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This is my first post, and wanting to respond prompted me to pony up the $ to become a member here. While I'm still learning about retirement, I was in almost exactly the same situation as you 2 years ago and hopefully I can help you out. Hopefully this email won't sound too preachy, but I've been there, and let me tell you, it's a great feeling to get out from under that debt.

I had $26K in credit card debt, and was leasing an Audi TT. I had a "good" job with a Big 5 consultancy and thought I deserved these finer things. While I was hired to provide technical and budgetary assistance to big companies, I was managing my money like a 8 year old kid. I'd get a nice big check, buy some stuff, charge things here and there, go out to nice dinners, etc. I never really looked at where I was spending, and never really did any planning other than socking some money in my 401(k). After a couple years like this, I got to a point where one month I started going over the limit on a few cards, and could just barely make the minimum payment. I tallied up what I owed and it shocked me. I vowed to cut back but after getting out of crisis mode I was back to old habits. My pay went up, but I never really "got ahead."

Finally something snapped, I think mainly that I was considering marriage, and I didn't want to start my new life with $26K hanging over my head. At the risk of sounding like a sap in a bad soap opera or self-help commercial, the first step really is mental. Decide you're ready to fix up your finances, and then mentally take yourself out of the picture. I would play a game with myself where once a week I would pretend I was the CFO of Me, Inc., and was tallying up figures I had no personal stake in. If you look at the numbers impassionately, you can figure out a strategy, rather than doing the addition, and having some insurmountable figure like $26K owed as your bottom line.

Next, go to Costco or Staples and get Quicken or MS Money. There are always hefty rebates around tax time. Take you last month's statements, and again, acting as an impassioned observer, tally everything up. I then took a month and kept my old habits, but made sure to sit down once a week and record everything. At the end of two months, you'll have some data to work with. I use MS Money, but I would imagine Quicken has a similar feature where you enter your credit card balances and interest rates, plus what you want to pay against your debt each month, and it tells you who to pay. Pretty simple stuff you could accomplish with a pen and a paper, but MS Money automates things, plus has a nice graph where you can see your debt disappear. This really helps inspire you to keep going.

In combination with a debt reduction plan, you can create a budget, and have it keep a tally of what you're spending in certain areas. I was eating out a lot, but rather than cease and desist, I had a nice "temperature guage" that told me when I was done for the month everytime I opened Money.

I also got out of my lease. I took a hit of about $2K, but I found a relative willing to donate their 1991 Maxima to my cause. Sure, I went from a $40K sports car to a clunker, but the $600 car payment + incremental insurance costs made a nice addition to the $2k I was using to beat down my debt. Consolidating your cards and/or asking for lower rates also helps, but my credit was getting a little rough since I was so highly leveraged, that until I started making real progress, I was ineligable for many of the deals.

The other trick I had was to tell everyone what I was up to. Before I would hide the total amount of debt from family and girlfriends, etc. This time, I told everyone and they were very supportive. My GF (now fiancee) knew what I was up to, and was perfectly fine when I suggested we dine in rather than eat out. Instead of looking cheap, when you explain your motives people want to help you out. Sympathy from my parents also probably contributed to their willingness to donate the old car.

Finally, and this may sound like it comes from left field, don't exclude the possibility of getting a new job to help you out of your situation. Even in the midst of the economic doldrums of 2002, I changed jobs and upped my salary nearly 45%. I was undervalued by my old employer, and rather than sitting around listening to the old "times are tough" stories, I went out and increased my ability to get financially free. Another creative solution with large lifestyle implications, is to get a travel job. I was used to the travel, so it wasn't a big deal, but with a travel job I had food expenses covered, which added even more to my ability to pay off debt.

Finally, I always thought "pay yourself first" was a trite gimmick, but it works. After MS Money and I figured out how much to pay each credit card, I set up the deductions from my checking account to follow when I was paid. If the money is not there, sitting in your account, you can't spend it!

I cut back on my 401(k), but still did around 5% of my salary, and put 10% in a stock purchase plan (I only did this because there was a 15% discount and it was made in one fell purchase at the end of the year, and I sold it immediately. Where else can you get 15% guarenteed?). I felt clearing out debt that was hitting 18% was better than maxing my 401(k).

It took me about 1.5 years to get out from under my 26K, but now I have 3 months salary banked, savings for our wedding, and it is amazing that amount of financial freedom this comes with. I no longer have to worry about getting canned by my job, since I have a 3-6 month cushion to look for something else.

Sorry for the epic proportions of this email, but I hope I can help you get out of your whole. Its not a good feeling dreading opening bank statements, and wondering if your credit card will balance in front of that nice guy/gal you just met.

good luck!

pgray007 - license to kill: debt
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