Working Towards the Goal – a Story of How I Lowered My Debt

One of my goals for this year is to get a handle on my debt. Oh, that sounds disastrous doesn’t it. I’ve never been over my head in credit card debt. I’ve never been over my head in mortgage debt. However, having two children means doctors and hospitals. Having bad insurance means a lot of money out of pocket. I was fortunate because I changed jobs the middle of last year and I received a significant increase in pay as well as incredible insurance. Unfortunately, the year and a half that I had bad insurance and not so great pay had left me in bad shape as far as my debt went. That being said, my goal for this year has been to eliminate the medical bills and pay down my credit card debt. This will also help me towards achieving my goal for next year.

In the month of January, I completely paid off and cancelled one of my credit cards. Theoretically I should have paid it off and kept it open, but it was a joint account in mine and my ex-husband’s name so closing the account was definitely the right thing to do in that situation.

In the month of February, I spent a large amount of money paying off every outstanding medical bill that I had. That was a HUGE accomplishment for me, and I’m not ashamed to say that I am really proud of myself.

Now it’s March. I’ve sat down and taken a look at the way I’ve been paying my monthly credit card bills. I always pay well over the minimum payment on all of them, but I would get frustrated and discouraged because I wouldn’t see much progress. It was suggested that I make a list of all my credit cards, balances, limits, interest rate and amount of time I’ve had the card. After deciding which card to pay off first – in my case it is the one with the highest interest rate which happens to have the lowest balance – I am going to pay one dollar over the minimum of each of my cards except the one that I’m working on paying off. I should have this card paid off in another two months.

You know, I used to focus on everything else except my finances. I never worried about the future and I was always living from paycheck to paycheck. It’s pretty sad, actually, because in high school I was planning on being a CPA. Life changed my plans, I made some decisions that I thought were right at the time but ended up being bad for me financially (although good in other aspects). Then I met a person who is pretty smart when it comes to finances. Although I often found it difficult to understand him, there where a few times when he sat down with me to explain some things and I understood what he was saying.

In a matter of two months, I’ve taken great steps towards reaching my goal for the year. The percentage of credit card debt that I have compared to my limit is at 77%. That’s still high, but it’s actually lower than it was two months ago. My credit score has gone up and I know it’ll go up even higher once my payments are reported. The thing that excites me the most out of all of this? My debt to income ratio is 27%.

All it took was focus and a little change in my spending habits. While I was calculating my debt to income ratio, I realized that I bring home a lot more money than I thought I did. I started questioning where in the world is all my money going? I took a look at my checkbook(s) and realized that I spend an awful lot of money eating out. This is my second week bringing my breakfast and lunch to work, and not only do I feel better health wise, but I have more money at the end of the week. I’ve been doing a lot more cooking dinner as opposed to ordering out and, in addition to having more money and eating healthier, I’m having quality time with my kids. I haven’t been spending frivolously on clothes or shoes (and shoes are definitely my weakness). Yes, I dropped $400.00 on new work clothes a month ago, but that was a planned expense. I would love to get the Coach tote bag that I saw, but instead of going and getting it immediately, even though I have the extra money to do so, I’ve been saving here and there. Do I miss eating out? Sometimes, yes. But another benefit of not eating out daily is that when I do decide to do so, I don’t feel bad about going to an expensive restaurant where the meal is $50.00 a plate. I miss going to the mall or shopping on Michigan Avenue and buying whatever I decide I can afford or whatever whim crosses my mind. But because I’m playing things smart and saving up for that expensive item, I’ll be sure about it in the long run (no buyer’s remorse) and I’ll have a sense of accomplishment for saving up instead of impulse buying. Right now I know where my money is, and it’s sitting in the bank as my cushion for emergencies (in addition to some of it being tied up in stocks, but that’s another story completely).

As far as my money and my debt are concerned, this has started off to be a very good year.