My Come-To-Jesus Moment

Debt never really bugged me. I figured so long as I can make my minimum monthly payment, I'd have plenty of time to pay it off. I never had a budget. I thought I could afford anything that was within my credit limit. Of course, I have nothing to show for my profligate ways. (Well, nothing of monetary value, anyways. More on this in future posts.)

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???