debt psychology... sort of

debtkid wrote a post called the #1 reason you can't get out of debt. he says that the real reason that people are not able to pay off their debt is because they don't want to badly enough. i love his post and i totally agree with him.

i have been struggling with credit card debt since may 2002. before that, i had a little here and there (a few hundred dollars some months), but was mostly able to pay it off after a couple months. what happened is that i graduated from college, took a road trip, and then was not able to find a job for several months. so i lived off my credit cards.

once i went down that path, it was so easy to just keep going. any time i wanted something that i could not immediately afford, i would put it on my credit cards. as i talked about before, three years in new york did not help my cause since that city is pretty much the epicenter of impulsive consumerism. anything you want is available any time you want it, as long as you are willing to slide a card across the table.

i did not even spend my money on anything that interesting... it was mostly restaurant meals, drinks in bars, flights to other fun cities, and some clothes and shoes here and there. but it was just so much temptation, and given that i was at a depressed, miserable point in my life (law school), i rationalized that i needed to maximize my fun time and "reward" myself with expensive meals and drinks.

i have had a few debt emergencies pretty much on an every six month schedule over the past couple of years. back in july, i freaked out when i realized i had -$19 in my checking account and was not getting paid for another two days. in december 2007, i reached the end of a month of partying and visiting people and buying gifts and was not sure how i was going to pay my january bills. i have had my credit card rejected in stores countless times for being over the limit, and have missed numerous payments.

for some reason, none of this really triggered a change in my brain though. that came this past december when i got a call from one of my credit card companies saying i had missed 2 months of payments. i talked them out of charging me but the next day the conversation haunted me. i kept hearing myself in my head and how ridiculous i sounded arguing about how it was "no big deal" that i was over my $2500 limit and "i do this almost every month" and "it's not fair of you guys to start charging me now."

it got to the point over the course of the day that i could not stop thinking about the conversation and i was compelled to look at my credit card statements. prior to that day, i had been throwing all credit card statements from at least the past year and a half into a box in my sun room, unopened. i would just take care of everything online and didn't look at the paper statements.

once i started opening them, i saw that the credit card had progressively been increasing my APR from 7.99% to 31.49% every month over the past year and a half. then i had what i can only describe as an actual panic attack. i have never had a panic attack before, so i don't really know for sure what they are like. but i was sweating, my heart was racing, i could hardly breathe and felt like i was suffocating, and my arms and hands were shaking. i did not know what to do so i just started calling my friends one after another and telling them about my financial mess.

i am lucky and have amazing friends who all promised to help me and did not freak out on me. but the thing is, ever since that day, everything has changed for me. for years i was convinced that i would just have credit card debt forever, that it was not a big deal, and that it was completely impossible for me to pay off. meanwhile, i would go out to eat almost daily, buy the most expensive specialty products in the grocery store, go on trips every other month or so, and occasionally spend hundreds of dollars on clothes i "needed" for work.

a lot of times when i talk to people about my new budget and the changes i am making in my financial situation, they will be like "well it has only been a few weeks now." i know that i have a long road ahead of me (3.5 years to pay off just the credit cards, according to my current plan) and that i can't expect that i can just change my mind about what i am doing and expect it to be easy after that.

but what i feel like many people do not understand is that there has been a fundamental and irreversible change in me. i feel like for the first time in my life, i am taking full responsibility for my financial situation and i am completely committed to paying off my debt and changing my lifestyle and choices. that call to my credit card company was a wake up call and a turning point, and i do not think there is any way i can go back to making the bad choices i made before with my money because i no longer believe that those choices are right for me.

debtkid says, "Getting out of debt requires sacrifice, but if your mind is right, those sacrifices become almost enjoyable, instead of unbearable." that is really what i think the difference is for me. i love that i am taking care of myself financially and i think it is fun to figure out where i am going to spend my fun money each week. every day when i get home from work, the first thing i do is enter my expenses into my spreadsheet.

i love seeing myself spending less than i planned to on things and i am so motivated about reaching my goal. and the fact that i am finding this process to be so fun and rewarding is how i know that i really am committed to getting myself out of debt.

prepare and file your tax returns online for free

if you made under $56,000 in 2008, you can file both your federal and state tax returns online for free via the beehive through h&r block's taxcut basic website. i know there are a lot of offers out there to do your taxes free online, but most of the ones i have seen other than the beehive only actually let you do the federal tax return for free and then you have to pay for state returns. the beehive is totally legit, i did my taxes through them last year.

i just saved $500 on my cell phone bill

i've been annoyed with my cell phone bill lately. here's the problem. my verizon bill, before taxes, was $74.98 per month. the breakdown:

• $59.99 per month for 900 minutes
• $10.00 per month for 500 text messages
• $4.99 per month for insurance on my phone

the reason this whole thing was really bothering lately was because a) i have verizon and so do most people i call regularly so i never need 900 minutes and b) i dropped my cell phone in a glass of water at the beginning of december and therefore was paying insurance for a phone that didn't work.

"for pete's sake, liz," you say, "if you have insurance, why not just replace the phone?" well it turns out that since it was all my fault that i dropped it in a glass of water, and not a malfunction of the phone, the insurance company was going to charge me $50 to replace the phone.

this seemed really stupid to me since i was seeing pre-owned versions of my phone (a pretty basic samsung) online for about $75. i had already paid 6 months worth of insurance on this phone (i got it back in august). 6 months x $5 = $30. $30 + $50 = $80. that is $5 more than the phone is worth. so i was pissed and just reverted back to my old nokia and seethed.

i bitched to a bunch of my friends who kept saying "call verizon! talk them down! you're a lawyer!" and finally i realized that i do not have to put up with this crap. as if by magic, just today julie sent me a link to this blog, which had this article on it, which addresses my exact problem!

as the article suggests, i went to this link and tracked my usage and figured out that no way in hell do i need 900 minutes... i need about 400-500 per month. that same link gave me suggestions on what plans would be best for me. as it turns out, verizon was the best plan for my needs. i also independently researched cincinnati bell, which was not one of the options listed. verizon was still the best. given that most people i call regularly also have verizon, and they let you have free unlimited calling with other customers, i was very interested in staying with them if possible.

so i called verizon. "hey. i'm having a financial crisis. i think i'm going to switch to cincinnati bell since they have this great offer that will let me have 500 minutes with unlimited text messages for $54.99 per month with no contract. also, i dropped my phone in a glass of water so i need a new phone and they'll give me one for free. i know i have insurance but i don't feel like paying $50 for a new phone. can you guys help me out? if not i just want to cancel my contract."

within about twenty minutes of haggling (very polite, no yelling), we agreed on a new plan: 450 minutes per month plus 500 text messages for $49.99 per month. i am also getting a $25 credit towards replacing my phone, 150 extra minutes for the next 60 days, and i can cancel the insurance on my phone at any time after i make the claim to replace the phone (which i will do next week). in addition, none of these changes will cause my contract to extend past the august 2010 end date.

in one hour (40 minutes of research + 20 minute phone call) using the very handy websites listed above, i saved myself $24.99 per month for the next 19 months.

total savings: $24.99/month x 19 months + $25 for new phone = $499.81.

sticking to the budget

i am really proud of myself. i know we are only two weeks into the new year, but that is halfway through the month, and 4% of the way through the year. and i am totally sticking to the budget! here are some interesting parts of the budget (ie- not rent/gas/insurance/etc):
-$47.50 per week for eating out (2 dinners and 1 lunch)
-$100 per week for groceries
-$50 per month to the emergency fund
-$40 per week for entertainment (drinking/movies/etc.)

there is more but i figure it's boring to list it all out. anyway, if i stick to this budget, i will get my credit card debt all paid off by june 2012. i am very lucky because my awesome excel genius friend bryan helped me make up my budget and made me this amazing monthly spreadsheet that calculates how much i have spent, how much i have left to spend, and even has a page showing how i am doing for the year. it's keeping me super motivated and it's making it very easy to stick to the budget. all i have to do is go in every day and enter what i have spent.

i can't believe that i am still so motivated about this. i know, i know, it has only been 14 days, but that is about 13.5 more days than i have ever stuck to a budget before in my life. i am really keeping my finances in mind at all times. i am learning to compare prices in the grocery store and buy cheaper when i can (certain things i can't compromise on though... and if i hate the foods i buy at the store, it will be much harder for me to resist the temptation to go out to eat). but i think it's ok to spend a little more on some things if i go cheap on others.

i'm also getting creative in order to maintain my social life. for example, one night some friends invited me over to hang out with them and order food in. i wanted to see them but had not planned on spending money on dinner that night. so i went over to visit them but brought a salad to eat while they ordered thai food. i also have been sticking to ordering beer rather than mixed drinks or wine at the bar. it's so much cheaper and i like beer anyway so it doesn't even feel like a sacrifice.

yay for a good start to the new year!

new year's resolutions

i have a confession to make. i am a personal improvement freak. i am seriously addicted to figuring out what i want to change about myself and then doing it. it's not that i am overly critical of myself (in fact, anyone who knows me would tell you, if anything, that i probably have too high of an opinion of myself). i just really enjoy making myself a better person, and trust me there is a lot of work to be done in that area. even i, as great as i am, am not perfect. shocking, i know. hahaha.

anyway, the point is that i just love making new year's resolutions, and most of the time i stick to them. i think the key is to not make resolutions that you are not completely sure you can keep. for instance, i think goals people make about losing a certain amount of weight or getting a boyfriend/girlfriend or "being a better person" just rely too much on a) outside factors and b) changing your personality or lifestyle in a way that may not be good or satisfying for you.

when i make my goals for the year, i spend a lot of time thinking about what is and is not working for me in my life, and what i feel that i can realistically accomplish. that means that i also have to think about whether i am able at the time to make certain changes. for example, if i were to say to myself, i want to make more money, that's great, but do i know how to do that? no, i do not. therefore, my goal might be, "spend x amount of time researching ways to make more money." then at the end of the year i can see where i am at and then reassess whether actually making more money is a realistic goal at that time.

here are some of my 2008 goals:

• commit myself fully to my life in cincinnati by developing close relationships to people here and making my job fulfilling to me and not overly stressful - check
• work through certain issues i was dealing with related to my parents' divorce - check
  
• call and visit my dad more often - check
  
• learn to make more of my grandma's lebanese recipes - check (well, i only learned hummus, but it still counts)
  
• travel no more than two weekends per month, three weekends per two month period, total - check

since my goal setting and accomplishing worked so well in 2008, i am being very ambitious in 2009. actually, i am a little worried that i have bitten off more than i can chew. my goals for 2009:

• stick to my budget (which i made, yay!)
  
• pay off $7k of my credit card debt
• pay off my car loan
  
• meet at least one new person each week
• call my mom, my dad, and my two sisters one time per month each
• visit michigan and illinois (where my family lives), or have people from there visit me, at least twice each
• do at least one volunteer project per month
• write on my own blogs (the food and debt blogs) at least once per week, and write on the cincinnati blog i write with my friend avani at least twice per month
• travel no more than two weekends per month, three weekends per two month period, total
• begin understanding and working on, and hopefully make substantial progress with, my most recently identified personal issue*

*my most recently identified personal issue = i am not good at knowing what i do and do not want, or what is or is not good for me, until well into something. i have noticed this most significantly in two areas: meeting people and making purchases. i am very impulsive in both of these areas. i will meet people and think i love them and then oops, i realize i don't really like them that much but by then they think we are best friends. on the flip side, i also sometimes decide i am not really interested in getting to know someone, only to find out they are really great later on and i just didn't give them a chance.

re: purchases, i will just decide i need something and buy it, and then only much later will i realize i made a bad choice and it is too late to change at that point for whatever reason. i need to work on understanding why i am bad at these early on decisions, and why my instincts are not good on these things, and hopefully then i can learn to change so that i am better at this.

i know this is a lot to take on this year, but i really think 2009 is going to be great even though i have a limited budget and a lot of work to do. yay for a new year!

emergency fund started!

i just opened up an ING savings account. it is going to take $50/month out of my paycheck to save for an emergency fund. pretty much the only emergency this will get me out of right now is buying myself lunch. however, i look forward to the day that my emergency fund can pay for a car accident or hospital stay.

hitting financial rock bottom

ok, i am now writing three blogs. some of you maybe found this one through getinmahbelly or cincinnatiimports.

after getting a call from one of my credit cards last week saying that i had been charged for 2 months in a row for being over balance, and haggling my way out of the charges, i realized that, in the past 2 years of not really looking at my credit card statements and just paying the minimums, the bastards had, month by month, raised my APR from 7.99% to (please sit down if you are not already) 31.49%. yes, i am officially getting completely screwed and yes, it is all my fault.

i am in this mess because i was jobless for a while after college graduation so i started using my credit cards to live. once you start being in debt and you realize it's not the end of the world, it's
way too easy to just keep going. i spent 3 years living (way outside my means) in new york for law school, which was really the hardest on my finances. i went from about $2500 in credit card debt before i started law school to about $12,000 when i graduated. this is not counting the almost $200,000 in student loan debt i also racked up.

my current debt breakdown:

• auto loan: $1,167.07
• credit cards: $15,736.72
• student loans: $177,741.18

i make way not enough money to handle this. fortunately, my student loans are currently being paid off through loan repayment programs, so that is slowly but surely being chipped away by people other than me.

my current asset breakdown:

• checking account: approx $1000
• savings account: $6
• 401k: $0
  
• pension: approx $3000
• car: approx $4500

that is it!

my tentative goals:

• pay off my credit cards by may 2012 (this would put me at paying approximately $450/month to start)
• start saving for an emergency fund
• start putting away money for retirement

over the holidays, i am going to take some time to make up a budget and specific goals, and then i am going to track my progress on this blog. wish me luck!