A few months ago we knew we were headed into “negative” territory on our bills.  A perfect storm of events were happening and we could see what was going to happen.

In our efforts to work with our credit card companies, we started by calling Chase - please don’t laugh… we didn’t realize at the time we were taking on the stupidest credit card company in the world, and I am not exaggerating.

Chase refused to work any hardship with us - we simply requested a lower interest rate and a temporary lowering of our payments (we did not request any reduction in principle).  Instead, they told us they couldn’t do anything and refused to work with us.  They told us our only option to work with them was through Consumer Credit Counsel Service (you know, that “credit counseling” company paid for by the credit card companies - the same one who’s focus is making sure the credit card companies get paid, 4-walls be darned?!).  They didn’t care that we were already working with a financial counselor through all of this.

Well Chase, this month will be the first of several months you won’t be getting paid.  You refuse to work with us so you’ll just have to wait in line behind others who are willing to work with us.

So, knowing what a nightmare our first attempt was, hubby called Merrick Bank today.  The 1st call didn’t go so well… however, she hung up on hubby so he called back again… and got someone nice - yes, I said nice, and helpful!  Those are oxymoron’s in the credit card industry.

So, Merrick bank is very willing to work with us.  We have 2 credit card’s with Merrick and they were wonderful on both of those cards.  We told them we don’t have any money this month, however due to our efforts at selling things and bringing in extra income, we anticipate having the ability to repay again beginning next month.  In otherwords, we will miss 1 payment on both cards.  They said just call them to make the arrangements they agreed to which was dropping our rate to 6% and eliminating any late fees that accrue once the accounts go late.

Imagine that, a credit card company that actually wants their money and is willing to work out something temporarily with us.

Spurred on by the success of that phone call, hubby went on to Juniper Bank (we have 2 accounts with them as well).  They won’t do anything, period.  We can work through Consumer Credit Counseling and that is our only option with them.  No lower of rate, no temporary hardship, nothing.  In fact, they tried to sell hubby “credit protection” - yes, just what we need: to increase our debt with you when we are telling you we are not able to make the payment this month?!

So, Merrick Bank and our credit union are first priority on our “debt snowball” list and Juniper Bank and Chase are last priority.  Unfortunately, it looks like we’ll be going 4-6 months late on payments to them (unless something drastic changes in our financial situation in the very near future) which means likely charge offs… which means the companies aren’t likely to get even the principle amount owed to them as they’ll have collection agencies collecting for them.

We tried - over and over we tried. We asked simply for temporary abatement, not a hand out.  It’s no wonder people just give up and file bankruptcy (we will not).

We’ve also done this with every single card (including my coveted Macy’s Elite card)…

I just updated the “our progress” section…  hoping to do this on the 1st of every month.

Looks like in the last 2 months of being focused, we were able to eliminate $2,328.62 in debt, which is an average so far of $1,164.31 per month.  With an average of approximately $1,000 per month of debt payoff, it’ll take us approximately 43 months to get rid of auto loans, credit cards and taxes.

That’s entirely TOO LONG.  We’ll keep plugging away at finding any money in any way we can to pay off this stuff.  We want it done by Christmas 2010.

Ok - this is a part of the getting debt free that isn’t an issue for us.  We’ve had a budget for a few years and have lived by our budget successfully.  Budgets are not something that are static, they are dynamic and fluid.

However, ours has been WAY too fluid the past couple of years as evidenced by our debt.  We’ve also never had the goal to actually live debt free - our focus had just been to … well whatever … living debt free is what it should have been.  We were incorrectly focused and not biblically aligned.  We are changing that now.

I keep a bi-weekly budget as opposed to a monthly budget.  I have it drafted out in a spreadsheet along with formula’s etc.  I just completed all of 2010’s budget - putting bills where they are due, income as it’s expected, etc.  I’m a bit of an accounting geek (just a bit, not too bad) so I enjoy this process.

However, most people do not like this process.  I recommend heading over to Dave’s site and checking out his forms.  Get yourself a budget written on paper, this is a huge first step.  Before you can pay off any debt, you must have a budget and you must be current on all of your obligations.  Dave has recommendations on how to get there and what to do if you can’t meet all of your monthly obligations.  Please visit him for his advice, it’s sound and will make you so incredibly healthy financially you’ll be jumping for joy.

Our budget is completed and low and behold, on paper it looks like we are running a negative every month.  Hum.  I don’t know what’s been keeping us afloat (we haven’t been using the cards for almost a year) as we’ve been meeting all of our obligations just fine.  We did recently purchase a home which increased our monthly housing expenses (ok, it doubled it) and that’s about the amount we are showing negative.

So… now the game is on to figure out how much we can reduce our monthly expenses.

Here is our current monthly budget… I’ll review as we reduce expenses:

• Tithe - 10% (I’m not prepared to reveal our income so this will have to suffice!)
• Mortgage - $1304.54
• Freedom Fund (annual expenses, repairs, medical, etc) - $180.00
• Electricity - $75.00
• W/S/G - $75.00
• Gas - $75.00
• Phones - $225.00
• Internet - $50.00
• Groceries - $600.00
• Car Payment - $314.54
• Gas/oil - $300.00
• Health Insurance - $242.27
• Toiletries/pets - $100.00
• Cosmetics - $10.00
• Hair care - $50.00
• Tuition - $935.00
• School supplies - $10.00
• CC #1 - $65.00
• CC #2 - $70.00
• CC #3 - $81.00
• CC #4 - $87.00
• CC #5 - $116.00
• CC #6 - $125.00
• Gas card - $20.00
• Macy’s - $70.00
• ISTC - $100.00
• Personal loan - $151.00
• Student loan #1 - on forbearance
• Student loan #2 - on forbearance

My goal is to reduce this budget by at least $300.00/month over the next 6 months.

First thing we are attacking is groceries/toiletries/pets - current budget of $700/month.  I would like to bring this entire expense down to $600/month immediately.

Second thing we are attacking is internet - looking to find a less expensive broadband option.  We don’t have cable TV or satellite TV or a landline so we don’t get a reduced cost for our internet.  This is in process.  I’m hoping to save at least $20/month on this service.

Third thing we are attacking is our cell phone bill.  However, there isn’t much room on this one… we have 3 lines (mine, his, house/kids).  2 lines have internet access on our phones - we work in real estate and use this frequently throughout the day for MLS access, email communication with our clients/prospects, etc.   The house/kids line is $10/month and that will remain - we want phone access for the kids when we are not home with them.  So, I think the only thing we’ll be able to change on this is phone insurance that we pay monthly - $2/month I believe.  That will be gone immediately.

Those 3 items total $132.00/month of unnecessary spending. Just $168.00 to go!

Some readers have commented that using your credit cards is an option for an emergency fund. Frankly, that’s ridiculous. If your goal is to be debt free, why would you keep using the credit cards? Sure, the idea of paying them off in full every month is great, but obviously if you are trying to get out of debt, you haven’t been paying them off every month! Get real people! Get that emergency fund established so you never have to use your credit cards again.

Remember, it’s a mind set. You must make up your mind that debt is not an option. This means that using your credit cards is not an option. When you are recovering from carrying balances (aka, getting yourself out of debt) you have to stay out of temptation completely. Become a “card carrying member” of the cash is king world!

Who knows why, but for some reason, our Chevron card has become a “convenience”.  There happens to be a Chevron right around the corner from our neighborhood and ARGH, we have started running there for little convenience things.  Want some ice cream? Run to Chevron.  No cash for bread?  Run to Chevron.  Not enough time to run to Costco (where gas is the least expensive)? Run to Chevron where gas is very expensive.

Ok, today I am chopping up the Chevron cards.  There is absolutely NO reason for us to have one.  We are on essentially a cash budget (debit card works fine for gas) so the only reason we use Chevron is when we want to either not spend our cash or when we want something when we don’t have cash available - in both cases, WE DON’T NEED whatever it is we want.

Don’t get me wrong, I’m not canceling the Chevron account, only chopping up the cards making it impossible for us to use them.  There’s a whole debate about canceling one’s credit cards and right now, we are not willing to start attacking our credit by closing up cards.   We want to reduce our auto/homeowners insurance expense and having a higher credit score is key for that so… credit needs to get better (not terrible, just not premium).

It’s a journey that begins with a conscious decision, a first step: deciding that being debt free is a top priority, that having debt is no longer an option. I equate it to the same thoughts as a marriage ending in divorce: if you enter a marriage without first deciding that no matter what, divorce is not an option, you will end up in divorce. So, from this point on, no matter what, debt is not an option.

I’ve decided to share our process, albeit anonymously for now. There will be ups and downs, achievements and failures. It’s called life and we live it on a daily basis. It’s also likely that most of our life will spill into this process, choices we make, investments in our relationships, etc. I hope to share the thought process going on in my head, even the politically incorrect and judgmental thoughts, you know the ones that flash through your head that you wouldn’t really share out loud, yes those.