How we found ourselves $276,243.63 in debt

An informal, undocumented loan was called due by text message at 3:30 AM, followed up by an email at around 4:30 AM, net seven days, mind you, so I applied online that evening to four different  reputable lenders. The next morning, my local credit union dumped fifteen grand into my checking account and it was official. I was the deepest in debt I had ever been in my life but I didn’t yet realize it.

Some Time to Really THINK

Five days later, I underwent a planned outpatient surgery that required a week & a half off of work from my day job. I spent hours each day, sitting on the back porch under the fan, watching the cats and thinking. I finally had time, the kind of time we always wish we had for projects, to think without interruption to reflect on how our spending lined up with our goals and values. Because it was bill-paying time, I had decided to calculate our total debt. My suspicions were confirmed: we were the deepest in debt I’ve ever been: $276,243.63 to be exact.

Total Debt $276.243.63 as of April 8, 2016. Ouch. 

Whoa. That’s over a quarter of a million dollars.

That figure rolled around in my head all week. Several evenings, my husband and I sat outside and discussed our situation. The townhouse had been on the market over nine months without a single offer. Why was it taking so long? Our baby had been sick so much, he was out a day or two per week visiting the doctor, but we had to pay daycare whether he went there or not. Paying two mortgages and having two toddlers in full-time daycare was putting us in the hole about $600 every month. Groceries were going on the credit cards, on which we were paying only the minimums. It was getting dangerous.

I couldn’t stand the thought of having a mortgage until we were 67! Were we going to have to abandon the townhouse mortgage and trash our credit just to keep this roof over our heads? Was I going to have to get a second job? Who would watch the children? Was I really going to have to work til I was 67? And every time I thought about making a payment on this particular $15,000 loan, it made me sick with disgust. No. This wouldn’t do at all.

There had to be a way out of it.

I scribbled through an entire spiral notebook coming up with plan after plan, charts and graphs, searching for inspiration and motivation to make it happen. We tested numbers in free online calculators and saw that we could be completely debt free in ten years, maybe even less! That’s before the boys even start high school! We could be on our way to financial independence, maybe even early retirement! I felt so much relief. There was at least hope for us, after all. We just had to make a plan & take action.

I Immediately Reduced Interest Rates

First of all, I paid off one credit card so that I could take advantage of a balance transfer offer to save money. I transferred two $1250.00 credit card balances to another card with an eighteen month promotional offer of 4.99% and no balance transfer fee. The interest rates on those two credit cards were both over 20%! How had I not noticed? That never would have happened in my twenties! I took the card out of my wallet and deleted it from my Amazon account so that we wouldn’t add to the balance. We could pay $150.00 per month and finish in 18 months, easily.
In 18 months, we will add that $150.00 to the new loan to pay it off faster.

I Set up Automatic Payments

I then set up automatic biweekly payments on the new loan, so I wouldn’t have to write a check every month. The balance will be paid in fewer than the scheduled five years. Any found money that is not already in the budget will be put toward the principal on this loan until it’s gone. I also promised myself anytime our utility bills run under budget, I will transfer the amount under budget toward the principal balance on the loan, which has a slightly higher interest rate than the promo on the credit card. I’m not looking at that thing for four years. It turns my stomach.

I Took Additional Steps to Sell Assets

I convinced my husband to let me take $1,200.00 and re-furnish the townhouse to stage it for sale. Obviously being vacant wasn’t getting it sold and we were losing $600 a month on it already, after the mortgage, insurance and utilities were paid. If we dropped the price, it would have to be at least $5,000 to be significant enough to interest buyers to take another look. $1,200.00 would be two months worth of losses we were already taking and way cheaper than the first price reduction. All the real estate blogs and websites insisted that Staged Homes Sell faster and for more money than vacant and unstaged homes. We had to take that chance. More on what I did to the Townhouse in an upcoming post.

Taskmaster – Getting Specifics on Paper

I spent a few hours doodling in my day-planner, The Taskmaster! I have a spot each day for meal-planning (which saves big on time, “what’s for dinner?” frustration, AND money when you think about it!). I have a spot for a daily goal focus. Did you ever read that book about the Habits of Highly Effective people? The author had an exercise called “Sharpen the Saw” that I remember and just latched on to the idea. Basically, you determine your roles in life. Then you focus on one thing each week in each role that will make you more effective in that role.

I have specific pages set up in the Taskmaster for all the goals & plans that weigh on my head around bedtime. I take a minute to dump out all the thoughts in this one book so I don’t have to remember them and I always know where to find them.

Meanwhile, we are working on other ways to cut costs, reduce debt, and increase income. The plan will grow and morph as we improve our situation. As a friend of mine says, “When you know better, you do better.” I have some ideas that I plan to flesh out here soon.

I’m amazed to discover and report that our Net Worth is Positive! Net Worth: $54,265.37*

This is reassuring! I went back to work the next week feeling like superwoman because I was finally back on track at home!

Regards,

Erica

*Does not include Retirement accounts.