Tuesday, May 13, 2008

Goliath Debt, David Income

The Federal Reserve releases statistics on how much debt we have, as consumers. This report releases on the 7th of every month, and contains some very interesting information that led me on several trains of thought. As my first post, I thought I would begin to delve into the overall problem, and then boil down into how I am doing to bring it on a more personal level. This is as much for my benefit as anything else, but I hope that you either find the information useful and situation applicable or, happily, not at all applicable nor useful.

Consumer credit (revolving and nonrevolving) reached over 2.5 TRILLION dollars in the 4th quarter last year. In March, it had increased to $2,558,400,000. That's an absolutely STAGGERING number, especially in comparison to the number of people on the planet (roughly 6.7 billion), much less relegated to the United States.

While I couldn't find verifiable statistics on what the average person in debt via credit cards has actually borrowed, I do know from discussions with people and with my own life that there are many who suffer from the title of this blog: They have an absolute overabundance of debt, and a meager income to boot. This is not a foreign concept to me. On January 1, 2007, I decided to turn around. I decided to spend less than I made. Well, actually, we decided. My wife of 2 months agreed that we needed a starting point, and we needed to make progress.

Here was the beginning, and, at the time, I was making a moderate salary, just not in comparison to the debt I'd accrued.

  • I had just over $100,000 in limits on an untold number of credit cards, due to my past history of paying the card companies well for allowing me to make purchases over and above my income. Today, that number has actually increased as I began my quest for balance. That is, no balances. You get the idea. :-)
  • As far as actual debt, we started with about $68,000 in credit card debt, student loans, and a car loan. About halfway into the year, our $400 car bought the farm, and so I added another $10k onto our debt picture getting another car. So, in essence, we began our journey with $78,000 in debt.
  • As to my income, I was making about half that (gross), having started a new job less than 5 months earlier. My wife was working here and there, but nothing paying more than about minimum wage, and not very many hours per week.

So, the beginning was $78k in debt, while making less than $40k a year to attempt to pay that down. Not a very encouraging picture, to be sure.

But, there is hope. I began by reading Dave Ramsey's "Total Money Makeover", and that was the beginning of my journey.

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