Digging out of Debt: Treading Water [Part 3]

Part 1 – Poor Attitude: My early money blunders

Part 2 – The Pit: How I got myself into the financial hole

Part 3 – Treading Water: 2 Years of No Progress (Now Reading)

Part 4 – Fire Under My Ass: The wake-up call

Part 5 – The Final Push: How I finally dug out, and what I’m doing to stay in the black.

This is a series of articles explaining how I personally got myself nearly $20k into debt over the course of 4 years, and then out in just under 2.  For the next week, I’ll post one article a day going through one particular phase of the process, and either how I screwed myself over, or how I started on the road to recovery.

Treading Water

Yesterday I covered how I dug myself into a massive financial hole through over-spending, zero savings, and a rather impulsive move to Michigan.  There’s no question that by the summer of 2006, I was in a very bad spot financially speaking.  $15k in debt, $0 in savings, living in a new state and not sure where the hell I was going in life.

So began a full two year period where I essentially ended up treading water.  I did look at my finances that first year I was in Michigan and did start to alter my spending behaviors, but not significantly.  I basically reached a break-even point, and didn’t move from there.

It helped immensely that living in Michigan is vastly cheaper than living in Connecticut.  Gas is cheaper, rent is massively cheaper (I saved around $300/mo in rent, and ended up with a bigger place), I didn’t have to drive as far to work either.  Overall, my essential costs fell off sharply.  I’d say that my fixed costs dropped by about $7,000/year.  A smarter person that I would have seen that as a way to save a lot of money and pay down debt.  What I did was just adjust my spending enough so that I wasn’t adding more debt to the pile.

Every month I paid my minimum balances with a little extra.  I wasn’t losing ground to interest, but I wasn’t gaining any ground either.  I pretty much stayed exactly where I was.  I cut back on some of my spending and didn’t buy a ton of new gadgets, or new computer games.  In fact I set a small budget for myself when it came to games and other entertainment costs.  I also started to cook for myself a bit more, so my eating out costs dropped.

I had lapses of course where I’d vastly overspend for a month or two, and that would be followed by a few months of guilty saving/paying bills to get back to that balance point.  For two full years I didn’t budge in either direction.  When gas prices shot through the roof, I adjusted my driving and other costs a bit to compensate.  I was getting good at spending right up to my income.  But I was still tossing hundreds of dollars a month at my credit cards.  I knew that if it wasn’t for that debt, I could actually save some money.

Winter 2007 I talked to a financial advisor and was told it would be in my interest to get a high-limit, low-interest card and consolidate my 3 current cards down to one with a much lower rate.  This was the first major smart move I’d make on the road to financial well-being.  I consolidated down all of my $15k in debt to one card.  Immediately the amount of money I was paying per month to debt dropped.  But that extra money just went into frivolous spending. 

In that same period, I came and went from relationships.  Dates were always on me, going to fun (expensive) events, eating at good restaurants, seeing movies, going to shows, taking trips etc.  All of that adds up quickly.

By the time the summer of 2008 rolled around, I was no further along than I was in 2006, and a hell of a lot worse off than I had been in 2004.  Four years, two jobs and I was further behind than ever.  Here I was, coming up on five years out of college, 4 years away from 30 and if even the slightest thing went wrong in my life, I would be absolutely screwed.

I was in store for a major revelation that would get me to turn my financial situation around, and quickly.  But that’s a story for tomorrow.