My thinking changed when my company announced its first round of layoffs 2 years ago. I survived 2 rounds of layoffs but I knew my present employment is on borrowed time. In hopes to control my debt, I applied for an American Express Clear Card but was rejected due to negative items on my credit report. (More on this later.) How embarrassing!
In early 2007, I calculated my monthly expenditure and discovered my total minimum payments were $500 over my take home pay every month. I tried taking on a second job as a telemarketer for a timeshare. THAT didn't last for more than a month.
My only other option was to withdraw $6,279 (contributions only) from my Roth IRA, sell 40 shares of my company stock (valued at $9,326) and withdraw $1,395 from my savings. I was fortunate enough to have $17,000 to pay down my credit card debt, which totaled nearly $36,000 at the time. To increase cashflow, I also stopped contributing to my 401k for over half the year.
As painful as this was, it was even more depressing that I still had $19,000 of credit card debt remaining. Worse yet, I had less than $1,500 in my emergency fund (EF).
I then created a rudimentary budget and discovered the following:
- It will take a freakin' long time to save $100 for "fun money" when I actually have to pay off debt, not incur additional debt and save money for my EF
- I will only have $8.70/day for food and other incidentals like moisturizer, toilet paper
- I won't even have one month's expenses saved by the end of 2008
I despair when I think how long it would actually take to pay off all this debt. How much longer can I live like this???