Tuesday, June 13, 2017

My Recent Debt and My Plan To Remove It



I’ve been making changes in my liabilities (debt) with actual real effort and thought since March of 2016 where I found myself with extreme buyer’s remorse the Monday after going to “look” at motorcycles on a Saturday with my brother because he was in the market for one.  The funny thing is, almost exactly a year prior in March of 2015, my brother asked me to go look at motorcycles with him because he was in the market for one.  Well, he didn’t buy one, I did.  It was a used Yamaha V-Star Classic and reasonably priced at $4000.  The payments were decent at around $101 a month and insurance was only $19 a month.  So, for another $120 a month, we loaded it up into my almost new Toyota Tundra and I brought it home.  Going back to the 2016 story, MY FRIGGIN BROTHER DID NOT BUY A MOTORCYCLE, I DID, AGAIN, WTF?  I’m pretty sure the Monday after the “purchase” (financed through Honda) of  a Brand New Honda VTX1300 Stateline, I realized I had a problem, well, several problems.  I had too much debt.  I also had too much monthly payments.  The second motorcycle in my garage was the proverbial straw that broke the camel’s back.  My income could not comfortably support the additional debt and about the same time, my roommate moved in with his girlfriend and my bills instantly doubled.  Something had to be done.  I’ve read Dave Ramsey’s books and listened to his audio archives for years and I knew what to do, but never actually laid out a plan to make a change, except his Baby Step 1 which is saving $1000 for an emergency fund.  In March of 2016, I had the following non-essential expenses that were forcing me to live paycheck to paycheck with nothing remaining to have any fun, let alone put towards paying off any debt:
Debt
Monthly Payment
Balance
2014 Toyota Tundra
$550
$28000
2015 Honda VTX1300
$200
$9000
2007 Yamaha V-Star Classic
$100
$3500
Chase Credit Card
$75
$3000
Total:
$925
$43500

On a whim (or well-timed radio ads), I took my Tundra across the street to Carmax to see what they’d offer since they always advertise that they’ll buy your car even if you don’t buy one of theirs.  Shockingly, there offer was only about $3000 under what I owed and they could handle all the payoff paperwork and do it all with about a half-hour of my time.  Being March, it was tax season and I was expecting a tax return of around $3000.  I took the tax return amount and the Carmax offer as a sign, a much needed sign that this was the route to go and the 3k was a small amount to pay for some stupid financial decisions.  This was the biggest step to getting some major debt and monthly expense out of my life.  It felt great doing it.  I felt so great that I listed the Yamaha and sold it too about a week later at a minimal loss, around $700.  Again, it was a small cost for huge change, both financially and mentally.  Shortly after the removal of the Tundra and the first motorcycle, I paid off the Chase credit card.  Removing the Tundra from my insurance also reduced my policy by $150 per month.  Having the 3k tax return, I calculated my deductions and updated my w9 to have less taxes taken out of my check, hoping to break even at the 2017 tax season.  With all the changes in March, I realized a positive $1000 per month addition in my budget.  This allowed me to catch up on utilities, most of them at least a month late.  I refilled my savings account that I use as an emergency fund until all my debt is gone.  It took a couple months to finally get straight, and I only had the Honda motorcycle payment of $200 per month plus $48 per month for insurance as my only debt.  Once caught up, my debt balance was about $8500, roughly $1500-$2000 over what I could get for the bike.  I make the decision to hold on to it over the winter and get it listed on craigslist in April of 2017 when most folks are in the market for a motorcycle while saving a little extra to cover the difference.
When I sold the Tundra, I had 3 other cars for me and my 16 year old to drive.  There was the 1991 Toyota Landcruiser that turned into my daily, a 1994 GMC pickup as a backup, and a 2004 Volkswagen GTI that my son drove.  His car broke down and sat on car ramps for months before I decided to sell it.  While looking for a replacement car for him, I found a nice 2003 BMW 5-series wagon and I thought I should upgrade MY daily driver and he could continue to drive the ugly blue pickup.  In January, I made a couple moves that resulted in me taking a personal loan to upgrade my daily driver (a whopping $3500) and sold the VW that I didn’t have enough time to work on.  I held on to the cash from the VW knowing I would need it in April to sell the motorcycle.  I listed the motorcycle at the beginning of April, but found buyers were not willing to send their money to my Honda account to buy the bike, so I got another personal loan ($5800 plus the cash I had on hand and the money I had in savings) to pay off the remaining $7800 balance on the Honda.  With title in hand after a week or so, I was finally able to sell the Honda for $6500; slightly more than its’ actual value, but of course, $1300 less than I owed.  I’m happy it’s gone though.  It was a toy I never rode and was constantly getting scratched by kids or cats and will not need to pay the $48 per month on insurance.  With the $6500 in cash from the buyer, I paid off the 1st personal loan since it was at a different bank than I normally use.  The rest, so far, went to rebuild my original savings accounts, $1000 to the 2nd personal loan, and $450 to my bank credit card I fell back on between the time of the Honda payoff and the actual sale of the bike on the 14th.  So, I am left with $4800 in debt and being able to have your ear and hopefully an encouraging reply, I hope to soon be out of debt completely before summer.  Oh yeah, I also impulsively bought a sailboat two months ago (with cash), that I have since came to my senses and realized I have no time for.  I can flip it at a slight profit though and hopefully sell it for around half of my remaining debt balance.  Removing my debt has given me further opportunities and choices for MY money.  Today, I have 2 savings accounts.  All bills caught up and most are paid early.  I (usually) have a little extra cash in my checking account.  I invest in my company’s Simple IRA at 3% (for now) to get their match.  I opened a TD Ameritrade account and I laid out a bi-weekly plan to purchase Dividend Paying Stocks.  I am still working on the $4800 debt balance and hope to have it gone completely in the next couple months.

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