A mini research poll

My cousin Virginia, who lives in New Orleans, conducted a mini research poll among her friends, and the results are very interesting:

"I’m no statistics expert," Virginia wrote to me in an email, "but I have an MBA in finance and an excellent memory. I have polled my 10 best friends (a combination of guys and girls) to establish this information.  It seems that on the average (at least in my friends) only 2 people paid their balance on their credit cards off in full at the end of the month.  Three people have car loans with the balance exceeding $10,000, and all but 1 had student loans with a balance of greater than $7,000.

"In more extreme instances, one of my friends is in law school and cannot work since she studies full time. At the end of her... 3-year studies, she will owe $150,000 in student loans, but has no other debt.  I have another friend who is studying to become a dentist.  He ended up retaking one year of school, and [when he graduates] he will owe about $250,000 in student loans.

"The more I tell people about your blog the more willing they are to share a personal story of debt with me.  One of my good girl friends who used to be a shopaholic, confessed that when she finally paid off her multiple credit cards, she cut them up and only uses checks and cash to pay for everything except for gasoline, which she puts on her credit card.

"An older co-worker of mine told me that his son had to put off his wedding for 2 years when his fiance confessed that she had $25,000 in credit card debt.  They moved from a nice 2 bedroom apartment in Boston to a small town in New York with her parents.  They pay a nominal fee to rent from her parents and both are currently working to pay off all her debt before the wedding they have planned for next spring.

I try not to compare myself to others, but some times it is nice to know that you are not alone in your quest to become debt free."

Thanks Virginia! It is nice to know we are not alone :)

A few interesting statistics, courtesy of Dave Ramsey's Total Money Makeover

According to the Wall Street Journal, nearly 70% of consumers live paycheck to paycheck.

The average American household has $91,000 in debt, and the total consumer debt has doubled since 1980 (now totaling $2.6 trillion). - Federal Reserve and U.S. Census Bureau

In 1929, only 2% of homes in America had a mortgage against them. By 1962, only 2% did not have a mortgage against them. - Christian Financial Concepts

According to Sallie Mae, 82% of college students don't pay off their credit card balances every month.

According to a 2008 survey by the National Foundation for Credit Counseling, roughly 76 million adults say they do not have any non-retirement savings. Of those who do have a cash fund, 61% don't have enough to cover three months of income.

Finaid.org reports that 70% of all students - undergraduate and graduate - borrow money for school expenses.

The Check is in the Mail

I wrote a check yesterday for $1,031 to my credit card. It was painful. It hurt. And before I could think twice about it (or spend it on something else), I put it in the mail. No turning back now! My debt is going away for good, one small check at a time.

Interest Free Financing

I know you have been offered an Interest Free Financing deal at least once in your life. They are so common, it would be nearly impossible not to (almost as impossible as never being offered a "pre-approved" credit card). And it sounds like a great deal, doesn't it? No interest for a certain period of time, and then just make sure to pay it off before the end date and you saved yourself some money!

Of course it hardly ever works out that nicely - most Americans do not pay off their balance before the end of the "interest-free" period. And I am one of those Americans. I stupidly fell for the gimmick, and signed up for a 12 month interest free credit card. Of course, I did not pay it off before the end of the 12 months, and ended up accruing ALL of the interest for the total 12 months. At a 24.9% APR! As Dave Ramsey would say, I just paid a "stupid tax."

Now I am working to pay off another (yes, I fell for it twice) interest free credit card before the interest is accrued in February. If you are diligent, these credit cards can be a good deal. But if you are normal and not so diligent, then they become very expensive very quickly. I agree with the experts: stay away from anything that sounds too good to be true, including "interest-free" financing offers.

Please Don't Make My Mistakes

One of my friends has been thinking about the future; she wants to be able to buy a house one day, and was told that she needed a good credit score in order to be able to get a mortgage. She applied for several credit cards, but was declined because she currently does not have any credit history (one of those frustrating Catch-22's). I understand that she will need a loan in order to buy a house in LA (real estate is so expensive here!), but I worry she is making the wrong choices by getting into debt. Even though she says she will not use the cards (which I do believe, because she is one of the few people I know who is very frugal and financially conservative), I worry that the temptation will be too great and she will find herself in a situation similar to mine. Most Americans can't resist the pull of "free money", and that is why we are in the middle of a debt crisis. So I gave my friend Dave Ramsey's book Total Money Makeover in hopes that she will not follow my lead. The only way to make smart financial decisions is to be well-educated in the topic.

So Far, So Good

It's amazing how much money you can find when you really start looking for it. I have always heard this phrase, but never believed it. If I had the money, I would have spent it! But when I got serious about getting rid of my debt, I started realizing I had money sitting around unused. I had sold 3 Coach purses on eBay and the money was just sitting in my savings account. I received a refund from the County Tax Board for overpaying my property taxes in 2010, and that was also just sitting in my savings account. So after hunting around and adding it all up, I found $923 to put towards my credit card payment this month! A positive start to a positive journey.