Debt Sucks

From February 2 to March 3, my net worth increased an average of $43.46 per day, or $1,260.20 overall, to -$52,916.60. This is a 2.38% increase, and results in a projected zero net worth on 8/1/2014.

Insert pretty table right here… or not.

A Pretty Table

Not surprisingly, since the majority of my net worth is debt, I hit the same milestone here this month, with an overall change from May 2009 of 10,010.22. Just barely.

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A couple of clicks here, a couple of checks written there, spread it out over about a year and what have you got? Ten thousand dollars less debt, that’s what! Only $54,000 or so to go.

Okay, when you put it like that, it sounds a little less exciting. One could also say 16% but that doesn’t make for much of a milestone. What’s more important is how I got here. Over the past month and a half I’ve been working on rule #1 of the YNAB way – to stop living paycheck to paycheck. This meant moving to a monthly budget, which I wasn’t really accustomed to. I thought my old system was better for me, because I was hanging on to my money longer by waiting until the paycheck before (or right on) the due date to make a payment. I also tend to see others ponder greatly over what to do with triple-paycheck months, almost as much as I see folks decide what to do with their tax refund, and figured I was avoiding that conundrum by living paycheck to paycheck.

I’ve been seeing my budget in a whole new light now, but one problem I ran in to is the fact that most of my payments are right at the beginning or the end of the month. End of month due dates aren’t so much a problem, because I have all month to pay them, but it would be really difficult to build a one-month buffer when you’re making payments a few days before the end of the month so that they get there by their due date… at the beginning of next month.

The solution? Somehow I managed to get all of my bills paid ahead by two months. Or one month, depending on how you look at it. On average, the due dates are now 65 days away. Through the magic of spreadsheets, that works out to a total of $1,300 ahead, which is actually a pretty useless number because I’m going to keep those due dates that far away. The lone exception is Capital One, which I have no control over, and as such can’t pay ahead. I still can’t figure out where I got the money to do that, but knowing that I somehow had the cash to do so makes me a little more optimistic about everything.

And, to top it all off, I have now achieved rule #1 of the YNAB way. My buffer is fully funded, and I am officially no longer living paycheck to paycheck. I have $84.81 left to budget in March, solely from February’s income, and that not only includes random minuscule savings here and there, but also $140 (just a guesstimate) for a new back tire on the scooter. The scooter that I hope to get back out on the road this week.

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A few days ago, I got yet another call from my old friends at Global Credit & Collections. Oh, how I’ve missed you. You hardly ever call me, but when you do, you only want something from me, and I’ve always been happy to oblige. So, what is it this time? They wanted to make my current, $200/mo plan permanent until the debt is completely paid off. Again, I was happy to oblige. It’s been a full year now, almost to the day, since I first started making payments to the good folks at Global to satisfy my Capital One debt. So far, it’s been good. I went from a high balance of just over $8,000 at a high interest rate to a balance of just under $6,500 while accruing no interest, just in the span of 12 months.

It sounds odd, but kind of like walking away from an upside-down mortgage, I can pretty much say that defaulting on my Capital One card was one of the best financial decisions I’ve ever made, even if there was no intention of doing so. I’ve saved a ton of money in interest, and am making solid progress at paying down the balance. With this payment plan continuing, I will be rid of that ugly debt in 33 months. That’s less than three years. Just for kicks, I ran the numbers and found that:

• With this payment plan, I will be rid of that ugly debt in 33 months. That’s less than three years.
• If I were making the same payments at Capital One’s current interest rate of 23%, it would take me 52 months (over four years) to pay it off, while paying about $3,750 in interest on that debt. It would take 16 months just for the amount applied to principal to surpass the amount applied to interest charges.
• If I were making minimum payments of 3% at the current interest rate, it would take me 289 months (that’s 24 years!) to pay it off, while paying $10,894 in interest charges – more than the current principal itself!

I also made this kickin’ graph to show the balance progression with the three different scenarios outlined above:

Of course, I’m not going to just let it ride at that payment level until the end. At least, I don’t plan on it anyway – I might feel differently about it a year or two from now. Right now, I can just ride those payments. It truly is set it and forget it, as they come out of my account automatically. I merely have to budget for them. In the meantime, there are much more pressing personal as well as interest bearing debts to take care of.

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I totally made the J backwards on purpose... I swear

The waiting game used to consist of me sitting around waiting for my next paycheck right after using up the last one. The new waiting game is a much better one to be playing. I’m winning this time, but it’s almost as stressful. One could say that I have an addiction. An addiction to paying down debt, that is. The goal of living off of the previous month’s money has resulted in me sitting on quite a tidy sum of money. Normally, this would be a good thing, but to a person trying to get out of debt, those are dollars that aren’t being put to work. They’re just sitting there, waiting for the calendar page to turn over, and nothing more.

It’s a similar feeling to having an emergency fund built up, but not quite on the dot. An emergency fund has a purpose, isn’t supposed to be touched, and you know this. This almost fully funded buffer, on the other hand, is meant to be spent. It’s begging to be put to work. Begging for the month to change. Or maybe it’s me begging for the month to change.

In any case, I haven’t met my debt payment quota for the month, as I budgeted only for minimum payments. This simple fact has been staring me in the face every night this month, and I want to do something about it, but I don’t know what. As I mentioned in that video that none of you saw, I’m currently a month or two ahead on Sallie Mae and LFCU, which are my two biggest payments (that allow me to pay ahead easily). I’m only $300 away from my monthly quota, and roughly the same away from a pretty good milestone in my journey out of debt. Again, LFCU is my highest interest rate, which makes the most mathematical sense, but we all know the debt snowball doesn’t work on math. The next on my snowball list, however, is going to be paid in full with one check, but also happens to be double what I need to do.

I know what I want to do, but in the back of my head I remember how much it sucks to live purely paycheck to paycheck, essentially planning to be broke right when each one comes in, and worry about spiraling in to that pit again.

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Seriously. I’ve sat here for the last 2 hours feeling like this kid:

I had a lot of good things to say, but all I ended up with was this, because otherwise it’d take me 3 days to piece it all together. Obviously the cat sympathizes.

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As much as I despise white backgrounds as I find them unnecessarily blinding, Debt Sucks was due for a facelift. I think I’m finally done fiddling with it. Hopefully it’s easier to read, and (at least on my monitor) it offers a lot more real estate. For comparison purposes:

Last night, I went ahead and made my first intentional large purchase in quite a while. Ever since I built the computer, I think. I finally bought a video camera, a Flip UltraHD. Amazon had a deal on it, 23% off or so, which made it $155. I didn’t spring for the mini tripod, because I already have one, even though I didn’t know where it was. Turns out it’s in my camera bag… imagine that! I did, however, get a RAM camera mount for my scooter for it, with the intention of having it on there every time I ride as a “just in case” matter (such as last summer when I almost got taken out by a car that pulled out in front of me in New Jersey). While I was at it, I also ordered a RAM GPS mount. I’ve found it terribly difficult to geocache on the scooter due to the inability to check where I am compared to the cache location.

The good news is that my two paychecks coming this month, including a bonus, combined with my tax refund, is more than enough to cover next month’s expenses. That’s right – next month. That means that I already have this month covered with what money I already have. So, once that last paycheck of the month comes in, I will have successfully stopped living paycheck to paycheck, started living on last month’s income, and achieved rule #1 of the YNAB Way. It’s no time to celebrate yet, though… who knows what lurks around the corner.

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From January 1 to February 2, my net worth increased an average of $27.20 per day, or $870.40 overall, to -$54,176.80. This is a 1.61% increase, and results in a projected zero net worth on 10/7/2014.

It’s a little lower than I would’ve liked, but hey, at least it’s still close to a grand. February is pretty well guaranteed (barring catastrophe) to make up for it. Overtime is getting less and less, but it’s not too many months away that it’ll pick up again. I’d really like to see that estimated zero net worth closer to May, but it’s better than being a year off like it was just two months ago. Progress, progress, she’s a slow one she is.

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