Confessions of a Laid-off Lawyer

Just Your Average Joe Blogging Away His Debt—In One Year or Less

Strategies and Specifics

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Total Black: $129.73
Total Red: $230,272.86

A number of people have asked me how I intend to get debt free in one year.  In the About Laid-Off Lawyer page I detailed the basics about this journey I’ve undertaken.  I’ve not yet mapped out the specifics in how I intend to accomplish this goal.  That’s mostly because I’m not clear on it myself.

I’ve explained in previous entries like Feelings and Finances that I believe one major obstacle in my path to debt freedom is cash flow management.  That’s something I need to grab hold of.  I tend to want to send as much as possible to my bills, both to silence them and my own worries.  If you have enough money to get through to the next paycheck, and monthly bills are paid, then that may be an option.  My problem has been doing that without having enough money to float me.  But all that aside, I don’t believe that the “straight and narrow” approach to financial management is necessarily the only way or the even best approach.  By straight and narrow I mean the advice of financial televangelists who insist on steady payments every month, paying your monthly minimum, paying off certain debts over others, and so on.  And here’s why I don’t necessarily believe them.

1) Generally speaking, utilities and similar bills (cellphone, cable, perhaps even car insurance) are not going to report you to a credit bureau if you’re one or even two months behind.  So, if the electric bill is manageable enough that you can let it slide one month and pay double the next, then do it if it means doubling up on a credit card payment.

2) Credit card companies don’t typically report if you miss one month’s payment, i.e., go past thirty days without making a payment.  I’ve done it many times already.  Most of the negative reports on my credit record are from going past sixty or ninety days without a payment.  So, it could be an option, if needed, to skip one card’s payment to make more of a dent in another.  But that’s not really going to work if you’ll just fall behind on the other cards next month and get caught in an endless loop.  Plus, if your APR is decent, missing a month’s payment may mean the credit card companies increase your interest rate.  Not good.

3) Making the minimum payment on a credit card each month is not going to get you out of debt.  Everyone is in agreement that with fees banks charge and interest rates, something more substantial than the minimum has to be paid each month.  So, why not use some guerrilla debt tactics.  Identify one card you’re targeting and focus all your ammunition on it.  For me, the first debt to go will be my American Express card.  Next will be the Raymour & Flanagan credit line for the furniture I purchased when I moved apartments in 2008.  After that, I think I’ll start targeting the IRS debt and then my private student loans.

4) Television pundits will advise that you pay off your credit cards first.  Why?  So your credit improves.  What do you need good credit for though?  Think about that for a moment.  If you’re like me, living in a major metropolitan area, renting an apartment, what do you need to worry about credit for?  I’m not getting a mortgage any time soon.  I don’t need a car.  I don’t want (and certainly don’t need) more credit cards.  So what good does a good FICO score do me?  Sure, you can be turned down for an apartment or even a job, so you don’t want your credit score in the toilet.  (And for licensed professionals, especially ones handling money, you don’t want your credit report to get too bad lest they worry about your trustworthiness with other people’s money.)  But really, maybe it’s time to rethink a bit the whole credit report game.  It is a corporate set-up they’ve forced us to into.  Credit reporting companies are certainly not on the consumer’s side.

So, in tackling debts, I think maybe a bit of video-game strategy is called for here.  As a boy I played Nintendo.  I loved all the Super Mario Brothers games, Legend of Zelda, Metroid, Kid Icarus, and so on—all the adventure games.  Even now I’m waiting with bated breath for Diablo III to come out.  For anyone who has played any of those types of games you’ll know that the basic set-up is the same: go out on your journey, kill bad guys, build up your arsenal and your armament, kill small bosses, repeat the same thing at the next level, and so on until you reach the top boss.  You can’t start out a video game and go directly to the top bad guy because you’d die.  So why should I tackle my largest debt first.  Instead, I think it might be smarter to knock out the little debts first: the department store cards (mine are at zero already—accomplished that goal before I started this project), the smaller credit cards, and so on.  Then, once you’ve boosted your morale, your self-confidence, and freed yourself from all the other debts pulling at you like Lilliputians, then you can wallop the big debts.  For me, that’s the government-backed student loan debt.

I’m off to go slay some document dragons in my quest for financial freedom.  Till next time.

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