This will be a tough post to write. Not because the news contained within is shocking or surprising, but because it is the first time I've been completely, totally, 100% honest my own money choices. Here is my deepest, darkest, dirtiest secret about my finances….
My Darkest Financial Secret
For those just tuning in a little back story: I bought my first home in July 2013. I funded the renovation with a 203k loan, but went over and had to raid my savings account to finish the project. Having no savings cushion then led me to lean on my credit cards for “emergencies” in the Fall of 2013 and by NYE 2014, I was 8,432.16 in debt.
I've been tracking my net worth all year and detailing my debt payments in the quarterly net worth updates. I was doing well on repayments, until the summer. My beloved dog died, my identity got stolen, and I had an intense falling out with a roommate all within the span of three weeks. On top of everything else I was still dealing with from the Fall (broken engagement, runaway renovation), it felt like a ton of bricks.
And if you've been reading here for a while, you know that I have a problem with shopping my feelings. Which is exactly what I did.Always saying “yes” to myself and opportunities instead of saying no, because GOD did I need cheering up, and badly.
At the end of July I was $10, 832.14 in debt, almost 3k up from where I was in April.
By Fall 2014 I was feeling better and I managed to make some progress on my debt repayment. I paid back my parents in full. I paid off my small, lingering, student loan. (The smartest decision I made was paying off accounts that couldn't be racked up again, so that debt is now gone for good!) I saved enough money to put down a sizable down payment on a new-to-me car I bought in November that I desperately needed.
Between my savings, my home appreciation, and my winning retirement accounts, my net worth did increase over the year.
All-in-all there were some financial victories in 2014.
But ultimately, 2014 was a year of financial failure, because honestly, I was too enthralled with the emotional things that were going on around me to pay too much attention to where my money was going. I am disappointed that for years I've prided myself on being a go-getter and a goal reacher, and my biggest financial goal in 2014 was to pay down all of my debt. I did not get there. Not even close.
I ended 2014 $8,164.97 in debt (does not include car loan.) This is only $300 less than where it was when I started.
Because I use my YTD spending tracker, I was, however, able to see how much I did put toward my cards. I made $11,011.54 in credit card payments this year, which would have been enough to cover all of the debt and then some.
Put simply: I was paying off debt, but only at the rate at which I was spending.
Please let this be a lesson to those of you working your way out of debt right now: STOP USING YOUR CARDS. You will never get anywhere if you don't.
Currently, mine are in my freezer.
Where We Go From Here
I took a lot of time off over the holidays to rest from a stressful year and reflect on what is most important to me.
- I've decided that 2015 is the year I'm going to stop letting the emotional turmoil of my past hold me back.
- This is easier said than done, but it also includes my debt. Debt keeps you shackled to your job, your life, your location. Whether you realize it or not, debt comes with large emotional baggage.
- As a New Year present to myself, I put $1,000 from my savings to my debt on January 2nd.
So as of right now, my debt sits at $7,164.97.
And as of January 1 2015 I'm on the Spending Diet, as created by the lovely Anna Newell-Jones. The gist of it is that you only spend on necessities, and give yourself $100 of “play money” each month. This is different than the spending fast where you don't spend anything except what it costs for rent/utilities/gas and groceries. That seemed a little too strict for me to begin with, but I liked the idea of the diet, so I'm trying it out.
Halfway through the month, it is going OK.
I've set a pretty lofty goal of trying to pay down all of my debt by March 31, which math-wise means I have to put $1200 toward my debt every fifteen days (and then a little extra at the end.) It's ambitious for sure, and I don't know what life is going to throw my way, but that is why I am sharing it with you all- to put it all out there and keep me accountable once and for all. I've also been inspired by other finance bloggers who came clean about their debt, like Carrie and Stephanie of the Empowered Dollar.
I hope this inspires some others out there battling with recurring credit card debt to join my movement, throw the cards in the freezer, and get free once and for all. This is Part 1 of what I'm calling the LBMT- Get Debt Free Plan.
I can't wait to share the progress with you all as the months go by. Anyone else have their finances in the plan for 2015?
Final Update: See how I paid off all $8,000 in 90 days here.