|by Mr Credit Card|
When I first started this blog in 2006, I checked out various other personal finance blog and came about Blogging Away Debt. It turns out that this blog was written by Tricia and back then, she had over $37+ in credit card debt. She started a blog to, well, document her journey to reduce (or rather eliminate) her debt. A couple of weeks ago, I asked if I could be the first to interview her when she is finally debt free. She told me that was cool and as a matter of fact had wired in the check to completely get her credit card balance to zero. Last week, she announced that she was officially credit card debt free!.
If you have credit card debt and are looking for inspiration and advice, I suggest you get over to her blog and subscribe to her blog feeds. In fact, now that she has gotten out of credit card debt, she’s got another blogger Beks (who herself in in debt) to blog about her journey (hence keeping up with the spirit of her blog). One of the things I really like about the blog is her writing style. She writes from the heart and about her experiences. You will not find any “top 10 ways to blah blah blah” attention seeking type post on her site.
Well, it’s a privilege to be granted the first interview since Tricia got out of debt. I hope you enjoy it and take home a few tips from this.
Mr Credit Card: Can you briefly describe how you got into your debt situation?
Tricia: My debt started with one of those tables in college where you sign up for a credit card and received a “goodie”. I received a candy bar. In my mind, the credit card was free money so I did not use that card responsibly. It didn’t take long before the card was maxed out. Then the credit limit was raised. I maxed it out again. The cycle began and didn’t stop for many years. Of course, other credit cards were added to the mix as the years went on and that’s how we ended up with over $37,000 in credit card debt.
Mr Credit Card: Did you explore other options like debt consolidation, debt negotiation etc?
Tricia: A co-worker showed me an agreement from a debt consolidation program that she was going to do. I didn’t like some of the wording so I never looked into it any further.
Mr Credit Card: Can you tell how your credit score was when your credit card debt was $37k and how it has moved as you reduced your debt?
Tricia: My credit score when I first started blogging about our debt was 711. Even though we had a lot of debt, I was very careful to never have a late payment so that has helped my credit score immensely. As of a few months ago, it was at 783. At one point when we transferred all of my credit card debt to my husband it raised to 804 so I am excited to see where it stands with my next update.
Mr Credit Card: Do you subscribe to any credit monitoring service? If you do, which one would you recommend?
Tricia: I do subscribe to a credit monitoring service. It started when we were trying to get some financing and I needed to know my credit score. During our debt reduction journey, I wanted to cancel it to save some money since you can get your credit report for free twice a year. But since I blog, I felt having a better eye on my credit report was worth it since I am in the public eye. Since I’ve only used one company, I don’t have anything to compare it to so I’ll refrain from a recommendation
Mr Credit Card: How did you come up with a plan to pay off your debt? Were you actually ahead or behind your schedule. Did you strictly follow it or were there deviations?
Tricia: We did not have a plan in the sense that we had a strict amount to pay towards our credit cards every month. I had an idea of how much I wanted to pay, but the goal was to always earn as much as we could and spend as little as we could. Extra went towards our debt. To do that, I read A LOT. I mostly read other blogs since I found the greatest tips there. I’d take tips that would work for our family to make what I call our “Recipe for Debt Reduction”. Everyone’s recipe will be a little different because everyone’s situation is a little different. Personal finance is not one size fits all.
There were some months that were tough and some were great. I loved to pay big chunks of debt off at a time. I think it gave me a “high” of sorts. It became addictive.
In the end, we were able to meet our goal date, although we had to pull some money from our savings account. Now the next step is to replenish that money as soon as possible.
Mr Credit Card: What advice you do have for setting realistic budgets?
Tricia: Ahhh…budgets. Budgets (in the traditional sense) and I never got along. In general, though, I had an idea in my head of how much certain spending should be. Since I have been tracking our finances using financial software for over 10 years, I knew what to expect for our spending and we went from there. So if you are trying to set realistic budgets, I think it’s very helpful to look at your past spending for at least a year (if you can) to get an idea of what is normal. Then try to lower it as much as you can from there.
Mr Credit Card: How did you deal with temptations to spend on “unnecessary stuff”? or when you know splurging on them will blow your budget?
Tricia: In my mind, any splurges would make it take longer to pay off our debt. Most of the temptations we had were dissipated by stepping away from the situation and letting it simmer for a few days. Often, we talked ourselves out of a purchase.
We have splurged a few times, but we thought out the purchases. When you are in debt reduction mode, it can be hard to stick with it in the long haul. So I think an occasional splurge can help you stay on track. But I stress the occasional and thought out splurge part
Mr Credit Card: Do you use any budgeting software? How do you monitor your monthly spending?
Tricia: I have been a user of Quicken for many years. When I said that I never had any late payments above, I credit using Quicken for helping to make that happen. I am a bit of a numbers/computer geek so having our finances on the computer suits me well. But, you can also do it with keeping your receipts and then adding them up by type of spending on a piece of paper. I did, however, update our finances to QuickBooks not too long ago since we use it for our business and I like the reporting ability better in QuickBooks.
Mr Credit Card: You recently wrote an article about how proud you were of your son as he has picked up good frugal money habits. But there must have been situations in the beginning when you keeps asking you for stuff cos his friends have them (I know that is the case with my kids). How did you deal with that?
Tricia: That is a tough thing to deal with. As parents I think we want the best for our kids. Our son was spoiled before we started our debt reduction journey. We bought him so many toys – I think Fisher Price has some excellent people working for them because they drew mom and dad in with their expandable sets (e.g. Little People).
After we started reducing our debt, things changed. It probably wasn’t the best way to handle it at first, but if our son wanted something really bad we’d mention that perhaps he could ask for it for Christmas or his birthday. Sometimes it worked – sometimes it would result in some tears – sometimes mom and dad did give in, but got something that didn’t cost quite as much as what our son originally wanted.
As we started learning more about personal finance, we started sharing information with our son and introducing the idea of saving up for a purchase. When he was able to purchase something he saved up for, we gave him a lot of praise and told him we were proud of him for saving up. You can tell he’s proud of himself too.
There was a recent situation where our son had money saved up and wanted to a toy that one of his friends had. We went to the store and he decided to not it once he learned the cost. He had the money, but he didn’t think it was worth it. You can almost see the wheels turning in his head since he’s starting to understand the concept of value.
Now we take time to help him think about things without telling him he cannot something with his own money. Does he really want it? Will he use it? He has experienced er’s remorse (“I shouldn’t have bought this. I should have saved up for the other toy.”). It’s tough to let him make these little mistakes, but we are here to help guide him. We’d rather him make these little mistakes now than the big ones when he’s older.
Mr Credit Card: You talked a lot about this on your blog – in that you were in charge of finances in your home. How did your goal and the process of getting rid of debt, setting a budget, being frugal affect your relationship with your husband?
Tricia: My husband has always trusted me with handing the finances – even though I was the one who got us in the credit card mess in the first place. He was not one to go out and spend money without talking to me first. I was the one that spent money without talking to him first. So it was natural that I wanted to take the lead to get out of the mess since I got us into it.
My husband has been fine with that. There have been some frugal things I wanted to try that he was not crazy about but he went along with it. Then there are some times where he looked at me like I was nuts when I mentioned a new idea. I’ve been known to go overboard, and he keeps me in check. Then there are also the times where I was tempted to purchase something and he was there to ask me, “Do we really need it.”
Overall, we survived mainly because we were on the same page and we have the same overall goals. Even though I was leading the journey, he provided a great deal of support along the way. He was the rock that provided stability to my sometimes impulsive nature.
Mr Credit Card: In your blog, you have documented some unexpected circumstances that temporarily caused you to missed your budget (like car repairs) etc. How has that affected your views of emergency funds? How many months of emergency funds do you have and what is your opinion of how much to have?
Tricia: I was against having an emergency fund in the beginning. My thought was that our credit cards were our emergency fund. I took advantage of opening up an online savings account to receive a bonus and I found that I liked having money in the bank. We slowly started adding to it and I found comfort in it.
Even though we had available credit to use for car repairs, I loved the fact that we had some cash on hand to be able to pay for it. I think it gave me a sense of power. We may have had a lot of credit card debt but we had some money set aside so we didn’t have to go into more debt.
Right now we have enough in our savings for a little over a month. We’d like to eventually increase that to 6 months…maybe more.
Mr Credit Card: Now that you have no credit card debt, will you cut up the plastic or do you feel that you now have the discipline to pay in full every month? You mentioned that you have 7 credit cards? How do you plan to use them in the future? Any plans to get a cash back card and actually get some cash back?
Tricia: I am not anti-credit card. I think that surprises a lot of people. While I do not agree with their practices and I find some of them outright sneaky – they were never to blame for our credit card debt situation. I was the one that was swiping the card knowing that I didn’t have the money to pay for what I was ing.
There is one card that we have been using for a while just for the cash back. It is paid in full multiple times a month and we do not use it unless we have money in our checking account to immediately turn around and pay it. We didn’t use any credit cards in the beginning – we only started doing that once we felt like we had the discipline to keep it under control. So far it has been working great and it’s nice to finally earn something back (we’ve earned $160 so far!) rather than pay them thousands in finance charges. But you have to be disciplined and very, very careful.
Mr Credit Card: You have made use of 0% balance transfer deals. Could you tell us how you chose the cards and what advice would you give others who plan to use this method?
Tricia: There are some credit card companies that I consider “good” companies. Some are “bad”. I always done balance transfers with the companies I have had good experiences with. I think the biggest thing I learned about balance transfers is that once you transfer the balance from one card to another – you do not use the card you transferred the balance from! I did not do that and it contributed to our large credit card debt balance.
Mr Credit Card: Do you set up autopay on your credit card bills or your other bills for that matter?
Tricia: I do have credit card autopay for one bill. I did it for a special promotion but haven’t put any other bills on autopay. I may consider adding more in the future. I don’t think I’m ready for that yet.
Mr Credit Card: You have negotiated with credit card companies to reduce your interest payment. Could you tell us how the conversation went and what advice would you give to others looking to do the same thing?
Tricia: Calling our credit card companies to reduce our interest rate didn’t always work. I wrote up a transcript (not exact) of one of my calls here. A few months later I was successful. I look at it this way – it usually doesn’t take more than a few minutes to try and it’s worth a shot. If it doesn’t work, you aren’t out anything except for a few minutes of your time. If it does work, you can save some money!
Mr Credit Card: Recently, a lot of folks have had their credit card lines reduced or their interest rates hiked. Has that happened to you?
Tricia: Surprisingly, no. In fact, our credit limits have been raised by two of our cards within the past few months. In light of what has been happening to others, we have been trying to use all of our cards at least once a month to keep them active. After we use them we turn around and pay them off regardless of when the statement comes. At some point, though, we will start closing some of our newer cards to simplify our finances.
Mr Credit Card: Are you worried about getting back to old habits and getting into credit card debt again? Or has the last 3 years permanently changed your spending habits for good? Are you taking any steps to make sure you will not get into credit card debt again?
Tricia: That fear is always there. For me, I am an emotional spender and I become impulsive at times. It’s a dangerous combination. Now that I’ve realized my weaknesses, I try to deal with them in a healthier manner. I also try to keep away from the stores if I think I may have urges to overspend.
In regards to our everyday spending, I think we are in a great place since we’ve learned so many great spending habits. There is some danger, though, of gradually getting back into bad habits. I will still be tracking our finances going forward so we can watch for things like that.
Mr Credit Card: During my first 10 years of working, I had no mortgage (which was a great feeling). Now that I have one, it feels like a burden and to me, that is like having credit card debt. Now that you have no more credit card debt, how do you feel about your mortgage and student loans? Does it bug you like your credit card debt did and do you plan to pay down off sooner than your loan term? Maybe the better question is what is the new financial goal for yourself and your family?
Tricia: Both our mortgage and student loans will be paid off sooner than the loan terms. However, it will not be at the same pace as we paid off our credit card. We really scrimped on some expenses while in credit card debt reduction mode so there is some money we need to spend (like making some repairs to our home that we put off). We also want to get a healthy amount in our savings and we need to get some retirement contributions going. So there are many “baskets” to get filled. We are not sure how much each one will get just yet.
Mr Credit Card: Any plans to start a blog about quitting smoking?
Tricia: LOL. While I do want to quit smoking, I think having to write about cigarettes would make me think about them too much and would not be productive. It worked to blog about our debt since we did have to keep focused on our finances to keep track of everything. I may blog about a topic in the future if the right opportunity arises.
Mr Credit Card: How about some general tips and advice to those in debt and looking to be debt free?
Tricia: Now that we have paid off our credit card debt, I can look back at our journey and mention a few things:
1.) Don’t wait another day. After you plug some numbers in a calculator, you may see that it will take years to pay off your debt. I thought it would take forever to pay off our debt in three years. But now that we are here, three years later, it didn’t seem like that long at all. Time flew by!
2.) Try not to get discouraged. I think it took so long for us to try to reduce our debt because we thought it wasn’t possible with our income (before we started our debt reduction journey we were making less than $30K/year combined). We didn’t have things to cut that were mentioned in many articles like landscaping services or personal care expenses. Once we started making more money was when we started our journey. In hindsight, we did have expenses we could have cut and there was no reason for us to have been in credit card debt in the first place. We could have lived on what we made – we were just living above our means.
3.) Personal finance is personal. This is related to #2 above. Everyone’s situation is different so all the tips you read may not apply to you. The key for
us was to search for tips that worked for us to make that recipe that I mentioned earlier in this interview.
I can think of many other things, but I think the three above were the ones I wish I realized a long time ago. They were the mental blocks that I think prevented us from taking action against our debt earlier than we did.
Mr Credit Card: Tricia, congratulations once again for getting rid of your credit card debt. What you have achieved is simply wonderful. I wish you all the best going forward
Tricia: Mr. Credit Card, you sure are a hard-hittin’ interviewer (watch out Anderson Cooper)! Thank you for my first after credit card debt interview