My Debt Blog

No not us, we’ve played that game and now we use our money. A story on CNN Money, Barely surviving by using their credit cards has really got my head hurting. This story is so biased and at no point blames consumers for their actions. Then I read this:

Government and agency statistics illustrate this troubling trend. The Federal Reserve reported Wednesday that Americans’ credit card debt jumped 6.7% in the first quarter of this year to $957.2 billion, This spike comes despite the fact that nearly one in three banks is tightening guidelines for credit cards.

The US is near $1,000,000,000,000 dollars in credit card debt. According to the story racking up credit card debt isn’t a choice people want to make. They had to run up their credit cards because the costs of their basic needs were going up. The reason they have to use their credit cards is because their lines of credit and home equity has been used up. At no point have they acknowledged the fact that they are living beyond their income and going deeper into debt. The great expert says that they can’t increase their income, but their expenses are going up.

Why does a weak housing market all the sudden create a financial problem so people have to use their credit cards? They drained the equity they were getting out of their house to fund their frivolous lifestyle. The system of not being able to tap their house for cash like an ATM has caused them to run to their credit cards. Now their balances are increasing to the point they cannot make the minimum payment. You will never get out of a hole by digging out the bottom.

The best line was at the very end:

“A lot of people will quit going out to dinner if they see their balances rise,” Hampel said. “This will hurt the economy.”

NO!

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I never like getting to January in that the damage from Christmas is actually felt this month. It has been a difficult month to get through on one income on top of that. With no EF or additional income, it is getting increasingly difficult to keep focus. As the pressure or weight of carrying everything gets to me, it gets harder to keep going. I’m to that paycheck to paycheck point and there is nothing to show for it.

So if January was bad, how does February get better? We need to pay close attention how much is coming in, and what needs to go out. My wife will also be setup to help with our household income, even though it won’t be permanent yet. Spending is the single most important issue that needs to be watched very closely.

Getting through February is important because I’m patiently waiting on my bonus. The bonus does not necessarily fix problems, but it will help turn things in a much more positive direction. I can’t post details yet because it isn’t in hand yet. Priority before paying down debt is to get that EF back to 1k though.

Expect my regular monthly plastic pinch update and my net worth update. I might as well point out that debt is going up and net worth is going way down, partly due to the huge hit I’m taking on my retirement savings. Even though it is only Monday, I cannot wait until Friday comes around.

Comments(7)

I guess the full force of my wife not bringing home any income is starting to show itself. Spending habits have not changed and in fact seem to have increased this month. Our EF is almost drained at the moment to the tune of $700 because of all these extra expenses that seem to come up like emergencies.

I’m having a real hard time trying to keep my head above water here trying to manage everything. Last week and this week has been very stressful for me and I haven’t put a lot of thought into where we stand in the financial areas. We really need to stop eating out. Spending is really out of control and something has to be done to get the EF back on track and get through this month. I need my wife to be on board with how we’re going about spending money since paying off debt isn’t working. This is getting too stressful for me to handle on my own.

Our debt is going nowhere because not operating on the income we have. I hope all the bills at least get paid this month to say the least. Pulling money from the EF to avoid hot checks I really don’t like doing. I think our bigger problem is the bulk of our income comes at the later end of the month, but there’s still stuff at the beginning of the month too. Something has to be done to reorganize things so when money gets low the EF doesn’t have to hold things over until the next paycheck.

I am fairly confident that I can get the EF back on track by the end of the month but not certain we won’t continue to run into this situation every month. This student teaching experience is important but not having her income is really putting some real pressure on us. The last thing I want to have happen is turning to the credit cards. This really sucks.

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College is a wonderful thing to go through before going full force into the real world. The issue with a college degree is it never guarantees income. I knew exactly what I wanted to do at the end of high school and went to college to help open the employment doors for me. There are a lot of things I learned in college far beyond what the degree is worth. When you’re done and have that paper in hand, it doesn’t mean you’ll get a job either.

My wife wasn’t sure what she wanted to do in college and switched paths a few times. Then after she graduated there was an opportunity for her to do an internship. Based on the field she was going into, I thought this was a good idea, except it didn’t pay anything. I got a job right out of school and made plenty of income to support the both of us, so it wasn’t a huge problem. After the internship was over, she was not interested in doing that as a career for various reasons. Great, so now what do you want to do with your life?

She ended up getting into a graduate school program in the education field to become a teacher. I was not really involved much in her going to graduate school to pursue this, but I wanted her to find something she would enjoy doing. Now that things are getting to the end of the rope, the amount of student loan debt scares me.

I didn’t know how much exactly she was borrowing, and as it turns out it’s quite a bit. When doctors and lawyers have to take out massive loans, most of the time they can eventually reach an income that will let them manage it. My wife will not be making a huge income, at the most half of what she borrowed, which would make it very difficult to pay off her student loans. Since we are married, income and debt is combined, so we will be paying off these for hopefully only several years. My focus regarding paying off debt is to try and get rid of the credit card debt completely. Once we no longer have those credit card payments to deal with, it will free up extra money to pay down student loans. It will be nice when she gets a salary so we can focus on a mutual goal together.

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I’m not a fan of paying high interest on credit cards, which is part why I opened a 0% card to transfer. I’m thinking I may need to open something else if I cannot get anywhere with Bank of America. Currently I am at 17.24% which is down from 25.24% when they screwed up a payment because of a Saturday, the computer said it was late, I called them up and got the late fee cleared, but my APR got rocked the next month. I got this rate down a few months ago and decided to call them up again to see if they’ll lower it more.

After a long hold time I got to the first person who cannot do much of anything so they transferred me to an account manager to handle my question. Waiting on an inner hold even longer, I finally got someone to talk to me. Asked them for a lower rate and they told me my rate was the best they could do for me. I told them other companies are giving me offers for 9.9% and lower, but she wouldn’t budge.

So this is where I start to get frustrated and annoyed. I asked them why they won’t lower my rate and they said the rate is based on several factors. They look at the overall balance in relation to credit limit, amount of monthly payments, and how much I use the credit card per billing cycle. She then went on and told me a credit card is a short term loan. By using it I am borrowing money from them at the best rate I can get, but then they expect a payment for that. I told her I don’t like to be lectured on how a credit card works and corrected her that a credit card is a revolving line, not a term loan.

This is where it got real interesting. I told her if I bought $200 in gas per month on my card, then added $200 to my regular payment, would that lower the rate? She told me yes it would! That doesn’t make any sense that I can increase the balance and payment just to get a better rate from Bank of America. I would still be paying down the same amount but they don’t see it like that. It’s not worth fighting with them anymore and I think I’m going to transfer that balance to something else. It will be nice to get my smaller cards paid off so I could really focus on paying these other cards with higher balances off quicker.

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There is so much scare out there about the sub prime mortgage lending damaging the economy. What confuses me is why so much blame is being put on the sub prime loans when it should also be shared by the consumer who signed up for that loan. For anyone who has ever bought a house, there is so much paperwork involved and it is a process to get the financing in order. At closing it can be exciting to just get through that paperwork so you can get the house. Did you have a real estate attorney at closing explaining and showing you exactly what you were signing? I did and know exactly what I am dealing with regarding my loans.

If someone buys a house they simply cannot afford, should it become a problem for the government to bale out people using taxpayer dollars? Our government will bale out corporations due to limited liability, sends money overseas as aide for other countries, but can’t help the average Joe save their home? The government is not going to make a person more responsible by helping them save their home. Regulation isn’t going to fix the existing problems of people trying to borrow 500k and pay 1k a month. It all seems fine until the payments adjust out of control and there is no way to handle the new payment.

When I got my house a year and a half ago, my credit was good and the time seemed right because I was getting married. Instead of doing one lump loan for 30 years, I did 100% financing through 2 separate loans. My first is a 80% 7 year ARM at a much lower rate than the fixed loan, lower payment, and no PMI. The second is a 20% HELOC which made up for the difference and structured the loans so I would not have to pay closing costs. This seems stupid to me now to have done it this way when I had 10k sitting in the bank. I did end up paying off my car and going on a completely paid for honeymoon, so what’s done is done.
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I have been pretty upset with my wife since last night. She is going to be student teaching soon and has some time off until the school year starts. This week she has gone out shopping for clothes and setting things up for school every day. Our ‘budget’ has some room for her to be able to spend some money on clothes, but what happens when it’s gone? That is where the fighting started.

She came home with a few more bags then I had expected. At first I brushed it off because I just didn’t want to know what she spent on all this stuff. Later that night she modeled the various things she bought and I tried to keep my cool. Then the ultimate question came up: how much did all this cost? She told me not to worry about it which confused me at first, then she told me she opened a new credit card and charged about $250 on it. It feels every effort I make to pay off debt is shifted into a new debt.

This is when it got interesting because she told me that when she is done with student teaching and gets her job, she wants her own checking account to handle her money. I told her it is a good thing I’m not that selfish with my income in that I consider it both of ours since it pays the mortgage, bills, and general cost of living. It’s not like this stuff is invisible either because I show her the exact amounts of what all this stuff costs and the extra at the bottom is the only wiggle room we have. Its not that we don’t have enough money, there’s just not enough extra for her anymore.

It always seems like a simple solution is when there isn’t enough money for lifestyle, instead of cutting lifestyle for a period of time, try to make more money so the standard of living doesn’t change. We are effectively going nowhere quickly because any progress is balanced out by overspending. I’m also being compared to our friend who is in the banking industry and recently was promoted to a VP at the age of 25 (same age as me) and got a huge pay increase from his already large salary, which I’m not sure what to think about that. My wife wants me to keep pushing for promotions and pay increases and my response is always the same, it all takes time. It is starting to depress me when I’m trying so hard to make our lives better and she only sees success as job title and salary. She still doesn’t know for sure if teaching is what she wants to do for a career. I don’t know what to do anymore but things are really ugly right now.

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