This past week something changed in me. Maybe it was me sporting Gen-X goatee, maybe not. Something changed though. For the past year I’ve been on edge constantly, never really feeling stable. Some stability finally showed up this week.
My debt is going to be with me for a long time. I’ve come to accept that this past week. There is no quick solution. There is no easy way out. If it takes me 5 years, then that’s just the way it has to be. If it takes me 10 years, then so be it. I can live with that.
A few months ago there is no way I would admit to being able to live like this for 10 years. Always paying someone back, always censoring what I do and don’t say. Well frack that, I’m in debt, but gosh darn it I’m really trying to get out.
How much have I paid back since I started writing here? I’ve paid back around 10K (off the top of my head, I’m too exhausted to compile stats right now), between my mother, principle payments on my business credit cards, car and student loan debt. 10K. That sounds like a lot of money. That IS a lot of money.
The good news is that between short selling my house and the personal bankruptcy, things are better now. When I first calculated my total unsecured debt, it was $334,442. That included a guesstimate on negative equity in my house. My total unsecured debt now (including of course the huge number to my mother) is probably around $260,000. It’s still a rough estimate because I don’t know what my IRS penalties are going to look like yet. I have another $44,000 in student loans, but those are deferred for 2008 because of the bankruptcy.
All in all, I do have a plan to get out of this mess. It may take longer than I like, but I’m just going to keep working hard, stay frugal, save when I can, and take the long road.
What can I do better?
- I plan to sell my car once it’s not upside-down, probably another 6-12 months of payments before that happens
- I have to send at least $40/mo to my Mother. My goal is $1000/mo
- I’m trying to save/invest $400/mo
- I have a business savings account setup to build up as a settlement account (most of my debts are in collections)
- I’m eating out less, cooking more. My budget is pretty bare bones in terms of entertainment/clothes/etc.
My best bet seems to keep working on the income side of things? Am I wrong?
{ 15 comments… read them below or add one }
Question – do you anticipate more of a return on your investments than the interest you pay on your debts? If not, shouldn’t that money go to paying off debt?
Congratulations on the progress so far, I must recommend diverting your savings/investments to paying down your debts. As Josh Morgan mentioned above, I doubt your investments will be returning at a higher rate than your highest debts. Keep it up though.
DK I don’t understand the investing right now. It would be one thing to invest money in something if you’re current on all your debt, but you’re not. It’s like telling someone you owe money to that they can’t have it because you need to save it for retirement. Would you borrow money to invest it?
I also disagree with the investing. I am pro-saving of course. Build up that emergency fund, but the rest needs to go to debt repayment.
On Investing – I put $900 in an investment account, but now all extra personal money will be going into a savings account. Remember, most of my debt is on the business side. So, with personal money (essentially the meager salary I take out of my business) I can either: 1. Pay my mother more (best option, but this is a 0% loan we are talking about here) 2. Save (what I’m going to do the next few months 3. Invest. So, I think for the next few months, at least with my salary I’m going to try and build up a large emergency fund. eh?
Debt Kid,
Have you seen Joel Maxwell’s blog at Joelmaxwell dot com? He’s paying back about $500,000 in unsecured debt.
03/29/08 Unbelievable! Don’t you realize that the IRS is going to be the most important bill in your life? You mention penalties, but you don’t mention how you’re going to pay the principal.The IRS will get everything, you betcha. You can kiss “business savings” goodbye. It almost makes me chuckle. Sorry. I know you’re young; time and experience will make you understand the gravity of the situation. You shouldn’t have had a payroll until you had a full grasp of the rules of the game. What was behind your decision not to pay the trust fund taxes?
I’m meeting with an IRS agent next week to work on a payment plan. I understand the situation, just because I’m young doesn’t mean one can’t learn from mistakes. Oh, and you don’t need to put the date on your comments, the internets are smarter now, welcome to 2008 : )
Sorry for double-dating; I am in rehab for it. It is one of those good habits I picked up when I began my business in 1971; others that are bothering me are good spelling, subject-verb agreement, and proper punctuation.I am getting help and hope to be cured soon.
I wish you the best in your meeting with the IRS. We just recently paid them off using credit cards. We felt that it would be easier dealing with the card than the IRS.
Sorry Debt Kid:
You are young (your 20s) – you’re reckless behavior resulted in a significant loss to your mother who is older and facing retirement far sooner than you. While she’s graciously given you the ability to “pay back” the funds at 0% – this is a HUGE “loss opportunity” cost for her since she doesn’t have the funds to invest elsewhere and earn interest against.
So, for your mother, this is a “double loss” — a loss of the funds currently… the funds she took years to earn and save… then the loss of interest she would be earning had you not lost the money.
You should be paying your mother the absolute maximum you can afford every month until the $$ is returned – then start saving and investing for yourself. You have years to “make-up” for your retirement and future…. your mother, not so many. This could make the difference for her in so many ways as to her standard of living and decisions regarding where she’ll be living, medical insurance, long term care, etc.
So…. start paying your mother back and until she is paid in full, forget about your own savings or investment.
@ Smart Girl – As usual you are spot on with your advice. I didn’t think about the investment time difference, you are totally right. Once I have a small emergency fund, any extra personal cash should be going towards my mom debt.
Debt Kid -
Glad to read you will do the right thing by your mom. My mom had Parkinson’s and died last Friday…. She and my dad had a nice nest egg set aside – following his passing two years ago mom needed to be in an assisted living facility. She had the funds so that her care was povided in the way and manner she wished, without being a burden on any of her children.
The funds you owe your mom will be needed and used by her long before you would require them. They will mean the difference between her living her “golden years” in comfort and independently as long as possible. Without return of these funds are you (and your siblings) prepared to take her into your homes and provide the care she may need when the time comes?
One final note: in cleaning out my mom’s final documents we found a letter today – it seems my parents made a $40,000 loan to my brother and his wife 12 years ago so they could purchase a new home. This money was from my parents’ retirement funds. My brother has never repaid the money. The document left by my mom says that the $40,000 is to be deducted from his share of the estate since he’s not repaid the $$…. or, should there be no money left at the time of their/her passing, forgiven.
There was no information in the document regarding interest or time frame when the loan was to be repaid. I am now in the uncomfortable position of contacting my brother and discussing this unpaid loan and the deduction of these funds from his share of the estate…..
I now understand why my parents were so hurt these past few years when my brother, as their home increased in value, would refinance the loan, take out equity and purchase a sail boat or new car.
My brother had an opportunity to show his integrity – and it didn’t happen. Now I’m saddled tring to figure out how to “making it right” for my other siblings who were provided with the same opportunities, but repaid the loans when they had been extended.
Tell me – what would you do?…. And what would you have your siblings do? The money my brother “owes” the estate now represents $10,000 each for me and my other brother and sisters…. I could use and benefit from the added $10,000…. but is it worth the bad blood and hard feelings to raise the issue?
@ Smart Girl – Wow…that’s an uncomfortable situation to be in. I think if you decide to pursue taking out the $40 (which you should), just make sure that your relationship with your brother is right first. If you have a healthy relationship I think you can avoid any bad blood. It seems pretty cut and dry that your mother’s wish was that be deducted from his share of the estate. Him not honoring that wish of your mother would be incredibly selfish and disrespectful. Just make sure that you and your siblings avoid ganging up on your brother….
just my two cents.
@Smart Girl: You have a legal and moral obligation to obey your mother’s final wishes. As debt kid said, it’s pretty cut and dry. It would be dishonorable to know her wishes and to ignore them.
You could show your brother the documentation, too. Say hey, this is what she wants done. It’s nothing between you and me.
Maybe it was make him realize the mistakes he’s made in the past.
A tough situation, but if you are the legal executor of the estate, it must be done to her wishes, not to how you feel.