what have you, we managed to get out of the Lake Elsinore home. We sold it in April of 2007, and took a loss of maybe 5K. We sold it for 505K, and now, zillow.com tells me it is worth 370K (note that we paid 470K in 2004). Wow, were we lucky. Not to mention, with gas now at $4.50 a gallon, driving 280 miles per day combined, we would have been hurting, big time. The house we have now has lost 80K in value since we bought it, but at least we have reasonable commutes and it's not 105 degrees during the summer. It does hurt to know that we no longer have a single penny of equity (in fact, if we had to sell, we'd be upside down a bit), but I am still so grateful that we were able to get out of the Inland Empire with only minor scrapes and bruises to show for it.

Here we are in 2008. I had been reading the blogs of other folks, and seeing how they were paying off debt and living frugally. Most notable was June with her Bye Bye Buy! blog. In February, one of the hubby's student loans was paid off -it was a parental education loan for which we were sending money to them every month. Around that same time, a small one I had, my Perkins loan, had only $150 left, and I figured, what the heck, and paid it off completely. It was a rush to suddenly be free of two loans. I started reading up on personal finance, and thinking, why was I just shuffling money away in our money market account that makes 3% and I'm paying up to 8.5% on car loans, student loans, and the 2nd mortgage? It didn't make sense. So here I am now, bitten by the debt reduction bug.

On June 1st, I paid the RAV in full - a total of $8,000 in 3 months. First time in my life I have ever owned my car, outright. In two weeks, we will begin paying down the Sentra. The balance is around $5500, at 1% interest, which is low, but I simply don't want this debt anymore. The car is worth maybe 4K, at best. I anticipate that will be paid in full by September. Which leaves the student loans which are still at a whopping 13K (down from originally over 30K back in 2000). As long as we both stay employed, these should be paid by the spring of 2009, leaving only the 2nd mortgage. Which is over 40K, but at least provides a tax write-off unlike the other debts which provide nothing at all.

The only thing I wish I could do is pay it down faster! This is probably where snowflaking grew out of - the desire to throw everything you can at your debt because you want it to go quicker. So, I am trying various things like selling stuff on eBay and Craigslist, having garage sales, and signing up for surveys, in an effort to take in a little more here and there. I think I'll post updates on our debt repayment endeavors, just in case anyone cares or finds it interesting. I know I do - I love to read about how other people are doing with their finances - it's great to get new ideas from the internet world.

2 comments:

  1. Hi, I just found your blog! Welcome to the path to debt free living. Sounds like you are doing amazing so far!!! Keep up the great work!!

    ReplyDelete
  2. Its good to see that some people really work hard to pay their debts off and not just blame everyone else for their financial situation. Have you looked at price comparison sites like eComparison to see if there is any better loan/credit card rates to help you clear your debts quicker? Might be worth a look.

    ReplyDelete