End of the Year Reflection - My 7 Stages of Debt Repayment

After I wrote about how I'm no longer underwater on my student loans, I marveled how my debt repayment process was awfully similar to that of the 7-stages of grief.

1. Shock (1998-1999) and Denial (1998-2007)
When I graduated from law school in 1998, I knew I was graduating with a big debt ($106,925, to be exact), but I never paid attention to exactly how much and never gave much thought on how I was going to pay back the loans.

When the grace-period after graduation expired, my reaction was, “Oh my God, I don’t know how I’m going to repay this. But I’m sure it’ll all work out somehow.”

I’m not sure exactly why I thought things were going to "work out somehow", since I didn’t have a budget or a plan.




During this time, I “borrowed” (read: took accepted) money from my parents and lived on credit cards. Whenever I was short on money (which was always), I sought and received forebearances on my student loans. I lived in complete and utter denial.

It seems like other people experience this type of denial as well. This article from MSN Money highlights the story of Sophia Wallace:

The 28-year-old New York resident has a master's degree from a prestigious university, a successful career in photography, stamps in her passport from around the globe and, until recently, personal finances that were out of control.

When Wallace graduated with a student-loan debt of $60,000, she found herself overwhelmed to the point of financial paralysis. She tore through a $5,000 loan from her dad as bills stacked up. She had no idea where her money was going -- despite making what she defines as a good salary. The sense of powerlessness crippled her.

2. Pain and Guilt (1999-2001)
As I was (barely) making my minimum monthly student loan payments and digging myself deeper into credit card debt, I kept thinking to myself, “What have I done? Why didn’t I study harder during undergrad so that I could get scholarships? Why didn’t I research whether I qualified for grants? Why am I not independently wealthy? Why, why, whyyyyyyy????”

I wallowed in self-pity for about 2 years, conveniently disregarding the fact that I got myself into this whole mess.


3. Anger and Bargaining (2001)
Despite the fact that I was taking accepting money from my parents to make ends meet, I found myself getting angry at my parents for not being rich enough to pay for my law school education.

Some of my classmates/friends lived in Beverly Hills and their parents funded their education 100%. Although some of these classmates were earning the same amount as I, they were living a much more extravagant lifestyle since they had no student loans to pay back.

I grumbled that I too could be living the "high life" had my parents paid for my law school education. I cursed my parents for not being rich. (Talk about misdirected anger!)

I also bought lots of Lotto tickets, praying to God, “If you let me win just enough to pay off my student loans, I promise I will do pro bono legal work for the poor and needy…” I don’t know exactly how much I spent on Lotto tickets, but that money probably would’ve been better spent paying off my debt, don't you think?


4. Depression, Reflection and Loneliness (2001-2007)
I was depressed and withdrew from many of my friends. They were all buying houses and I was still living in a rented 1 BR apartment (and still am). They were driving fancy cars and I was still driving my mom’s hand-me down, beater Toyota Corolla.

I was already $157,000+ in debt and went through a downward spiral of spending binges on cars, fancy designer clothes and accessories, and fancy vacations.

I may not be rich, but at least I can spend like one.

In 2003, I fell behind on my student loan and some credit card payments. I came to accept the fact that I was going to die with my debts. Who cares about my credit score? I'll never be able to buy a house anyways.


5. The Upward Turn (2007)
(Earlier this month, FruGal was very kind enough to highlight me in her “Five Minutes With” series. The following is from the interview.) My lightbulb moment came when I got rejected for an American Express Clear Card.

I was desperate to transfer some of my high-interest credit card balance to a 0% interest card. American Express instantly rejected me for: 1) serious delinquent payment history and 2.) excessive debt-to-credit ratio.

I’d never been rejected for a credit card so this was a horrible slap in the face. I knew I needed to do something. But what? How?


6. Reconstruction and Working Through (2007-present)
After the rejection, I tallied up my debt payments and I discovered, to my horror, that my monthly expenses were $500 over my monthly income. I had no choice but to: (a) increase my income by taking a second job and/or (b) reduce my debt.

My second job as a telemarketer for a cheesy timeshare didn’t last for a month. So I chose option (b).

In 2007, I liquidated most of my employee stock option account, my savings and my Roth IRA to pay down $17,000 of my credit card debt immediately. I also stopped contributing to my 401k (i.e., tax-deferred, employer sponsored retirement account) for 7 months to increase my cash flow. At the time, liquidating my assets was the hardest and scariest thing I’d ever done.

I was also ruing the lost opportunity of not contributing to my 401k, but as they say, things happen for a reason. This was the smartest move I ever made since I'd stopped contributing during the height of the stock market bubble and paid down my debts instead.

Anyhow, during this time, I did the next scariest thing – I created a budget for the first time in my life.


7. Acceptance and Hope (2008) [My Current Stage!!]
Up until mid-2008, I was still pretty depressed since I was upside-down on my debt and I didn't think I could pay off my debt ever.

But when I plugged the numbers in a debt reduction calculator and into my spreadsheet, I discovered that I could pay off my entire debt in 6 years and 5 months. I thought, "That’s totally do-able AND I’ll still be in my early 40s when that happens!" A ray of light.

Well… the rest is documented in my blog that I started in August 2008 with the encouragement of Sallie's Niece.

I still have a long journey ahead of me and my blog is helping me be honest and accountable. I am grateful for all the tips, support, encouragement, and yes, criticism, the PF blogging community has given me in 2008.

Thank you all and have a blessed 2009! Go PF Bloggers!

Security Freeze on My Credit Report Thwarted My Free Credit Check

Some time in early November, I took a 0% credit card offer to work. Mindlessly, I either misplaced the offer or I threw it away without shredding it. I became concerned enough that I placed an initial 90 day fraud alert on my credit report.

All good, but when I tried checking my free credit report from www.annualcreditreport.com this morning, I was thwarted.

I now have to fill in a written form, include a copy of an i.d. that shows my mailing address, and submit via snail mail. I'll also have to wait to receive a copy of my credit report via snail mail as well.

Sigh... I guess the price of security is convenience.

I think I'll wait to order my free credit report since I want to purchase my FICO score at the same time. According to this MSN Money article, the newly revamped FICO 08 won't be available until next year anyways:

TransUnion will offer the new score to lenders starting in late January, with Equifax introducing it in the spring, said Craig Watts, a Fair Isaac spokesman. (Experian, the third bureau, hasn't yet announced when it will offer the score.)

While I'm on the topic of free credit reports, did you know as a member of AAA, you can get free credit monitoring service? (Note: I'm not sure if this benefit is limited to Southern California AAA members only. Please check with your local branch of AAA to verify.)

As a AAA member, you can enroll in Experian's CreditCheckSelect for free and get:

• One free online Experian Credit Report;


• Free daily credit report monitoring;


• Free email alerts;


• Free fraud resolution support.

You'll need to go AAA's website to enroll. Also note that the fine print says that after you enroll, if for any reason you decide to cancel your CreditCheck Select benefit, you may not re-enroll in this free benefit at a later date. And of course, the benefit is subject to change or termination at any time without notice. (There's never a free lunch.)

My Post-Christmas Economic Stimulus Activity

I got a couple of gift cards this Christmas and I shall do my duty as a good citizen to spend it to stimulate the economy! (Eh, who am I kidding? I'm going to use them as fast as I can, before either of these stores go bankrupt.)



My parents gave me a $100 gift card from Ann Taylor. This is a thoughtful gift from my mom, since she is aware of my weird superstition of wearing a new outfit (including new underwear) on New Year's Day. A male friend once said it sounded like a bogus superstition I made up to justify buying a new outfit. Ha ha ha. Maybe it is, maybe it isn't. ;-P

I already bought my New Year's outfit when I went shopping with my BFF and big sis, but I wouldn't mind buying something extra as well. If you look at my monthly budget, you'll notice I have no allowance for cosmetics or clothing. That is one of the many things I nixed from my budget when I vowed to bring my finances under control. If I need want to buy clothes or cosmetics, I'll have to pay for it from my food budget or pay for it out of my miscellaneous earmark fund. With this gift card, I'm excited I'll be able to shop for clothes without worrying how I'm going to pay for it.

My IT guy gave me a $50 gift card to Bed, Bath and Beyond. (My IT guy at work and I developed a strange tradition over the years of giving each other gift cards for our birthdays and Christmas. It's a total wash, but it's fun.)

The BBB gift card will come in handy since I'm planning a frugal bedroom makeover before the end of the year. I purchased a bed-in-a-bag on sale from Macy's a couple years ago. (See, picture at right.) I haven't taken it out of the bag yet since my current yellow, floral lampshades will clash with the brown/teal color scheme of the new bed covers. I'm planning to get new lampshades from BBB and possibly some new bath towels. And you better believe I'm going to be using all the 20% discount coupons I've been collecting the past few months for my purchases!

I'll repeat: I LOVE gift cards. :-D

Oh My Gosh... I (Finally) Caught Up To My Original Student Loan Balance!

As regular readers of this blog know, I've been bemoaning my irresponsible borrowing of student loans 13 years ago. Regular readers also know that I've been whining about how I've been out of school for 10 years, yet I owe more on my student loans now than when I graduated due to several forbearances I took. (My prior rants on this issue can be read here, here and here.)

For those unfamiliar with student loan forbearances, the process allowed me to postpone monthly payments due to hardships (or any other approved reasons), but it also allowed interest to continue to accrue, adding to the principal owed.

Up until now, I couldn't figure out what my exact original student loan balance was, because I kept such shoddy records. (You didn't expect me to be in the debt-hole I'm in by being organized, did ya?)

But today, I found the information I was looking for: I originally took out $25,500 in Federal Stafford Loans, $30,000 in Federal Unsubsidized Stafford Loans and $47,325 in Private Student Loans. [UPDATE: I forgot to add $4,100 I borrowed through the Federal Perkins Loan program. I completely forgot about this since I paid off the Perkins loan on 3/5/07. Hurray!]

My original student loan amount in 1998: $102,825 $106,925.
My current combined student loan balance: $102,726.85

I just discovered that for the first time in 10 years, I owe less [in my Federal and Private student loans] than when I graduated!

Note: This is how I really dance.

I know I shouldn't be elated about owing now what I did back in 1998, but I can't help but feel ecstatic. I no longer have the "sinking in quick sand" feeling. I feel like I'm FINALLY clawing my way out of this hole I've dug for myself 10-13 years ago.

Oh, happy day and what a great way to end 2008! This is the best Christmas gift I've ever given to myself!

Keeping My Fingers Crossed for a Debt-Free December

I hope everyone had a great Christmas. Mine was certainly relaxing and downright frugal (at least for the day).

Anyhow, I've been keeping track of my spending for the holidays and so far, I'm under-budget. But to be honest with you, I'm only under-budget if I count some financial chicks that haven't hatched quite yet.



My holiday budget was based upon:

1. My Christmas fund (which was woefully underfunded at $150),


2. My December food/gas/toiletries/incidental budget ($500),


3. Several pending business expense reimbursements from my company ($821), and


4. A monetary bonus that I should be getting for successfully completing a professional designation program ($480 after taxes).

Part of the problem with my budget this month was that I had couple of expenses that arose unexpectedly (e.g., my cat's $275 vet bill and $744 to replace my tires.) I've tapped my other earmark funds like my "pet fund" and "car maintenance fund" to pay for these items, but alas, they too were inadequately funded. Therefore, I'll have to access my "new laptop fund" to pay for some these expenses.

I also took an ill-timed $288 girls' getaway weekend with my BFF early this month. My BFF and I agreed that the weekend will be our Christmas gift to each other and that helped a little bit. I'll be paying for the weekend out of my "Vacation Fund", but again, the fund is insufficient. (Sigh...)

Based upon my spreadsheet, I won't incur new debt this month so long as my company reimburses/bonuses me before my credit card comes due on 1/26/09. If my company doesn't come through in time, I will either have to tap my EF or sell some company stock to pay it off. Either scenario is not great, but I am determined not to incur any new debt.

Let this be a lesson to me to avoid creating budgets and spending money based upon money that I don't yet have in hand!

Merry Christmas from Shtinky and MJ

May your holidays be safe and joyous!

Pre-Holiday Miscommunication With Family Resolved

I’m spending Christmas alone this year with my cat, MJ. No sympathies, dear readers; This is by choice. (Some of my friends have kindly extended invitations to spend Christmas with their families, but I’ve declined.)

Christmas has never been THE big holiday for my family. The biggie holiday has always been New Year’s Eve, when my parents come to visit.

Since I only live in a 1 BR, I put my parents up at the local Residence Inn every year. I live in a “tony” neighborhood, so the local Residence Inn on New Year’s Eve is always surprisingly expensive (i.e., over $200/night). Hence, my “winter holiday budget” always includes 1 night hotel stay, champagne and meals (approx. $500+), in addition to gifts.

Luckily, my budget will be lower this year since my sister will be joining us. My sister will take on the financial burden of the champagne and meals. Phew!

Anyhow, last week, my sister told me that mom wanted to come a day early. I told my sister that the extra night will have to be on someone else’s dime (hint, hint), since I’m not spending over $250 for their hotel costs.

Unbeknownst to me, my sister told my mom something to the effect of, “Shtinky doesn’t want us to visit a day early.” (Grrrrrr….)



Oblivious to my sister's misrepresentation miscommunication, I called my parents yesterday to thank them for the Christmas gift that I received in the mail. My mom, in the subtlest way said, “Your sister tells us that you don’t want to spend an extra day with us....” Sigh….

I set the record straight. “No, mom. I would love for you guys to stay an extra day. It’s just that I can’t afford 2 night’s hotel stay. If you’re willing to pay an extra night, you’re more than welcome.”

I then reconsidered said, “Actually, I guess I could pay an extra night in lieu of a Christmas gift to you and dad.” As expected, my mom replied, “Oh, silly. Don’t get us anything. We'll pay for the extra night.”

But... as it turns out, my dad (who is suffering from dementia), did NOT want to come out for an extra day. This discussion was all moot and pointless all along!

Anyhow, I'm glad any hurt feelings within my family is cleared up now.

Hope you all have a SANE holiday!