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Today is pay day and I stopped by the ATM on my way to work this morning. I was irritated by having to park in a very awkward space, but when I got out of the car there was a grimy old penny on the ground. I always have good luck on days when I pick up pennies. So pick it up I did, wondering what small blessing may come my way today. 

I know the act of picking up pennies has absolutely nothing to do with whatever events may unfold. What it does do though is change my perspective. I instantly know something good will come my way. I believe it is that assuredness that subconsciously allows me to recognize and appreciate whatever small occurrence I will ultimately attribute to the good fortune from picking up that penny.

I shouldn’t need to pick up a penny to invite positivity, but I’m sure glad I found one this morning.

Too Many

I have a great desire to simplify and consolidate my life. The easiest place (of all places) to apply this is my finances. I have 1 checking, 3 savings, 2 ROTH IRA’s, 1 brokerage, and 1 401K account split between 3 institutions. In the past few days I have rid myself of 2 savings accounts and thereby 1 of the institutions, and consolidated the ROTH IRA’s. I have 4 credit cards that I’d like to get down to just 2, once I pay everything off.

My debt is feeling overwhelming at the moment, which I interpret as the driving force behind my general desire to simplify and control. I am actually doing an awesome job with my debt and I should be feeling more in control of my financial destiny than I have in years. I have paid off 30% of my credit card debt since the beginning of the year and I’ve also started rounding up my car payment and giving an extra $45 every month. It makes me feel better even though it’s barely a drop in the ocean of the loan.

I track every dollar I spend, still contribute a modest amount to retirement and savings, and my net worth – while still negative to the tune of $9K – has improved massively over the last 8 months.

My goals from now through the end of 2013 are to pay off 3 credit cards (approx. $12K) have $30K in savings/retirement and generally simplify every aspect of my life. I am making phenomenal progress on these goals, but I’m finding it’s a hard to week to keep the faith.

I’ve been reflecting on this subject for the entire last month and putting fingers to keys is long overdue.

2012 was a year of both very good and very bad for me. It included some very bad financial behavior but I learned a tremendous amount about myself at the same time. When all is taken into account, the scales of 2012 tip much more on the positive side than the negative.

The Good Stuff

Retirement: I started the year off owing $13,500 on my credit card and I decided I’d paid down enough debt (approx. $26,500) that I should start rebuilding my retirement savings. I learned a lot about investing, made modest but consistent contributions, and ended up making smart choices that ultimately delivered a 13.4% return for the year. That pretty much matched the S&P 500, and was a lot more than I expected.

Savings: I actually got consistent about saving and in addition to a baby emergency fund attached to my checking account, I also started a longer term emergency fund in a high interest savings account (PAUSE… while I smile to myself at what constitutes “high interest” these days). Although I chose to use a good chunk of the long-term fund to throw at the credit card this Autumn and the emergency fund was thankfully in place to help cover a massive medical bill at the end of the year, a good habit was established and, slow and steady, the funds are being replenished. While I’d obviously like the balances to be higher, it finally sunk in that savings go hand in hand with debt repayment so along with the consistency of the habit, this is a big win.

Debt: Surprisingly, my debt does actually fall heavier into positive recap of 2012. I learned the tools the first time I started Operation Kill Debt in 2011, but I did not learn the lesson. Although 2012 ended with me significantly more in debt than it started, it became blindingly obvious WHY I hadn’t succeeded the first time. As a result, Operation Kill Debt: Part Deux started on a much more solid and realistic foundation. Big wins for 2012 in the debt category are:

  1. Downgraded AMEX card from Platinum to Green; received refund on ridiculous annual fee.
  2. Aside from a couple of travel expenses that were already in the works and hit at the very beginning of October, no credit card use since the end of September.
  3. Cancelled all remaining auto-pays of expenses to credit cards; eliminated the unnecessary expenses, set the rest to deduct from checking. No charges have been made to any card since November 23.
  4. Cut up ALL credit cards (this is technically my biggest and proudest achievement of 2012, but I’m going in chronological order here…).
  5. Reduced outstanding credit card debt from $52,371.30 on September 23 to $38,775 on December 31.

As ridiculous as this sounds, I would rather be in the position I am now – owing $38,775 on the credit cards – than had I just paid off the $13,500 that I owed at the start of the year. The latter outcome would have left me in a much more vulnerable position, as I hadn’t acknowledged that credit cards MUST be eliminated from my life. I needed to feel some pain and some failure to put me in a better place for long-term success.

Hi, my name is Ha’penny Bits and I am a compulsive spender who cannot manage credit. Period.

Employment: This is a post unto itself, but for now I’ll just say I overcame a lot of fear and anxiety and proved to myself more of who I am and what I CAN do, rather than stressing over who I’m not and what I can’t. I also got to travel a lot, see new places in the world, as well as meet some fantastic new people along the way.

Health: I completely overhauled my diet and began consistent exercising in 2012. I implemented these changes to improve my overall health, physical fitness and mental wellbeing. It worked and it became yet another habit that’s stuck.

The Bad Stuff

This section is going to be short because there is no benefit to excessive dwelling on past behavior or handing over a lot of time and energy to regrets.

Debt: Goes without saying that running up my cards AGAIN was not a good decision. I have a closet – hell, make that a house – full of stuff that feels stifling, and my current and future self will be paying for all that shit for the next two years. Side note: eBay sales began in 2012 with many more to come in 2013.

Savings: Precariously low balances, which is even more scary as for the first time in 17-years I can’t reach for a credit card to use in case of an emergency (although that’s a big YEAH!!).

Retirement: Pitiful retirement savings for someone in her mid-30’s.

In summary, I acknowledge my mistakes but feel blessed that a course-correction occurred and I continue to take steps to rectify my situation. And with that, 2012 will always be remembered fondly.

The one thing I don’t need to learn is literally HOW to successfully manage my money. I know all the tools of the trade from spending less than I earn and paying myself first, to having a budget and killing consumer debt ASAP. I’m really great at the latter – my budget is a work of art and I’m paying that debt as fast as I possibly can. I am spending less than I earn  but it’s the paying myself first that needs some work. The urge to send every last cent to the credit cards (A.K.A. Saving) is all-too-tempting, despite the fact I KNOW I need an emergency cushion – just in case. This is even more important than it was last time, as I have cut up my credit cards so they’re not an option if I even wanted them to be.

It is stating the obvious that personal finance is more about psychology and behavior than it is about dollars and cents, so I guess it’s understandable that I’m spending more time managing myself than actually managing my money.

To that end, I have moved the goal posts this second “kill debt” time though. Gazelle intensity is fantastic in short bursts, but personally speaking, I admit that I just can’t sustain it for the long-haul. I wish I could and I sure as hell tried. But, I failed once and I have learned that I need to do what works for me. Read all the advice, take what works, leave the rest at the door.

AMEX

My second wake-up “your finances suck” call came last September, when AMEX politely informed me they were cancelling the extended payment option on my account. Thankfully they were still allowing my $31K balance to be paid over time, however, all future charges would have to be paid in full. Also thankfully, they informed me of this before I’d had a chance to charge another $5K of outfits in that particular billing cycle.

This is why I have such a love/hate relationship with AMEX.

AMEX was the spark that ignited my explosive spending. It’s always been my card of choice. I had a Platinum one, because that’s the story I wanted to tell. My credit card said SO much about my fabulousness and my status in life (It did! It told everyone I was shallow, irresponsible and in debt!!!). I should have dropped the Platinum the first time I woke up and paid it off, but despite the $450 fee, I wanted to keep that warm and special feeling.

NOTE: My AMEX has since been downgraded to Green and despite it being the oldest account on my credit report, I will be cancelling it when it’s paid off later this year. I prefer the story my Green Card tells. It’s in a drawer still wearing it’s “Activate Me” sticker and it’s cut into two pieces. I also got a new card number so I don’t have it memorized if I ever wander onto shopbop.com or similar.

But when all is said and done, I do love AMEX very much, because they have also been the catalyst for my wake up calls. They have twice cut me off before I’ve gotten so far adrift I can’t save myself. For that reason alone, AMEX will always have a special place in my heart.

Family Money

I’ve spent a fair bit of time this holiday digging into some of the more historical posts on my favorite financial blogs. Over the course of the last few days I’ve read a lot about peoples’ dysfunctional relationships with money beginning with financially irresponsible parents.

I never thought I had much to say in this area. I wasn’t particularly taught anything about money (then again, who is?!) but I never saw anything negative in my parents’ financial behavior that would explain my own recklessness over the years.

I grew up in a solidly middle class family. My parents worked hard, never borrowed a penny they didn’t have a plan to pay back, invested responsibly. We weren’t “rich” by any sense of the word, but we were very comfortable and as an only child, I didn’t want for anything. I entered adulthood knowing only that I had to replicate the life I had. This was my parents’ expectation of me and I grew up with that message constantly being hammered home.

Now in my mid-30’s, I earn more money that my parents ever did. I have a fancier car than my parents ever had. I have luxuries that they never even thought of. I did what I was supposed to do and very quickly satisfied expectations. BUT, I did it all on credit.

Starting out, struggling, and building over time wasn’t a concept I was familiar with. I also never really stopped to think that my parents worked a lifetime to afford the house we lived in and the nice family car etc. My mother waited 20-years before she was finally able to afford her dream car. I got mine during my lunch break.

I’m a big believer in taking personal responsibility, and I acknowledge a million percent that I dug my own financial hole. I guess I just love what a little personal introspection can uncover during some festive downtime. I didn’t grow up with bad role models, I just grew up with a short-sighted approach to my family’s long-term expectations.

Merry Christmas World! A cup of good coffee, the love of a good dog, festive wishes, family and friends… $$$ not required.

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