Red or Black?
 

A numer of articles indicate that more Americans are in debt than ever before. I held around $8k in debt and managed to finally kill it after some hard work -- the feeling is liberating and wonderful. If you're in the red, how much are you and what caused you to be there? (property and vehicle loans don't count)

...and I have no idea how I managed to put this in "Politics". Ah, well. Someone make it political!

i'm in the black. i paid off the CC's slowly, but at the same time was saving $XX each month on a dollar cost averaging program. every time i got something paid off and had freed up cash, i added 50% of it to my monthly plan. every time my income increased i added 50% of the increase to the investment. in the beginning we were just scratching by, we really didn't have anything for entertainment for some months, but it was worth it in the long run. in the last 5 years we've managed to accumulate about 1 year's income in investments and savings. that does count investment growth.

if it weren't for that dirtbag GWB we could all be rich!!!

Student loans were bad, but credit cards were the real killer for me. They took forever. I used them for all my big purchases after my move and new job. In an attempt to remedy my debt, I took the cards out of my wallet and began using cash. That should have made the debt go down, right?

Bad idea.

Each time I'd take money out of the ATM and break a twenty, it would dissapear a short time later and I had no way to know where it went. Lunch out somewhere? The grocery store? Gasoline? Piles of checks being written didn't help much, either. I tried various methods of keeping a budget which didn't work so well, was difficult to keep up with, and was tough to stay motivated about. My savings account never seemed to have anything in it.

Oddly enough the solution, for me, was to use nothing but a credit card for everyday purchases. With the help of a friend, I was able to consolidate all my credit card debt onto one card with a high limit (this required some balance transfers) and then use one of the newly empty cards for daily transactions. While I paid a set amount to the low rate/high balance card each month, I paid off the small card with the high rate/low balance every thirty days without fail. The result was that none of the cards accumulated interest and I got a nice printed, running tally of my monthy budget. Gasoline, the phone bill, and food were all easy to check at a glance.

Sometime ago I had worked out that it would have taken five years (perhaps longer) to clear my debt the old way of paying it off in chunks on the card it originated on. I don't think I'll ever trust any of the advertised consolidators, either.

Of course, being single and not having children, I've often been told I have no idea what living with real debt is like...

I have about $3,000 in debt, mostly since I bought my house and have splurged on some repairs and improvements. I also took a big pay cut for my current job and don't have the ability to save the way I would like to anymore. I was about $20k in debt at one time (mostly from credit card use in college and right after), but managed to get it all paid off by working lots of overtime at my old job. Luckily my credit is nearly perfect now, so the debt I carry has a rate of only 2.99%.

(thread moved)

My husband and I technically have about $5000 left on his student loans, but since he's back in school right now they're deferred without interest, so we're putting the money we were paying on it each month against our mortgage principal instead.

Other than that, I'm proud to say we're completely debt-free--just paid off the second car last month, actually! I've only carried a balance on my credit card once, December of my freshman year in college. The dorms were closed for the holidays, so I didn't get the bill out of my mailbox until the due date had already passed.

We've got just the mortgage, my car (to be paid off this year, and kept) and his truck (hubby already wants a newer one, and it's only 2 yrs old). I paid off my ~$800 of CC debt right away after getting first 'real' job 4 years ago, now only carry a balance once in awhile. Never had student loans, lived at home during my BS, 'rents paid tuition, then got schalorships and assistantships for grad school tuition. Have had a job (or 3) continuously since I was 16. Husband dropped out of school way before any debt accumulated. :) Now, with 1 child, we are usually in the black at the end of the month, December excluded. I sell Mary Kay VERY part-time for a little $$ to blow.

We have a large debt because of the house. I assume you weren't talking about that. Otherwise we pay our bills off and save a bit each month.

Most of our debt is student loans. I'm still in school and so is my husband, so I guess it's inevitable. Neither of us had student loan debt from undergrad, so we are in good shape compared to many of our collegues. We did a financial management course through our church called Financial Peace University. It was developed by a guy named Dave Ramsey. He has a syndicated talk radio show as well. The focus of the program is not too religious, just a little bit, but even if you are not Christian, I strongly suggest you check FPU out. It has helped us immensly and we're in the black pretty much every month and have manage to save quite a bit - which is hard when you're both in school. The website is www.daveramsey.com.

Mine is credit card bills ($7500 including the one I had years ago and defaulted on) and my husbands student loan ($2000 left) and my tax screw up from last year ($1300). The car and taxes will be paid off by my refund this year, and the $200 that we were paying to the car every month is going toward the misc medical bills (about $300 total) and then the student loan. Once that's paid we're paying off and closing his credit card ($200 left) and then mine ($1500 of the above $7500) then the older bills. It's happening, just frustratingly slowly.

I'm horrible with spending little bits of money through the week. I'm now down to taking the ATM card out of my wallet, and my husband gives me $20 a week for gas and whatever. If we don't do that I'll go through $50 a week just on crap I have no clue where it goes. He has the will power, I know it's my weakness and I don't mind giving it up for the sake of our financial fitness in the long run.

It's like the ant and the grasshopper. Be an ant.

We have a lot less "stuff" than most of our friends. I bring sandwiches to work every day for lunch. One peanut butter and jelly, and one with meat. We drive an old, reliable, compact car. We bought new with savings almost a decade ago, so never had to make payments on it. It still runs great. I hope that lasts.

We amost never eat out. We never buy anything impulsively. We discuss every non-essential purchase beforehand, and often decide to hold off for a while on buying it. We usually then forget we wanted it. We rent movies from the corner $1 rental place, but don't go out to the theaters.

We are debt free, except for our mortgage, and even that bothers me a little bit even though it is less than the current rent on a 1 BR apartment around here. We live within our means, and actually come out ahead a few grand each year, which we put aside for the kids or in our nest egg. In addition, I contribute 10% to my 401K.

I feel a little envious when I go over to friends houses and see the stuff they have, but I know on paper I'm far wealthier than most Americans, and probably wealthier than many of my friends.

Oh yeah, and we are happy. Even without all that "stuff."

That's really a good tactic... I do that as well. It's much easier be smart with your money when you have cash - it's sometimes hard to let the green stuff go. I know I think twice when I need to buy something and all I have to pay for it is cash. Now with gas, I'd just have to suck it up and pay for it :).

Sorted all the finances out a couple of months ago. I use an Amex card now for most things as I have to pay it all back inside a month.

Being still in school I'm somewhat oblivious to just how dire my finances are, but y'all've got me thinking. Are there any big college-years fiscal shoulda-woulda-coulda's, beyond the obvious "get all your food, booze, and pot from friends & shack up with a business/econ/compsci major from a rich family"?

(I like the "use plastic, not cash" bit, particularly with online banking and such.)

Don't charge up the credit cards, no matter how tempting it may seem. It's scary how easy it is for college kids to get credit these days, and I definitely fell into that trap. At one point I received an offer for a pre-approved credit card with a $5,000 limit, and I didn't even have a job at the time (yup, I got it, and shortly after had it maxed out). I had a good time in college, but it took me almost 10 years to pay off that stuff. I've certainly learned my lesson...don't do it!

I think you pretty much have it figured out. :)

Beyond that, I'd try to keep a low limit on the cards and resist the temptation to increase to the level that credit card companies would like you to raise it to. The Capital Ones of the world would love nothing more than to own your ass once you get out of school.

I always tried to get a job on campus that I could use to offset some expense like being a dorm advisor in exchange for free rent or work in the cafeteria for free food. Jobs that pay with real money are fine but I tended to piss away the money.

Are there any big college-years fiscal shoulda-woulda-coulda's, beyond the obvious "get all your food, booze, and pot from friends & shack up with a business/econ/compsci major from a rich family"?

Avoid those damn student ID debit cards that don't permit you to use the money anywhere else but on campus. We ended up burning the money away in the school store on stupid crap because we weren't permitted to widthdraw the money until we had graduated (ha ha). Meal plans are sometimes a massive waste, too -- go to the grocery store and sustain on the joys of college, like Coco Puffs, coffee, and Ramen.

I really hate how credit card companys prey on college students. I fell victim to their free tshirts and candy bars as a college student and it pains me to see other college students fall victim to them. Whats sad is with all of the credit card debt that I did rack up in college, I have nothing to show for it. I didn't buy anything cool, just crap!

I work on a college campus now and really try to tell all of my students that credit cards are evil and not the way to build up your credit. Pay your cell phone bill on time, pay your tuition... that will help you build up your credit without going into debt.

My other thing is - if you don't have the money to pay for it now, do you really need it? Emergencies are one thing... but if you don't have $500 to pay for a pair of jeans, do you really need them? I don't think so.

Pay your credit card bill in full every month. Pretend that the balance is the minimum payment.

I agree. I never got my money's worth out of the meal plans. Most of the food was gross anyway, and I never got up early enough to eat breakfast, so that was a waste of 1/3 of the cost. I did a lot better with a mini-fridge and microwave in my dorm room.

Black. I use credit cards but pay them off each month. I spent a lot of money last year (mostly that New Zealand vacation mentioned elsewhere), so was red for the year but I had the savings to cover it.

Of course, making the property not count is cheating... I've got six figures of debt in the house.

Not really. You own a house worth 100,000 and you owe $98,000 on it you are technically in the black for $2,000 (transaction costs notwithstanding).

When there is no corresponding asset to the debt, that is a problem even if only a temporary one.

also, having a free and clear home is not the wisest choice. Real Estate with either appreciate or depreciate in value irrespective of the amount owed on it. if you can pay 4-6% interest annually on a mortgage balance and have a greater portion of your net worth invested wisely you will have more for your retirement nest egg in the long run.

BTW, i have to change my previous answer as i will now finish january seriously in the red. i just purchased another piece of land last night and will have to wait 6-8 weeks to pull my money back out and return it to my investments.

I'm about $12K in debt due to student loans. Minus that, I have about $400 that I owe on, made up of medical bills and credit card debt. I only got my first credit card two years ago. It came with a $500 limit and I've left it there because I know I'll spiral out of control if I get a limit much higher than that. Also, by using my debit card instead of cash for most of my purchases, I can easily see what my money's going into. And if there's something I really really want, I'm patient enough to wait until Christmas time or near my birthday and start dropping hints :D

Please explain how buying property puts one in the red. Unless, of course, you paid considerably more than the property was worth.

property counts when the sheriff nails the tax sale notice up
 

Debt is a lifestyle choice. Its great for the mobile fully employed middle class suburbanite who can afford to play the government tax and education games that were written for him. Buying land on speculation may not be a great idea for working class country folks, with rural population wanning and the buying pressure from city folks inflating land prices (temporarily?). Agriculture is dead, we live in a difficult job market but won't have a banker on our butts if we lose our jobs. We live very different lives, let's not pretend that our economies are the same. My house is free and clear. I built (am building) it spending no more per month than I would have spent on a morgage so there was no initial lump sum that could have been invested differently. I did take a hit on salary but that was balanced by being the primary care-giver for my kids before they became school age and providing that crucial stability. You have to tune your debt to your personal situation. You can use debt but debt can just as easily use you. Griff

Beestie, i meant that i'll be in the red for the short term, as i chose to drain savings to pay for it. i will mortgage it next month and return the money to my investments (keep in mind i pay no sales charges). just playing numbers games for best possible terms, really.

Griff, i definitely wasn't encouraging excessive debt. i wouldn't take out a larger than necessary mortgage unless i had that same amount invested in relatively conservative vehicles. that way, if the need arises, one can always pay the mortgage down without fear. example, if your home is free and clear and you were to take a loan for 50% of the value and invest that into a nice blend of conservative investments returning an average of 8-10% annually and you were only paying out 5% on the mortgage balance(which is tax deductible, so in a 15% tax bracket you are really only losing 4.25%), your money would be working more effectively for you. if you run into hard times you can A) pull monthly expenses out of investments, B) liquidate investments to pay off debt completely eliminating payment altogether. that scenario is equally valid in any job and housing environment.

That doesn't mean you should do it, though. All financial plans have to fit your comfort level. If you have a fantastic financial plan in place with wonderful investment vehicles working for you, but you can't sleep at night because of concern over the mortgage, it wouldn't be the right plan for you. Like i tell my clients "I have many great investments available, that doesn't mean they are all great for you. the goal is to fit the investment to the person."

i should also add that i don't really invest in property for investment sake. i am going to build a new home over the next 24 months then sell the one i'm in now. i believe the big housing bubble is going to deflate over the next couple of years as people who got in over their heads start to drown, creating opportunity for others who were a little more restrained about the housing markets. IMO

All I have now is my student loan, which was originally $8250--I'm almost halfway through paying it off (6 years down, 6 to go), but I might try to pay it off sooner. Rho owes 4 or 5 more payments to CCCS and she's debt-free.

But your net worth doesn't change when you convert assets from one type (cash) to another (real estate). So, the transaction is neutral to your red/black status - it hasn't changed one penny. Not trying to split hairs just making the distinction clear.