Drowning in Debt

Oh how I wish I was 22 and just graduating.  With the knowledge I have know, I could have done things so differently.

Mr. Breeze and I have taken risks, and we have done well at times and we have made bad decisions as well [hence the Chapter 13 we are trying to pay off - see this post for our basic story].

Some of you may be laughing at me.  You may be thinking she's in debt (bankruptcy, in fact) and she thinks she can retire in 5 years?  This is crazy!

Well, maybe we are crazy but I can't get anywhere if I don't take a chance and try.  And I am willing to share with you how I got here, lessons I have learned and my steps on our journey to becoming Financially Independent [if you can't tell I am somewhat stubborn!]

Some of the best risks that Mr. Breeze and I have taken have been in our careers.  When we met back in 2004 we both made around $40,000 each.  Since then we have gone up and down in our salary, but in the last year we have both taken new job opportunities.  Now Mr. Breeze and I are making at total of $157,000 a year, and I have taken on some teaching opportunities making approximately another $10k-$16k.   We have more that doubled our salary over the last 10 years.

Unfortunately not all of our decisions worked out so well.  In 2004, I purchased a condo.  After a few years, I decided to rent it out and Mr. Breeze and I bought a house together.  We completely remodeled that fixer-upper.  There was a lot of sweat and tears, but we loved that house.  We took another risk and took out an HELOC on the house to buy a business [a gym franchise].  All was going along pretty well.  Our condo was rented and paying its mortgage (not a lot of cash flow, but it was positive).  The business was doing well and helping us pay down the HELOC.  We had no children, so we worked every hour at our full time jobs and the business.

Enter in October 2008 - the stock market starts to crash entering us into a long recession.  December 2008, I [Mrs. Breeze] lose my job as 1/3 of our company is let go; losing an $85,000 salary in the process.  Our business is a Gym, and as the consumers tighten their belts or get laid off our membership starts shrinking.  We found that we couldn't keep paying the mortgages and all our debts with Mr. Breezes $40,000 income.

So over the next 5 years, we sell the business, and move to Ohio where I found a new job at 85% of my previous salary but a lower cost of living. We purchased a home in Ohio.  We tried to rent out our home and the condo, but struggled being landlords 2,000 miles away.  Mr. Breeze spends a year unemployed, and eventually takes a part-time job for 3 years making approximately $20,000.  In November 2010, we have used up all our of savings, our homes are under water and we cannot sell them and we are being threatened by the banks. We finally talk to a lawyer, and was told the best thing to do was file Chapter 13.  This would allow us to consolidate our debts and pay them off over 60 months.  We had to short-sell the condo, and the home went into foreclosure since the bank wouldn't accept the short sale offer.  We were allowed to keep the home in Ohio as our Primary residence, and both our cars were already paid for.

Total Debt in November 2010: $177,000 in Chapter 13 and $98,200 on our Primary Mortgage = $275,200

Since then our incomes have continued to increase, and we have continued to pay down our debt.  (Chapter 13 requires $2950 a month taken out of our paychecks, so it is sort of forced, but it is great to see our debt reduced each month).

Total Debt today - October 2013: $71,863 [Ch.13] and $93,700 [Mortgage] = $165,563

We have paid off over $100,000 in debt, and we are on track to have the Chapter 13 paid off in November 2015.  Yippee!  At that time I will apply the $2950 a month towards savings or paying off the mortgage payment, as we have found we can comfortably live without these funds.

So there is an end is sight, but we have 24 more months to go.  In the meantime we continue to work on increasing our income and lowering our spending.  How much debt do you have?  How much are you paying off?  Set a goal and see how close you can reach it!