Experience the freedom!

Do you get these too? I rarely go more than a month without receiving one of these come-ons:

I am already responsible for an insane amount of personal debt. In addition to my line of credit, I have three credit cards. Most of the time, I don't carry a balance on my credit cards from month-to-month. I try to be a credit card "freeloader" as much of the time as I can be. But, as a freelancer, I have been known to live off my credit cards during a lean month (or two, or sometimes – gulp! – three).

Despite the fact that my wonderful local personal banker is supporting me in my goal to reduce my ability to borrow on my line of credit by $5,000 a year, the folks at banking HQ would be "happy to help" me take on the option of more credit. 

Treat yourself!

Take that trip! 

Relax!

Experience the freedom – yes the freedom of crippling debt with interest payments that make it ever harder to get back into the black. 

I've been experiencing that freedom for years. It sucks.

But you've worked soooooooo hard!

I bet they have people with psychology degrees holed up at the bank writing these letters. You've worked hard to maintain an excellent credit history. Pat yourself on the back, kid, and show us what you can do with several thousand more dollars of rope with which to hang yourself!

I tell you, I'd have been working a lot harder if I'd simply managed my money properly in the first place. If only I'd used my brain and a little common sense. For instance, if I'd never spent the HST I had collected and then scrambled after it three months later when it was time to remit. Or if I'd put a little something aside during the lush months for the coming lean months and the inevitability of income taxes. 

The party is over; a better party is just beginning

I think I may have found my answer. I read a great article in the Montreal Gazette a couple of weeks ago about a person who lived in Montreal on $11,000 last year. It's an inspiring story about co-operative living and alternative economic models. 

And careful money management. 

The article mentioned something called YNAB (You Need A Budget). I thought, that sounds like me. I need a budget.

I've been checking YNAB out and I love it! It's software with a phone app that lets me track what I spend, anywhere, anytime, so I actually know both what's in my budget and what's in my bank account. This may shock some people, but it is novel for me to know how much money I have. And really novel for me to try to hold a conscious awareness of how much of my money is truly available to spend – when a lot of it is really owed to of all the infrequent expenses that keep mounting in the background (taxes, bills that get autopaid by my credit card, etc., etc.)  Before, I was blithely spending the money I appeared to have – and not really caring because I knew I had the cushion of credit whenever I screwed up and overspent (which was often). Wotthehell, I thought, I'll pay it back later. Un-hunh, with interest.

YNAB is good software, but as they say themselves: "It's not just software, it's a mission." What I really find YNAB good at is training (i.e. re-training) the way I look at money. They offer 4 simple rules to follow. There are webinars about how to apply the rules – about how exactly to get out of existing debt and how to handle the dramatic ebbs and flows of freelance income. I feel like it was made for me. It guess it was. It was made for people just like me. People who need a budget.

The whole point of YNAB is to have money saved up for needs and emergencies so that I'll eventually be spending only money I have instead of continually dipping into the poisoned credit candy dish. It's going to take a little time and a little (unaccustomed) restraint, but with a good tool on my side, I'm looking forward to experiencing the freedom – of living within my means.

Debt Reduction: Please Stop Trying to Loan Me More Money!

So remember when I posted a few weeks ago about my debt situation? Well, I filled in the paperwork to have the limit on my line of credit reduced by $5,000 and instead, the bank increased it by $10,000. So now I have access to $15,000 that I don't want. I wanted my temptations reduced.

I long to buy a 'round the world ticket and then declare bankruptcy.

I am a responsible adult. I am a responsible adult. I am a responsible adult.

Debt: Getting in and getting out

A bunch of years ago, I worked for an IT department at one of the big five Canadian banks. It was probably the worst job I have ever had and I lasted about eight months.

As soon as I got there, they explained to me about the awesome perks of staff banking – no fees and the offer of a huge, unsecured line of credit at the bank's prime interest rate. I was making more money than I had ever made before (or have ever made since) and like a fool, I accepted their offer of the giant line of credit. 

Falling in, Crawling out

I racked that line of credit up about halfway - paid it off - and then racked it right up to the hilt. The money went to tuition when I was in school in Toronto, it went to rent, taxes, emergencies, meals out, trips and all kinds of "wotthehell" moments. 

I can be quite undisciplined about money. I'm in good health, I see many working years ahead of me and I have no dependents or other pressing responsibilities. This encourages me to throw my money around - I love feeling open-handed and relaxed about money. I come by this honestly, since my family is full of people who fit the description: "last of the big-time spenders". We are generous to a fault. This is something I rather like about us. It's really fun to live that way. But when the money behind that lifestyle is borrowed money, there's a dark side.

After I quit that job at the bank, the interest started to climb. They put it up and up, and with the balance climbing as well, it all got more and more painful. Eventually, it has come to feel like the proverbial albatross. 

In over my head

I'm not going to reveal the shocking amount that I owe, but suffice it to say that I've spoken to many telephone bankers over the years who are simply amazed (and probably appalled) when they realize that my line of credit is not secured against a house or other asset.

The bank bet only on my honesty and sense of responsibility when they loaned me that money. And it was a good bet. I borrowed that money in full, adult knowledge of what I was doing and I'm committed to paying it back. I got myself in and I'm going to get myself out again.

This time for keeps. 

This year, I made a plan to reduce my debt by 5,000 bucks every year until it is gone. And to protect myself against my own profligacy, I am going to have the bank reduce the limit on my line of credit by that amount each year. Hilariously, I have to fill in paperwork to ASK the bank (perhaps BEG would be a more appropriate word) to reduce the limit. Please don't let me borrow any more money from you. PLEASE!

I wasn't sure I was going to be able to fulfill my goal this year. As usual, I've made some less-than-responsible decisions with my money lately. But, work and decreased living expenses, in combination with a surprise gift from one of my generous family members, has put me in a position to meet my goal. Tomorrow morning I have an appointment at the bank to fill in the paperwork that will relinquish five grand of borrowing power. I'm painfully aware that that could be a massive trip or a down payment on a small Nova Scotian house. However, I'm also aware that I'm paying about half that amount in interest each year for the privilege of being so far in the hole.

Here's to debt freedom, folks! Five grand at a time!

How's your household debt situation? Any plans or resolutions to get out of the hole? Feel welcome to share your thoughts in the comments.