The Plan, Part I: Turning Sense into Cents

I've mentioned I have A Plan, right?

Of course I have! And I'm sure you've all been sitting on the edge of your seats, waiting with baited breath for The Big Reveal hoping I have the magic key to financial freedom. Aren't you?

Well...here it is:

Spend less. Pay more.

That's it, in a nutshell.

Of course, there's a lot more detail behind it but the basic principle is just that: Spend less. Pay more. Oh yes, and save. If that sounds vaguely familiar - and it should if you've ever been on a diet - it's because it's the basic principle behind that pesky little weight problem the typical American Jerk (including me) has too.

No magic, just common sense.

The problem is I hate dieting. Hate hate HATE it. I don't like the idea of restricting anything - money or food - at least, not to the point of feeling deprived. Deprivation, to me, feels like I'm one of those shriveled up, tired raisins in the bottom of a box of store brand Raisin Bran. It leads to a binge/purge cycle...frantic, meaningless, reckless spending on things I will never use and, eventually, give away.

No bueno.

Besides, I've already been there, done that. I restricted my "financial diet" so much shedding that extra $5,000 in debt I had the first time, I'm not sure I really learned the lesson. In fact, I know I didn't or I wouldn't be where I am today. Instead of learning how to be reasonable in my spending, what I learned is that I could binge - sometimes for years - and then painfully restrict for a little while so that I could start the process all over again.

And that's just not particularly helpful. Hence, why I'm not at all interested in going that route again.

So the question is how can I shed the debt AND break the binge/purge cycle AND maintain some semblance of a quality life with as little hard work and pain as possible?

The very first step most experts will point out to a blossoming debt-reductionist such as myself - I mean, besides admitting I have a problem - is to know where my money goes. Luckily, that bit of work is something I've already done and know practically off the top of my head. Because, you see, I've been keeping a record of that very thing for literally years. I am, however, admittedly a tad bit OCD.

Now, when I say I've been keeping track for years, I don't mean I've kept every receipt and written down every penny I've spent and on what. But I have a running tally - a spreadsheet I created back at the beginning of 2007 when I first started trying to peck this thing to death - of what bills need paid and when, and how much "discretionary" income I'm left with after the obligations have been cleared. And then, at month end, and because I do nearly everything by debit (and, let's face it, credit) card, I run reports on what got spent and where outside of my fixed bills. Gas, cigarettes, grocery, dining out, wine, wine, and more wine. Then I plug those figures into the spreadsheet, overwriting the budgeted amounts, and I can see how I've done for the month.

Ahem.





As I've said then, I already know where I spend my money.

Now, if you're playing along and you don't know where you spend money or where you might be able to cut back and you've been using debit/credit cards for most purchases? You are within quick, easy reach of having a firm idea of where it all went just by logging onto your account and playing around with the reporting features offered by your bank and/or cardholders. I'd do at least a 3-4 month average and more, if you can, what with the holidays having just occurred. Holidays, as we all know, blow all finances to holy living hell.

If you spend only cash, then clearly you have no need of my advice *laughing*.

Seriously though. If you are one of a kind of people who just takes out hunks of cash as necessary and spends it until there's nothing but lint left, you may have to do a little pre-historic hunting and gathering to have a better understanding of just how many lattes you're really buying (or, in my case, cocktails).

Then, you make a list of all your bills and all your expenditures by category (you can be as vague or as specific as you like) and you assign each one a number...the average of the ACTUAL amounts you spent - not the ones you wished you'd spent - and add it all up.

If you're lucky, your total expense is already less than your net income. Why are you still only making your minimum payments again?

If you're like me, you are breaking even or maybe even a little upside down.

If you're way overspending, you'll see it immediately and really. Just. Stop. It...Now. Not only are you "bridging the gap" between your salary and expenses, you're hanging by your fingernails from the middle of the suspension bridge at Royal Gorge.

Photo courtesy of Fremont County

Now remember, I want to make this process - for me - as painless and work free as possible. But there is some work involved (we've done most of the hard work already) and there is a little pain. Because now that we know where we've spent our nickels and dimes? We have to decide where to cut back. And that can be rough.

There are eleventy-billion lists of practically painless ways to cut personal spending available on the internet. I know. I checked. And I've read them all.

Here are a couple of examples:

Being Frugal 101 Ways to Save Money

MSN Money Central 50 Ways to Trim Your Budget

At this point, it's really important to know yourself and your habits. Just because someone recommends doing your own oil change does not mean you should do your own oil change! Especially if you are, say, me. And frankly? If you ever find me elbow deep in Borax and baking soda attempting to make my own laundry soap? Please, by all means, put me out of my misery.

But there are some really decent tips out there.

Most of them, I'm already doing. For instance, I got rid of cable television...10 years ago about the time I got rid of the boyfriend. I don't belong to a gym and I seriously do work out at home or by taking walks. I had a bus pass through my work until just this month. But what I discovered is that I was still spending a lot of money on gas in addition to the $30 I was paying for the bus pass. So I've given the pass up for this year. That could have been a budgetary mistake given that gas - in January - has risen to nearly $3 a gallon in my city. Too late now. I'll work around it.

My problem then isn't that I have all of these "extra" luxuries like cable or Netflix or gym memberships or mani/pedis and massages I can cut out. The problem is that I:

A) Give my money away and
B) Love to socialize, drink wine, and travel.

So here are the list of things - the carbs - I'm trimming from my financial diet:

1) No more lunches out. I work less than 5 minutes away from my favorite Mediterranean restaurant in the metro area. But at $15 a pop? I can make my own hummus - fantastic hummus - and bring it with me to work.

2) No more charitable donations. This one absolutely kills me because I do love to support my favorite people and causes. I have a tremendous amount of guilt surrounding my decision to withdraw my financial support. But, by the same token, if my debt does not decrease, I will likely require those same charitable donations.

3) No more spontaneous Church o' Brunches. While I love bacon and eggs and bloody marys and congregating with friends, these are expensive endeavors - ones I should not afford.

4) Shop the heck out of grocery sales and clip coupons where applicable. Frankly? Our grocery budget is disgustingly inflated. And we don't even shop at the Whole Paycheck Foods. It's just that we buy what we want, when we want and have given no thought to how much it really costs. I am embarrassed to tell you then that, in the month of December, we spent no less than ONE THOUSAND DOLLARS at the grocery store.

Ahem.

5) Stick to my REASONABLE budget. I have a reasonable budget and I'll talk about it soon. The problem is that I've not, until now, been sticking to it. Rather, I've said to myself, "Self? You can get by with just sending in that minimum payment just this once in order to do [fill in the blank]." Unfortunately, that happens nearly every month.

6) Give up fancy schmancy salon shampoo and conditioner. While I will continue to have my fancy schmancy salon haircuts because A) my hair stylist is the BEST I'VE EVER HAD and B) because the $40 a cut every 8 weeks keeps me on a professional-looking level (necessary for my middle management job), the extra inflated dollars for salon quality product, right now, is unnecessary. I'm keeping my M.A.C. makeup though. For now. My skin thanks me. And again, we want as pain-free as possible...right?

*EDITED TO ADD:*

7) Enforce a moratorium on all travel. If it requires a hotel stay I'm responsible for, it's not in the budget.
So that's where I'm cutting back. If I do these things - and I am (or have at least for the last month) and will continue to do so  - I free up an extra $250 a month to go toward paying down debt.

I can, am, and will do this.

Watch me.

So. Now. Tell me. Where do you think you can cut back your own expenses relatively painlessly in order to make a dent in your own debt? You don't have to comment here to tell me. You can send me a private message telling me. Or you don't have to tell me at all. But I would love for you to think about it...really think about it...along with me. Please. I don't want to be alone.

Interlude: How Did I Get Here?

I graduated college with a 3.73 GPA, a liberal arts degree, and more than $5,000 in credit card debt.

As an unemployed graduate, panicked does not even begin to describe what I felt about that overwhelming number. Adding to that anxiety was the knowledge that I:

A) still did not know what I wanted to be when I grew up,
B) had few marketable skills, and
C) had no idea what kind of job I could get.

I went to college because I didn't want to work minimum wage anymore. However, I had no idea that, with a liberal arts degree, I'd come out of college with the inability to demand more. Had I been in a better financial position to begin with, I likely could have held out for a much more lucrative offer or I could have possibly gone back to school for a Master's. As it was, I took the first job offered me and then took on two more part time jobs at little more than minimum wage.

Additionally, I did the dreaded thing - what every adult child hopes will never happen and what many other college graduates my age (and older) have had to do at one time or another...I moved back "home" to my dad's. Unfortunately, it wasn't enough. When the creditors began calling and talking to him, the gig was up. Busted.

Surprisingly, he was pretty awesome about dragging me by my 24-year-old ear, kicking, screaming, and crying down to the Consumer Credit Counseling center as he made me sign up. He even kept his own yelling to a minimum.

I signed up. I did all the work. I relinquished my cards to my counselor. She contacted all my debtors and negotiated special terms for me. And then I sent her 70% of my net pay - a figure she and I came up with together - so that, in just over a year - I was credit card debt free.

Ahem.

It. Was. Painful. I had just enough to pay for room and board (my father generously provided both for just $300 a month), 1 tank of gas a month, and $25 a week for everything else including cigarettes, hair cuts, clothing, toiletries, and any other incidental expense.

For 14 months, I did not eat out, see friends, have a gourmet cup of coffee, buy books or CDs, go to the movies. I worked. I went home. I sent my check each month. I cried...a lot.

I chose to do it that way. It was my choice to get out of debt as fast as humanly possible. I set the dollar amount of my monthly payments. I knew it would be AW-FUL. But I also knew, at the end of the ordeal, I'd be credit card debt free and able to get out of my dad's house! Priority #1. We've all got them. That was mine.

I did great after that...for awhile. No cards, no bills other than the basics. I moved out of my dad's and in with two roommates. I got a job making a little bit better money and decided to go it alone. And then I acquired a live in boyfriend and I thought we would be together forever.

Ahem.

I got an even better job. We upsized to a bigger apartment. We bought his and hers computers. We bought him a car. We bought me a new car. We had cable television and high speed internet and cell phones. We ate out. A lot. We could afford it. We were a two-income household! Right?

Slowly but surely, the debt began to pile back on. As the relationship began to disintegrate, I began to spend recklessly attempting to, what? Buy his love back? Make us both happy? I can't answer that beyond saying the spending was most certainly psychologically driven.

When he left, I was stuck with the expensive apartment and the brand new car. I tried to manage the debt on my own, tried to budget and stick to it, but little things...silly things...arose with alarming frequency and I was forced to put even more on the cards until pretty soon I was pushing up against the ceiling. I stopped opening my mail. I stopped opening my door. I stopped answering the phone.

Eventually, I would have a practice run at a mid-life crisis, cash out my retirement, live on it for 6 months, and then decide it was better to be underpaid and passionate about my job than to be well-paid and miserable. I still hold firm to that belief. It's just not a belief that helps reduce debt.

How it did help though, is it forced me to really take a look at my finances, develop a budget, and try to stick to it so that I didn't get any further into debt. And I haven't...exactly. I did have an issue with the IRS in that, when they caught wind of the retirement cash out, they rubbed their greedy governmental hands together and slammed me with a 10% penalty in addition to regular taxes. So I adjusted my then current withholding in order to meet my payment arrangement obligations...in essence, robbing Peter to pay Peter. Just this past year, I've finally gotten that piece under control and am expecting a little tiny refund from them this year for the first time in years.

Aside from that, I was promoted twice and am no longer underpaid. I make a modestly decent living and I've managed to get by fairly well. For instance, four years ago, I was more than $25,000 in debt - including the car. I managed to pay that off and pay off one of my student loans ridding myself of more than $7,000 of the outstanding debt I had.

And I don't buy a lot of "stuff". I drive a 10-year-old car that's paid for, I rarely clothes shop unless I must, I have a library card. We don't have television channels. We don't subscribe to Netflix. Occasionally, I splurge on a new kitchen gadget. But as far as stuff goes? I just don't have much. Nearly everything in my modest, basement apartment (politely called a garden level) is secondhand and was free including my terrible excuse for a bed.


But what I do have a taste for is taking care of others. I donate a lot of my money to people who need it. I've also treated many a friend to suppers out, drinks, late night breakfast foods. I bake out of love. A lot. I (used to) entertain a lot. We've always had an open bar policy at The Grotto. I've also developed a taste for new and different dining experiences, fine wines, top shelf gin, and travel. Mostly though, my "discretionary income" has been used to cultivate and nurture my relationships.

So...somewhere along the line, I lost focus on getting out of debt. I just continued to make my $20+minimum payments on my cards and sometimes used them...when I had to. For...whatever (let's just leave it at that).

Then, in December, Lex - my partner in crime - brought up the idea again of buying a house together.

I hung my head, knowing full well no mortgage company - especially after the sub-prime mortgage crisis and today's economic climate - would come near me with a mortgage.

"I can't," I said.

"Oh surely, you can," he said.

"Um...no. I really can't," I said.

It would take weeks for me to come clean about my level of debt with someone I love and trust beyond measure. I was embarrassed...ashamed...mortified. While I knew and have known for quite some time just how much debt I was carrying, it never mattered to anyone else before now. And, frankly, talking about that kind of thing is a major taboo in America. Don't ask. Don't tell.

The conversation forced me to think about it. Seriously think about it. In the midst of #reverb10, I thought about it and, just as though the universe were speaking only to me, a writing prompt about action and accomplishment was delivered unto me and I got cranky. Really really cranky...and then realistic...and then determined.

He offered to help me. We've lived together almost 3 years and have known each other for 5. We have a fur baby together. We have long-term plans and are committed to each other. Taking his money though felt like more commitment than I could possibly stand.

However, he had a strong argument - he can be very persuasive when he wants to be - and so I was just on the verge of accepting his offer when...

His job was severely cut back cutting his pay in half.

It was then I knew for certain I had to - not just for me but for him too. We're a team and I'm not pulling my weight. He's been smart - paying off all but his student loan debt and socking away money into savings hand over fist. I, well, haven't. He has an unexpected opportunity and I won't drag him down so he can't explore it. I'm in a perfect position to work toward this goal of ridding myself of this debt while still giving him the time to explore his opportunities and his passion, and I'm not afraid of it or even uncomfortable. I'm shocked to discover that, once I told him what I owed, I could easily tell you.

It is what it is.

And I have a plan.

Only this time, the plan isn't nearly so AW-FUL or painful or tear-inducing as the last. Because I have time and pleasant surroundings and amazing, supportive people in my life to help me navigate the emotional waters of becoming debt free in the land of debt.

Watch me.

Step 1: Admitting I Have a Problem

I am a typical American Jerk.

See that picture over there? --->


That's me. Except with bigger boobs. And rhythm...sorta.

When I say I'm "typical", I don't mean I'm married/divorced with children, living in a big suburban house, and watching football or Dancing with the Stars on my flat screen television. None of those things apply to me.

However, I am a typical American Jerk because I have debt...A LOT of debt. And virtually no savings.

According to CNN Money, the average American household with at least one credit card has $10,700 in credit card debt. That number fluctuates depending on the source - I've seen quotes of $8,400 and $20,000. $10,700 seemed nicely ensconced between low and high so I picked the CNN source for my purposes.

By the same token, the same average American household has less than $3,000 in savings.

Now, while I'll admit to being "typical" for this specific purpose, I clearly abhor the thought of just being ordinary or average. So I'll tell you I have $9.98 in savings currently - well below the average $2,400. And my debt?

*deep breath*

Between credit cards and student loans (I've been out of college for almost 15 years) is:

Totally in Comic Sans - I thought it was appropriate

DO. NOT. TELL. MY. FATHER.

So that's why I'm here. To admit publically for all the virtual world to hear that I have a problem. A problem I am, luckily, in a position to resolve. And I'm going to resolve it. I've got a plan.

Watch me.