The master plan to be debt free is coming into place…

Failure is not a single, cataclysmic event. You don't fail overnight. Instead, failure is a few errors in judgement, repeated every day.
— Jim Rohn

Sometimes it's harder to be honest with yourself, than it is to be with others.

Ever since 18, when I began living independently, I learned a lot about putting myself in financial peril the hard way. Between numerous (likely actionable) missteps by employers when compensating me in my earlier years, misuse of credit, failure to plan ahead for my savings, failure to pay my bills timely, failure to stay organized, failure to file taxes timely and keep proper accountings of things, and unexpected expenses, I've put myself in quite a perilous place.

I make more myself than the average income of my neighborhood. But a few months ago, I was so far behind on my bills I was struggling to keep the lights on, and was only weeks from foreclosure. I didn't want to talk about it. I still don't. You write hardship letters to banks, and you don't know what to say. It's not like I lost an arm in a machine shop and lost my income, I made a ton of poor choices, poor organizational planning, and didn't keep track of what bills I was paying and when they were due. I was often a month behind on all my bills. I had only $500 in savings. When unexpected expenses came up, no way I was going further in debt, but I always thought "I can pay this, I have money in the bank!" and then a week later, I was all "oh crap, I forgot to pay DTE. That's why my power just went out.".. yeah.

2 years ago I locked all my revolving credit cards except a small $300 limit one for emergencies in a firesafe. I haven't touched them since. I cut my debts in half by focusing my efforts on paying those down as aggressively as possible. But I wasn't keeping track of things well, and more than a few times got more aggressive than I should have, and put money toward debt retirement I should have put toward normal bills. Obviously this was an untenable plan. I sat down and realized if I didn't put some serious math toward things and figure out a plan, I'd lose everything I worked for, and worst – continue to work my ass off and have nothing to show for it. I'd get massive bonuses, and dump them into paying bills.

I realized between jacked up penalty interest rates as high as 30% on balances as high as $5,000, and late fees, that my previously affordable plans had become a massive mess of unpayable penalties. I was getting kicked when I was down from every possible direction, and was liable every month for more than I made, despite the plans being affordable only months before. When you fail to pay one card, all the other cards take notice. They crank your limits down, they jack up your interest, and when you pay late on them, WHAM, 15% revolving interest just became 30%. Your budget to pay this card off in 3 years? No longer makes the monthly minimum payment anymore, which by the way  now has a $35 late fee.

After putting my head around every bill I was past due on, every revolving credit line I have, and the rare few collections I had, I realized I need a comprehensive plan. And then my car insurance doubled. WTF.

Today I got the fedwire transfer from a massive 401k loan (at 4something% interest). My first impulse when I saw the amount in my bank, combined with my biweekly paycheck, was to run to tijuana and say screw it all. But of course,  my debt will be 100% paid off in 5 years, and I'll save thousands in interest. The money I'm saving will be going directly into savings to cover rainy day funds, and my goal is to build up 3-6 months of pay in buffer money, as the financial folks always recommend.

I know 401k loans can be risky, but I read the risk carefully, and fully understand what I'm doing. By doing this, I've saved literally $500 a month in late fees, excessive interest, and other costs. That will obviously help when it comes to savings. I'm going to leverage the situation to try to refinance my horrid sub-prime 8.25% mortgage (shouldn't be hard, they said I could before if I were caught up in payments (as of tomorrow, I will be current to 4/1/2013 – I am current on mortgage payments on day 1 of the month for the first time in 3 years!) it's not like my debts disappeared, they just all went into one place). I see the light at the end of the tunnel.

And esurance cut my insurance rates in half for the same coverage. So there's another $150 a month I can put toward savings. EXCELLENT.

And when I have a buffer, I can safely put all my bills on autopay, and never screw them up again.

Things are coming together nicely! For the first time in 3 years, I'm looking forward to opening quicken, my online banking, and I'm feeling better about answering numbers I don't recognize on my cell phone. My credit score dropped 200 points this year. It's at 550. I have a long ways to go, but I'll get there. I can do this.

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