Baring my soul…my financial soul

I spend a lot of time talking about money and debt but I have never disclosed exactly how much debt I have, in part because it feels like a private matter. Yet as I start to get serious about wanting to clean my financial house up, I am struck by the fact that most folks who choose to do financial housekeeping generally at some point are willing to share with others the level of debt they have.

If you are a long time reader, you know that I have grappled with the idea of filing bankruptcy. It’s a lovely idea but after looking at my debt distribution, bankruptcy may not be the best idea since the bulk of my debt is not dischargable in a bankruptcy…and as far as I am concerned the idea of completely trashing my credit without complete relief does not seem like a great idea.

So drum roll…the grand total of debt that the Spousal Unit and I have is $211,310.57! Yes, that is two hundred thousand dollars and no that does not include our mortgage. Actually $113,310.57 of that is my student loans, that is for both my undergraduate and graduate degrees. The other large portion is the $66,000 that is owed in back taxes. The early years of the Spousal Unit being self employed we were not as good with the taxes as we could have been and lets just say the penalty and interest rates the IRS charges actually makes Vinny the loan shark look like a bargain and that is a understatement. You start off owing Uncle Sam $5000 and it can grow to $10,000 real fast so you have a few bad years and what was a small sum becomes really unmanageable.

The remaining $32,000 is $12,000 remaining on the hubby’s student loans and a mere $20,000 in credit card and medical debt.

So that is where I am, suffice it to say I don’t have a spare $200,000 sitting around to pay these bills off and since our income started dropping two years ago, the picture is a tad bleak at times. Right now we are planning to take Dave Ramsey’s Financial Peace class, though having read his book, I am not sure we will be able to implement all his ideas exactly to move us along but I do think its a step in the right direction.

However thanks to the fact I am lowly non-profit servant, it looks like the US Dept of Education has some options aside from being in constant deferment where I might actually be able to get my loans paid off sooner rather than later…10 years versus the current 30 year plan I am on when I am not in deferment.

As for the IRS, they too have been willing to work with us since we have worked hard to not run up more debt and since they know all about us financially they realize we have no hidden funds. The IRS actually offers settlement programs and we are exploring those options since interest rates that accrue daily don’t get them any closer to getting the money from me.

As for the remaining debts, well that $20,000 is the only amount that could be legally discharged in bankruptcy but as we get serious with our not spending plans we are hoping this is where Dave Ramsey’s advice might help us as far as starting a debt snowball.

So there it is…I have laid my financial soul bare for all the world to see. I admit knowing there are friends and associates that read my blog I am a little nervous about this but truth is I need help. I need folks to know that  I struggle with money in part because for years I could not face the fact I had a shopping habit. On some level I see my situation as similar to someone dealing with a substance abuse issue though my drug of choice is consumption. In the early years of our marriage we could have easily been saving 20-30K a year and had we been doing that we could have better weathered the financial storms that really started stirring when we moved to Maine 7 years ago and became a hurricane 2 years ago. Instead I assumed we would make more and more money and in the first 5 years of marriage amassed a lovely collection of designer clothes and other useless trinkets. At one point I was like Sarah Jessica Parker’s character from Sex and the City…broke as hell but looked great. I mortgaged our financial future to have weekly hair appointments at upscale hair salons back in Chicago.

I have come a long way, and I am proud of it but I know I have a lot more work to do, to realize I don’t have to spend money. That the temporary fix I get from that $4 coffee is just that temporary, instead saving that money to pay off creditors is a much better idea.

Now with the holidays coming up, clearly the potential to get in a jam is there but we are looking at ways to have a frugal holiday, most likely by using layaway at area stores to buy for the kiddos. The upside of not having much extended family is that we only buy for our kids and send cards to everyone else. We are also planning on visiting family and friends soon. I realize many would consider this a splurge but its important to me that my daughter know our family and since folks are willing to put us up, we can find ways to travel on the cheap.

So now that I bared my financial soul, while I have no plans to become a financial/frugality blog, I will be writing more about my struggle to manage my money. I have written a budget for Oct that looks great, things would get paid, we would be working towards our financial goals and it’s not complete deprivation…I can still have an occasional mocha at the evil empire. The thing is I have to stick with it and that’s where I am going to need some help. Its sorta the baby steps to a no-spend lifestyle.

So if you have any ideas or thoughts or want to share your own struggles with money and how you overcame it, I would love to hear from you.

PSA…Real Financial Advice

Several years ago when the Spousal Unit and I started to experience a decrease in our income, for the first time in my adult life I really had to get serious about tackling our finances. I am embarrassed to admit that for many years I pretty much mimicked what I had seen with my own parents when it came to money, get paid, pay your bills and if there is anything left just spend it. Yep, and I cringe in writing this but for years I never thought about what happens if???? No rainy day fund, no plans for the future just spend, spend spend. Always counting on future job growth and raises.

Early in our marriage we were netting just a hair under 6 figures and in that time saved not a dime and still managed to put things on credit cards. I know, just dumb as hell. I sometimes I wish I could go back in time for just a year, lets just say I would have a nice savings fund. Some might ask how did you get to that point? Like I said, my folks had no financial sense, we never talked money. I do recall seeing them stave off collectors and was an adult before I realized you can pay the light bill before they send the disconnect notice.

However in these rough financial times, I will say that the way I was raised (with little cash) has been helpful after all unlike my good girlfriend who just can’t imagine ever buying second hand clothes, I have no problems with yard sales, thrift shops or things like that. In fact I now prefer buying used over buying new. I get more bang for my buck and often net some unique items.

However in the past several years as I was saying, I had to start getting real serious about our finances, sadly it took a huge loss in income to get real about money. So I started surfing the net and reading folks like Dave Ramsey and Suze Orman. Now before I start I should say that I think both of them have some excellent nuggets of advice but overall I feel like they are not living where I live or where many folks are currently living. After all at the end of the day, these guys are laughing all the way to the bank on the funds they earn from us buying their products.

That said, the best thing Dave Ramsey says that I agree with is that everyone needs an emergency fund, look…I’m not talking 6 months of income put away. Yeah, that is a great goal but for many us including yours truly, that is not reality now or anytime in the future. Yet we all know situations where the car needs a minor repair or you need to call a plumber out and its a few hundred dollar expense, now maybe you can put it on the credit card and that is most certainly an option. However in this current economy you may not have that available on your card and you shouldn’t count on it being available, after all the credit card companies are reducing their lines. No, this is when an emergency fund is a great idea and really in my opinion what it is designed for.

Now if you are like me and don’t have much cash left over after paying the bills, you may be saying where the hell do I get the cash to fund this emergency fund? This is when cleaning out your house and having a yard sale or listing your stuff you don’t use on Craigslist would be a great idea. Two years ago, I made a decent sum getting rid of the kids stuff on ebay as well as my old Coach purse collection. I generated well over a thousand bucks in about 6 weeks time and while it didn’t go towards the emergency fund (I was out of work at the end of 2007) the money did go towards paying bills. So it was still worth selling shit off. Right now I am thinking of a spring yard sale and this time the cash will go towards the emergency fund, since last weeks plumbing debacle reminded me of why I need one. It was 4 days before pay day and I was running on empty thankfully a good friend was able to front me the cash till payday but its been years since I have had to borrow money and while I was thankful, truth is I don’t want to be there again.

Now other gems of advice that the financial gurus give you seems predicated on having folks who earn enough money like I used to and are just making bad choices with how to spend it. If you are like me and have been where I was until recently and simply did not have enough money to meet all the bills that’s when I find the advice these so-called gurus give to be rather lacking.

Look, the bottom line is you need food, shelter, utilities, transportation and any regular medical needs…these are what I call priority items. Lately I skim the financial boards and am amazed at the number of folks who don’t realize that if you are jobless, Visa and Mastercard are not a priority. Yeah, good credit is important but don’t pay the credit card folks to the exclusion of the folks who keep you housed. That’s just not a smart move. Suze talks alot about the important of a good FICO score, yeah it is important but if you are struggling, something has to give. Call me crazy but what good is having Visa paid but living in a cardboard box?

Also in these current times, we have to look long and hard at needs versus wants….cable TV complete with movie channels is nice, when you can afford it. However I axed premium cable a couple years ago when the going got tough and for the most part don’t miss it. Only reason we have any form of cable is that the company gave us a deal since we use them for internet. which in our case the internet is actually a legitimate business expense since the Spousal Unit needs it for work. Otherwise it would be gone.

I am an avid reader and love reading the newspaper, had home subscription..I now read it online for free. There are all sorts of small items we pay for, we consider them necessities but truth is they are not. Speaking of , I only had Starbucks one time last week, regular readers know about my battle with the Bux….better to use that money on more enriching activities.

So just a little financial advice from someone in the trenches.