New Address

I am excited to announce that I have moved to www.thegoodlifeonabudget.com! My husband set up the site for me, including the hosting on one of his servers, and I have been working on putting together all the particulars and transferring my posts for a few weeks now. This will be the last post at blogspot, please update any links and feeds. Thanks for reading!

My Husband is out of Credit Card Debt

When I was running the numbers for my update post, I realized something. The two credit cards we have remaining are both in my name only. So technically, on paper, my husband no longer has any credit card debt.

We didn’t really plan for this to happen, and it’s all my doing anyway. He doesn’t deal with the day-to-day finances or payment plan, and I devised it based solely on interest rates. When I opened our 0% Citibank card last fall, I used my name only because it was easier, and the money transferred was from the one card that is in his name only. So now that the Discover card is paid off, he has no more credit card debt.

His interest rates were only a few points higher than mine, and that’s most likely due to his student loans, which are 3 times larger than mine are. That and my obsession with calling my cards and negotiating lower interest rates, which he does not share.

Now my husband has a head start on me in improving his credit score, which is going to come in handy pretty soon…

Where Did Summer Go?

I can’t believe it’s the end of August already. Labor Day is right around the corner. This summer has been crazy, but strangely, for no particular reason. Work has taken over my weekdays completely, and every weekend it seems like there’s somewhere to go (and sleep to catch up on!).

Our credit card debt currently stands at $7880.64, split between 2 cards:

• Mastercard (9.99%) - $4424.64
• Citibank (0.00%) - $3456.00

We are so close to being done with this beast that I can taste it! We’ve been through a lot of ups and downs, but we’ve never been below $10,000 since we began our journey out of the hole. We are in the home stretch now, and we’re going to sprint to the finish. The plan is to be completely credit card debt free by the end of September. It’s going to take a lot of concentration and effort, but we are determined.

We have imposed a spending freeze until we are out of debt, save for our normally budgeted items. All our extra money will be thrown at the cards. The only problem is, I don’t know which card to pay off first. The 0% promotion ends on September 25. I am ashamed to say I don’t know what happens to the remaining balance at that time. Does it just then accrue interest? Or does it back-charge interest for the total amount on the card (which was $5100) for the entire year? That’s not a risk I’m willing to take. I have been splitting our payments equally between the two cards, and when it gets closer to the end date, I’ll pay the Citibank off first. This will also help keep me motivated and aware of our September 30^th deadline.

My Car Insurance Pays Off

A few weeks ago, I was walking out the door to go to work when I saw something that stopped me dead in my tracks.


A thunderstorm had passed in the night and this branch broke off the tree, falling directly onto our car. That's just suuuper. I said a few choice words, then turned around and walked back inside to get my husband.

We assessed the damage and determined that the only thing wrong with the car (besides the huge branch still on it) was that the window was cracked. Not smashed, fortunately, but messed up pretty bad.


Since the crack was on the passenger side, the car could still be driven. We wanted to fix it quickly, though, before it got any worse.

I did a little research online and determined the cost to replace the windshield to be about $200. Then I called our insurance company to report the damage and see if they would cover any of it. I was skeptical, as we have a $500 deductible. Come to find out, in MA insurance companies cover 100% of windshield replacement. I was shocked! The insurance company even arranged for a windshield repairman to come to my office and replace the windshield.

I was impressed. I have never dealt with my auto insurer, as we have never had a claim with them. This experience was almost pleasant. I never had to worry or stress about the damage; as soon as I talked to them, the wheels were turning to fix the problem. Now that is what insurance is all about - peace of mind.

Independence Day Challenge Complete! (Mostly)

One more credit card down!

A few weeks ago, I challenged myself to run a 5K and pay off $5K of debt by the Fourth of July. Unfortunately, I have fallen off the running wagon. Again. My dad hurt his ankle in the week following my original post and, without my running partner, I let the training slide.

But on to better news: yesterday I paid off our Discover card! I have been chipping away at the balance all month, and still had $1907.22 left to go. I planned on using part of my husband's next paycheck, due to arrive on July 3, to sneak in the final payment and wipe it out. However, I was surprised to find that my commissions last week included a bonus that I thought I hadn't qualified for. After some calculations in Quicken, I sent off the last payment. We are now free from this credit card!!

Our newfound financial freedom is particularly gratifying when you consider the original cause of this debt. We opened the account in October 2005 based on a 0% balance transfer offer. All of our other credit cards were maxed out and at that time we didn't have a lot of resources. We decided to take the 0% offer and transfer part of another balance to the new Discover card. Only it didn't end there. Before we knew it, we had charged up to the limit of the Discover card and the original card. So we were worse off than before.

If you think of debt as a hole you're stuck in, the Discover card was a false step in the right direction. We were trying to climb out of the hole, only to find that the floor was falling out beneath us. I am so excited to finally be one step closer to complete debt independence.

Cheap Date #7- Canoeing

I try to find fun, interesting dates to go on with my husband that cost less than $20 for both of us. Not all our dates qualify, but we try to make at least half of our dates cheap dates that don't break the bank.

Around Christmas 2006, my in-laws moved to another house. When they were cleaning out their basement and garage, they came a across a bunch of things they no longer used or needed, including a couch, armchair, a variety of my husband's childhood items and a canoe. My husband rented a U-Haul and brought the whole lot up to our house one weekend.

It was great to get their only slightly used furniture, which I am lounging on right now. The canoe, however, was put into storage. Our garage doesn't have a lot of room in it, so the canoe went into the basement. Until a couple of weeks ago, when we had a stretch of 90 degree days. We decided the time was right to take out the canoe.

It was a little tricky putting it on the car, but we figured it out. My in-laws gave us the foam blocks, but we bought the tie down straps at Job Lot. They cost $7 apiece, which will amortize over each use. One for the front, one for the back.

Our first excursion, it turned cloudy and cold as soon as we hit the water. We paddled around for a bit, saw some turtles, a heron and a pair of beaver dams, then headed back in.

Turns out there's not all that much to do when canoeing. You paddle around and look at the scenery. We got a little bored after a while so the next time we went canoeing, we came prepared with books and snacks.

Then we really enjoyed ourselves! We paddled around for a a little bit, then beached the canoe and read our books for a little while. I think next time we'll even pack a picnic lunch and some drinks and relax for an afternoon. There is a lake about 5 minutes from our house that we can pop over for an hour or so to unwind. This is definitely a cheap date we'll be doing all summer!

Paying Uncle Sam

Last week I got the revised bill from the IRS. Incidentally, I was driving home from work and cursing myself for not calling them yet to inquire about our economic stimulus check. I stopped at the mailbox and there sat the shiny, updated bill. The IRS and I must have some sort of psychic connection. Either that or I procrastinated the perfect amount of time. It's an art.

But I digress. The Grand Total came to $1834.39, which is the previous total of $3030.91, minus the economic stimulus of $1200. There was also some additional interest added in to the tune of $3.48, which makes me wonder if there will be any more residual interest between the time I received that invoice and the time my check is cashed.

I sent the payment in (finally!) last Tuesday and I am waiting not so patiently for it to be processed. I'm so eager to be rid of this once and for all.

Independence Day Challenge

Back in high school, I ran cross country. I was even first team all state my senior year (Thank you, smallest state in the union). Since then, I have kinda fallen off the running wagon. I played rugby in college, which interfered with the cross country season, and then switched the gym (intermittently) after that. For the past few years, I haven't run at all.

My parents recently participated in 12-week fitness program that jump-started a more active lifestyle. Fresh off that, my Dad decided he needed a new goal to work towards and enlisted me to partner with him. So basically, I got roped into running again, as we are planning to run in the town's annual 4th of July 5K.

Yesterday I was planning on going for a training run, and I wasn't really feeling like going. I made myself get up and do it anyway, because I have to be ready for the 4th of July road race. I made a commitment to my Dad and to myself that I would run in that race. It's only a month away. I don't have time to skip training runs.

So as I was running, I was thinking about the road race and how it mirrored other goals of mine, specifically getting out of debt. I realized that the reason I agreed to run in the race was that I knew I could prepare in time. If I just followed a training schedule, I would be in good enough shape to run the 5K. Similarly, if I follow my budget, I will be able to pay back my debts.

I decided to make a short term goal for the debt payoff. Wouldn't it be nice if, on Independence Day, I was independent of debt? Well, that's definitely too much of a stretch, but what about one debt? What if I can kick one credit card to the curb before the 4th of July?

As it turns out, the next debt on my list (after the tax bill, which is already planned for) is my Discover card. The current balance on that card is $5329.33. Just about $5K, huh? So although it won't be easy, I think we can do it. My Independence Day Challenge is to pay off the $5K before I run the 5K. I have 30 days to do it.

I am challenging myself - and everyone out there - to set a short term goal. By the 4th of July, promise yourself that you will be in a better financial position than you are today. Maybe you'll be independent of credit cards by taking them out of your wallet and promising not to use them again. Maybe you'll be independent of worry by setting up an emergency fund. Maybe you'll be independent of one of your debts, like I am trying to do. It doesn't matter what it is - only that we make positive steps towards financial independence. The point of money is the freedom it provides - so why not celebrate Independence Day a little more free?

How will you be more financially free before Independence Day? Leave a comment, write a post, let me know! Let's all have a little more freedom.

The Tax Bill Cometh

All day yesterday I was formulating in my head a post about how we hadn't yet received a bill for our federal taxes, lamenting how poor a job the IRS was doing in sending it out. Which is pretty stupid, actually, since the taxes were due over a month ago. So it was really me who did a lousy job by not preparing for the nearly $4000 we owed for 2007 taxes.

But I digress. It was all spoiled yesterday when I opened our mailbox and pulled out a shiny letter from the IRS, stating that we have an amount due on our income tax. Finally! I have been like a little kid, running to the mailbox every day, hoping upon hope that the bill would be there. (Well, not actually running, more like walking briskly from my car, parked directly outside the post office.) I just couldn't wait to get this bill. I was so upset and irritated that I made the mistakes of not withholding enough, not filing early enough, and not saving enough to pay the taxes on time. Finally I can fix it and make it all go away.

The original tax due in April was $3481. At that time, I sent in a check for $500, which brought the "overdue" amount to $2981. The underpaid tax was then penalized a half percent for each month overdue (April and May), or $29.81. Then 6% interest was charged on the principal for the 41 days overdue, which came to $20.10. Now, I am not a big fan of interest or fees, but compared to some I have seen in the past, these are incredibly reasonable. I was expecting worse.

My husband got paid today and I will be getting my paycheck tomorrow, which together provides us with enough to pay off this bill at the end of the week. Before I got ahead of myself, though, I looked deeper in the mail and saw another letter from the IRS - this one about the economic stimulus package. It stated that we would be receiving $1200 no later than May 23. The letter arrived in my mailbox on May 27. Then, in small print on the back, it mentioned that if outstanding taxes were owed, the economic stimulus would be applied directly to the balance.

I would love if they took the stimulus check and reduced the tax bill by $1200. However, I don't want to pay the tax bill if it's going to be reduced by $1200 in the near future. I called the number on the tax bill to figure this out and got some weird static on the other end, so I will have to call the number on the stimulus check letter. I am just trying to be patient and accept that we will pay it off soon.

How Many Chickens?

Back in the beginning, when we started our debt payoff, I made a Excel spreadsheet that listed all of our debts, from highest interest rate to lowest interest rate. I made our budget and figured out how much money we could allocate towards our debt every month. Then I went online, found this debt calculator, and plugged all the numbers into it. Shazam! We would have our debt paid off by October 2007. I made my goal December 2007 to give myself a little wiggle room, and rejoiced that I would enter 2008 debt-free.

It is now May 2008. I am not debt free.

Sometime in the summer of 2007, I re-did our calculations and determined that we would be out of debt by the end of April 2008. I continued with that assumption and even made it one of my goals for 2008. Now in May, we are in more debt than we were at the beginning of the year.

What happened? Life. Not planning for things. Not seeing the writing on the wall.

I counted our chickens before they hatched. I did the same thing before, back in the day when we accumulated all of this debt. I planned on using future money to pay for things, not thinking that the future money would vary and would be needed for more immediate concerns.

This was illustrated to me all too clearly at the beginning of the month. In November, we decided that, instead of exchanging gifts with my in-laws, we would all take a trip together. We scheduled that trip for the first week of May. I planned on being out of debt by the end of April, so I was psyched about the prospect of having no financial worries and relaxing in Mexico. Of course, that's not how it all turned out. We had to put our continued debt reduction on hold to pay for the trip, and there were quite a few stressful days where we weren't sure if we would have cash spending money to bring along with us. Not the relaxation I was hoping for. In the end, it all worked out, the trip was completely paid for, and we had a great time.

But moving forward, I will not be counting my eggs and making plans until they are chickens. Or at least not very rigid plans.

One Job at Last!

For a year and seven months, I worked two jobs - my "day job" in sales and nights and weekends at a retail store. Forty to fifty hours a week at the day job and an additional 20-25 at the store.

At the end of March, I quit my second job. I finally understand again why people look forward to Fridays.

It was a long time coming. I have wanted to quit for... well, forever. I never really enjoyed relinquishing my precious free time for $8.50/hr. Sure, I made the best of it and had fun when I could, but I was never in it for enjoyment.

The first weekend in April was revolutionary. Friday night I came home from work and had a nice relaxing evening at home with my husband. Saturday we awoke to no alarm and spent the day taking care of errands and cleaning up around the house. That Sunday we went on a fantastic hike. All in all, I got to remember what it is like to have 2 sequential days off.

It was great to have the extra income, and it enabled us to put about $8,000 towards our debt snowball. The time had come, however, when the cons outweighed the pros. I am happy I was able to do it for so long, and happy to no longer have the two jobs!

Taxing

So we finally buckled down and did our taxes. (Last weekend, the post is late, not the filing.) When I say we "did" our taxes, I use the term pretty loosely. Since my husband has his own business, it can get a little complicated, so we have an accountant. The accountant sends us a tax planner, which is a 10 page document with tax-related questions. All we have to do is fill it out, attach any related documents, sign and send it back. Not quite as involved as actually "doing" our taxes ourselves.

Last year when we filed our taxes on April 14, we told the accountant that we would be much better this year. Not wait until the last minute. Send them in early, with plenty of time to spare.

Yeah, right.

I finished our planner on Sunday. April 13. Beat last year's record! Except Sunday is not a business day. Undeterred, I drove the packet to the accountant anyway. At 5:30pm. Not surprisingly, the door was locked and no one came when I knocked and yelled. This was not good. I drove 45 minutes and spent $50 in gas to bring this packet in! I was going to submit it! So I dialed the phone number on the business card and, one by one, punched in the names of each of the 4 partners. And got 3 voice mails. In a movie-esque climatic scene, the fourth and final partner was there, in his office, and came downstairs to accept my packet. No dirty looks or anything! I was shocked.

The next day I got the phone call from our accountant. I was expecting to hear from her as there are always a few things to go over. What I was not expecting was the amount due. Almost $3500. In federal taxes alone. I just about fainted right there in my cube at work.

With complete lack of foresight and the unforgivable ignorance of taxation, I had assumed that our taxes would be about the same as the prior year. It was not. Last year we owed about $1000 total, between state and federal taxes. This year the total between the two was almost $4000. Thinking back, it's obvious that this would happen. Our income almost doubled from 2006 to 2007. That alone accounts for much of the difference. The main issue here, though, is that we failed to plan ahead.

That's right, we didn't have the money to pay the taxes.

When I heard the total from the accountant, I panicked. Last year was the first year I've paid taxes instead of getting a refund, so I'm inexperienced. I was freaked out that if we didn't pay in full by April 15, we would get audited and penalized beyond belief. The accountant reassured me that it's not that bad, and to pay what we could immediately and they will bill us for the rest. So I wrote a check for $500 to the IRS, and another check for the entire state tax and now we wait. Wait for the next round of paychecks and for the bill to show up in my mailbox. Hopefully the two will coincide and I will be able to kick this swiftly.

In the meantime, though, I'm going to change my exemptions. :)

Cheap Date #6 - Stargazing

I try to find fun, interesting dates to go on with my husband that cost less than $20 for both of us. It's been a while, but we are back in the game, trying to go out on cheap dates without breaking the bank.

Many people just pass them by, with an occasional glance towards the heavens to see the twinkly brightness. I know that I have many a time paid them no attention on all but the clearest of nights. So when my husband suggested that we go on a stargazing date, I was a little skeptical, but I agreed.

When my husband was 7 or 8 years old, he got a stargazing book, complete with Planosphere, for Christmas. This was the beginning of our journey. We perused the pages and found what our night sky would hold. Then we packed up the book, a couple of sleeping bags, a flashlight, a pair of binoculars with one side broken (or monoculars, as we called them), hats, mittens, and an adult beverage, and headed to the local park.

Our location wasn't perfect, but we sat overlooking the lake and had a pretty decent view of the sky. We were a little too close to civilization, so the ambient light blocked out stars near the horizon. Quickly we recognized Orien, but then we had to consult the book to find the others: Leo, Hydra, Gemini and many more. It was fantastic to finally put a name to something we've been looking at for years and romantic to snuggle under the sleeping bags while we looked up the different constellations. After about an hour, we were sufficiently cold that we headed home, but I was hooked.

The night sky you can see changes considerably depending on the time of year and even the time of night. The change is gradual, but the stars in March are entirely differnt than those you see in August. We've decided to make this a recurring date, about once every season - maybe skipping the dead of winter! The best part of this date is the thrill of matching the stars in the sky to what you see in the book (or on this website) and the closeness you feel in accomplishing that. Plus it's educational and free! This cheap date is definitely a keeper.

Back from the Dead

I am embarrassed. One blog post in March. ONE! Oh, the shame. Oh, the horror. I apologize to you for being such a lousy blogger.

I'm not a big fan of making excuses, but there are plenty of reasons. Reasons that will help to fuel some future posts. I have been traveling quite a bit for work, I left my second job (finally!) and spending some much-needed time with my family. The good news is that now I have more free time to do things that have been neglected (clean my house), build my career and work on my blog! I have so many ideas for posts and geeky changes I have been dying to make. I'm so excited to finally be able to implement them.

So bear with me... the best is yet to come!

Cheap Date #5 - Cinema Pub

I try to find fun, interesting dates to go on with my husband that cost less than $20 for both of us. It's been a while, but we are back in the game, trying to go out on cheap dates without breaking the bank.

A little while back, I had a comment on a cheap date post that anonymously mentioned a local movie theater that also served drinks. Anyone who knows me would know that I am game for that! Well, it turns out that my "anonymous" commenter was actually my uncle! So he and my aunt knew that this is a place we would love to try. They were so convinced that they gave us a gift certificate to the Cinema Pub for our birthdays in January. Thank you!!

We drove to the theater on a Saturday night to catch the late showing of Atonement (which was a great movie, by the way). Like many less expensive movie theaters, they don't offer the brand new movies, but rather movies that have been out in theaters for a little while. With most movie theater tickets approaching $10 a pop, I can deal with seeing a movie that's a few weeks old.

Each ticket cost $5 and a pitcher of Bass was $14. Even in a bar, you'd be hard-pressed to find Bass for that price! Since we were also using our gift certificate, we went ahead and ordered some buffalo wings to go along with it, while staying well below our $20 budget.

If you live in MA or RI, I highly recommend the Cinema Pub, but if not, try doing a search for a discount movie theater in your area. It's a great night out, especially in the winter when outside dates aren't really an option.

Beauty and the Frugalite: At-Home Haircuts

For years I have cut my husband's hair at home. We have a trimmer with all the attachments that we bought for about $20 and has served us well over time. My husband used to do the simple #1 buzz cut all over, but then switched to a two-length fade. It took a little adjustment, but I figured it out and can do it pretty well now.

Much more risky, however, is cutting my hair. His hair is so short that in a week or so any errors will be erased. My hair is a little more complicated. It's fairly straight, and I like to wear it between chin- and shoulder-length. It sounds simple, but cutting it is definitely more involved than buzzing his melon.

The last time I cut my hair was in May 2007. I try not to spend money on myself very much to keep within our budget and throw more at the debt, and regular haircuts have never been my specialty. Recently, my hair has been bothering me - it was too long and lifeless, and it took forever to blow dry. So I did something adventurous - I asked my husband to cut my hair for me.

He cut my hair once before, and it turned out pretty good. Or at least I thought it did until I went to a salon and they asked me if I had cut it myself. Oops, I didn't think it was that obvious. Regardless, I figured I'd give it another go. The budget has been tighter than normal and I was fed up with my hair. It was time to take a risk.

I won't pretend I wasn't nervous. What if it came out crooked? What if he cut off too much? What if he slipped and poked me in the eye with the scissors? But in the end, I trusted my husband to do a good job. We went for a simple cut, no angles or layers and soon the floor looked like this:


Yipes! That's a lot of hair! He cut off about 4 inches, and I am loving the new 'do. If you want to try this at home, I recommend:

• Sharp hair scissors - no paper shears, they can fray you into split-endsville
• Comb - all we had was a brush and my ears suffered for it
• Towel to wrap around your shoulders
• Trash bag to lay on the floor & catch the cuttings
• Steady hand
• Sharp eyes
• Hand held mirror to check out the back

My coworkers think I'm crazy to let my husband near my hair with scissors. Have you or would you ever try this at home?

*Update* Shanti tried it at home the very same day as I did and posted about it too! Great frugal minds think alike!

Tales of a Cashier - Store Credit Cards

The Tales of a Cashier series relates my experiences at my part time job in a retail store.

At our store last weekend, our manager announced a new initiative: to push the store credit card. We are now supposed to ask every customer who comes through our line if they would like to put their purchase on their store card. If they showed any interest we should then spout off the benefits:

• 20% off today's purchase
• Gift certificate rewards
• Special coupons & events
• Special gifts.

Of course, nowhere in there do we mention any of the pitfalls of opening store cards, the biggest of which is the horrible interest rate: 21.99%! This is fairly common for retail stores. The fees and billing are pretty awful, too - you can't even pay your bill in store or online, and the expedited phone payments to avoid a late fee cost $15.

When I heard we were to start promoting this, I balked. I told the boss that I wasn't going to ask every one of our customers if they would like to go into debt, regardless of the "benefits" of the program. The only way I will even mention it to anybody is if they have a huge overflowing carriage and saving 20% on everything will make a BIG difference ($50+). Other than that, no way. I know that every person should be responsible for their own way, but I don't need to show them the door to debt. If they want it that badly, they can open the door.

SB at Be Thrifty Like Us discussed the many disadvantages of store credit cards recently as well. What do you think about store cards and "helpful" clerks who ask you if you want to open one? Leave a comment and let me know!

Stepping Up

Well the last couple of weeks have been crazy, to say the least. Most of the insanity has revolved around my job. Last week I spent a whirlwind two days in New Jersey for a sales conference. In addition to that, I have started taking on a larger workload.

Back in January, my boss asked me if I would like to be considered for a promotion, so like any normal person, I accepted. Once I was in the running, there was a lot to do. I had to complete online courses and tests, which were required to be done on a tight deadline and during non-working hours. This translated into coming home from work and spending 1-2 hours doing the online courses. The after-work time had formerly been referred to as "blogging time". :)

Fortunately, my efforts paid off and I will take on my new position starting our second quarter in May! It is still a sales position, so I will continue to be paid with a salary + commission structure, except the salary increases and the commission potential is better.

Since the only portion I can absolutely count on is the salary, I crunched the numbers to determine the difference this will make to our budget. My salary base will increase by $5000, which breaks down to $192.30 per paycheck (I get paid bi-weekly). After taxes, my take-home will be approximately $150 more per paycheck. Pretty sweet!

With the promotion, however, I plan to definitively quit my second job. Long time readers will know that I have wanted to quit for quite some time, but there's always a good reason to keep at it. Once I have the increased responsibility, I simply won't have time to do both jobs. So my drop-dead date on the second job is May 1. I am so excited! (Perhaps even more excited about that the the promotion itself!)

At the second job, I take home roughly $600 a month. So in actual hard paycheck figures, I will be taking a pay cut in taking this promotion. The plan, of course, is to make up the difference in commissions and I am confident I will be able to do so. Not to mention my quality of life will increase as well!

How We Got Into Debt

About a month ago, a commenter asked me how we managed to accumulate all this debt. It's not a surprising question, and I've been meaning to discuss it for a while now. I've been procrastinating for a few reasons, the biggest of which is that it's pretty embarrassing. I am ashamed of how we managed to go $38,000 in the red. There was no medical crisis, or house fire or tragedy that we borrowed money to cover. We just made a series of poor decisions. A series of very poor decisions.

We bought our first house in April of 2005. This in itself was not a mistake; however, we made too many assumptions when we purchased the house. We primarily considered the cost of the mortgage and not all the other costs associated with home ownership. Even with that, we would have been just fine.

In May 2005 we got engaged and began planning our wedding. We made a budget for the wedding based on how much money we could put towards it every month until the following summer, when we were to be wed. In June 2005, we bought a new car. Not new-to-us, brand spankin' new. With the car payment, we were still ahead and making more than we spent.

So what pushed us over the edge? In July 2005, I quit my job to work for a small business as their sales and marketing director. It was a commission based position. If I didn't make any sales, I didn't get paid. Unfortunately, I didn't have any sales experience, so I didn't make a lot of money. My income dropped by about 75%. All of a sudden, we didn't make enough money to pay our bills.

That alone wouldn't have been devastating - if we had made adjustments to allow for the lower income. But we continued living our old lifestyle, going out to eat, vacationing, buying needless things. We went away twice in less than a year - both trips piggybacked on business trips, but there were, of course, plenty of expenses incurred. We only sent the minimums to the credit cards and incurred a variety of late fees and over limit charges. The interest rates skyrocketed t 29.99%.

In October 2005, we attempted to minimize the damage by transferring some of the debt to a zero percent card. Within 2 months we were back up to the limit, as well as using the zero percent card. We had bills being automatically paid by the credit cards: cable, internet, gym fees, tolls. Every month was a decision of which bill would be paid late, as we never had enough to pay them all on time.

On top of our every day expenses was the wedding. While we stayed within our original budget, we by no means had any savings to draw upon. We didn't go all out, but there were plenty of places where we could have spent less money. We even took out an additional loan of $10,000 just for the wedding - which later blew up in our face.

When we returned from getting married, I found a new job almost instantly (I had been looking for a few months) and we turned a new leaf. Our rock bottom debt was in October 2006: $38,440. Since then we have paid off $26,000 and wiped out 8 separate debts (and added one). I cannot wait to erase the remaining 3 credit cards from our life!

Looks Like Our Home Value Has Decreased

I received a letter in the mail the other day from the lender of our second mortgage. The second mortgage is technically an interest only HELOC. Arguably not the best method of buying a house, but that's an entirely different post.

Although I call it a house, where we live is technically a townhouse. That is, the building our house is in also holds two other townhouses. Fortunately, we have an end unit, so we only share one wall and have direct access to the garage, which adds to the value of our home. Unfortunately, townhouses and condos are usually the first to drop when the housing market takes a hit.

When we bought our house in 2005, we paid $280,000 (Remember, this is Massachusetts). It was appraised 2 weeks after we closed for $305,000. Sweet! Very exciting. Instant equity. Of course, what something is worth only counts if you're selling it.

The letter from our second mortgage stated that we couldn't further draw on our HELOC because our house's value had dropped so much. I don't know exactly how they calculate the houses' value or how much of the value they will lend up to, so it's difficult to say if our house's value has dropped so much that we are now upside down on our mortgage. It's possible, if it dropped enough. We didn't have any plans to draw further on the HELOC, or take any equity our of house at all, so that part doesn't affect us directly. What I am worried about is when we do want to sell our house.

I checked Zillow.com, and they list our house at $253,000 currently. Their estimates aren't perfectly accurate, but the letter from our mortgage company lends a bit of credibility as well. I want to close my eyes and shut it out, but it appears we now owe more on our house than it is worth. Or at least it's close.

When we bought our house, we intended to live here for 3-5 years. This summer will be 3 years, and we moving isn't even on the horizon right now, for a variety of reasons. We'll be staying put for the foreseeable future, and we may end up staying past what we had originally planned. There is still plenty of room here, even for when we eventually start adding people. I just liked having the option to move if we wanted to, and right now it would be pretty foolish to do so. Even more reason to pay down the debt - eventually we'll get to paying off the mortgage!