The First Step

So goes the saying - the journey of a thousand miles begins with one step - or something like that. Here's my step. Honestly, I feel like I've already traveled thousands of miles, but it really has always been in the wrong direction. I just finished reading the book, "Julie & Julia" about a woman who cooks all 524 recipes in Julia Child's "Mastering the Art of French Cooking" in one year. I think that is crazy. Add that to the fact that I refuse to eat most organ meats or cook with alcohol, and that project is out of the question for me. But something she said really struck me. Speaking of Julia on the day of her death she said, "I have no claim over the woman at all, unless it's the claim one who has nearly drowned has over the person who pulled her out of the ocean." I'm pretty religious, and I don't feel as if a blog can compensate where the atonement cannot, but I do feel like I'm in a rut. I'm making the same choices and living the same way that got me into this mess, so how 'bout it? My hope is that this activity will help lend the internal motivation that the mountain of debt sitting on top of me has not.

So, here's my story. The last time I was debt free was nearly a year after I had my daughter. I had accumulated some stupid debt - a target credit card and some medical bills (from when I got hit by a car just 4 days after my 18th birthday making me liable). I remember the collection calls when I was 2 days postpartum, and I was explaining to the nice (ha!) collector man that you can't get blood from a stone. I'm not spending recklessly, I explained, I'm just plain out of money. Anyway, I really want to honor debts incurred and I did my best to keep up minimum payments until my first tax return as a single parent. Boy howdy! I was able to pay off all of my debt in one fell swoop. I vowed as I made my last payment - NEVER AGAIN! And, actually, I kept to that for a number of years. I belong to a church that emphasizes debt-free living and I had been mightily traumatized by the collections experience. I did not have a credit card or loan for 6 years after that. I had expenses, but no debts. It was awesome.

In the interim, though I worked for Citibank (credit card company, if you've never heard of it) and was brainwashed into thinking that it is smart to "build your credit" by having a credit card and paying off the balance every month. I didn't act on that feeling, but I began to believe it. I began to think of debt as a tool. Let me state unequivocally - it is not a tool, it is a trap. So, I'm working at Citibank and tire of the peon role, so I decide to enter academia at the ripe old age of 26--I had a nearly 6 year old child and no money for tuition, but I felt that I would be forever hindered by my lack of a college degree. So, I applied for federal aid and was promised that all the loans that I was blithely signing for would be paid by the government for my service as a nurse. Little did I know that out of the thousands of applicants every year for that program, only about 2000 receive the award. Plus, there are millions of restrictions about the kind of job you have to have to qualify, and it's considered taxable income. BUT, I was in the fantasy land of deferred loans, and lack of any real experience with large debt. My debt before totaled less than $1500.
During the lean years of college, I was also wooed by offers of credit that were "pre-approved"! I was so flattered. I had basically no credit history and here I was a "real citizen". (I guess you could call that carnal security) I got a Juniper MasterCard, a CapitalOne MasterCard, a Home Depot Credit Card, a Lane Bryant Credit Card, Orchard Visa, a visa from my bank, and to top it all off I got Lasik eye surgery with a Care Credit discover card. (I'm glad I got Lasik, but I definitely should have paid for it with cash. I'm still paying the card, and it has virtually the same balance as when I got the surgery - 3 years ago!) Now, at first, I used the credit cards and I paid the balance every month--I was so disciplined! I got credit line increases and more offers for credit that thankfully I did not participate in.

Then came graduation and my first job (dun dun dun!) I was making more than I ever had, but then I started spending like I never had. The day I received my nursing license, I got in a car wreck and totaled my car. I got $1400 for it that I used as a down payment on a slightly used Toyota Highlander. I deserve this, I argued. My family tried to talk me out of it, but I insisted I could afford it. Plus, everyone has a car payment right? The other shoe dropped, the deferment period on my loan ended and here came $500 payments!!!!!!! I was drowning.

Just at this perfect moment, I quit my job. I began immediately applying for every job out there. I was hired by a unit at UNM Hospital, but their HR moves like an iceberg. I was out of work for a month, then a month in, my boss in that unit fired me with absolutely no warning. It was horrible, but I did get unemployment (about a third of what I had been making). I interviewed the Monday after I was fired on Friday, and she said I was hired, but the glacier affect happened again and I was not rehired for 3 weeks. So, during this time I used credit cards justifying that this was an emergency. I had no savings and bills out the wazoo, but I felt that I was handling things well.

So, now I am nearly 2 years into the job that I was hired for that Monday, and my cash flow is MUCH better, but my financial picture is not. Everything is current and I haven't had any repossessions or anything, but I have had some serious rough spots. I feel like I make too much to feel this poor! I mean it's truly ghetto. So about a year ago, I started listening to this guy Dave Ramsey. I am a believer in his system. I even paid off the bank visa, the Lane Bryant card and the Orchard visa, but I fell off the wagon. And bumped my head. I recharged the Lane Bryant card and I only have a portion of my baby emergency fund! I suck!! Curse You Aqua Scum!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

So, what can I do to run behind the wagon and climb back on? Well this blog is my attempt. First I want to outline the baby steps in Dave Ramsey's plan:

1a Destroy all credit cards and never use credit again (this is not really a baby step but an important addenda, I think)
1. Establish a baby emergency fund of $1000

2. Pay off all debt using the debt snowball (which I'll outline in a subsequent entry)

3. 3-6 months of expenses in savings

4. Invest 15% of household income into Roth IRAs and pre-tax retirement.

5. College funding for children

6. Pay off home early (in my case buy a home)

7. Build wealth and give! Invest in mutual funds and real estate

I keep vascillating between baby steps 1 & 2 because I over spend and have to pull money out of my baby emergency fund (BEF).

So, here goes. By August of 2014 I hope to be on baby step #5.
Wish me luck, pray for me - whatever you think will work. I need to do it, and Madison deserves it.

OK. Off to church, 'til we meet again!