last week, i prepared a guest post for pf blogger clever dude which was published at his site today: you’re broke because you want to be: 12 rules for debt elimination.

Last month, I finished reading a copy of “You’re Broke Because You Want To Be“
by Larry Winget.  [..]

Winget is very straightforward and to the point. he doesn’t and won’t put up with (almost) any excuse as to why someone is in debt. There is no hand-holding or gentle encouragement from this author.  There are no parables.  If you’re in debt, you put yourself in that situation, you chose to, you wanted to, and you must start taking responsibility and get yourself out!  That’s all there is to it.  Although he will come off as blunt and crass to some, i found his telling-it-like-it-is attitude rather refreshing.

[..]

In this article, I review Winget’s steps for getting oneself out of debt.

please visit clever dude’s blog to read the rest of this article.

thanks to clever dude for hosting an FWP post!  while there, please take a moment to look around and check out some of his own posts, and offer feedback and support.

how did i fall into debt starting oh so many moons ago? i’d like to take this time to share my story, to the best of my memory. i’ll probably have to bust out my latest copy of my credit report for reference.

it all started with college, my first semester at UCB about a dozen years ago.

sign up for a credit card, get a free t-shirt!

near the main administrative building of the university, the street bancroft crosses telegraph avenue. in this intersection and further south down telegraph, one might find various tables set up where artisans sell their craftsmanships in the form of jewelry, clothing, or other handiwork. among these tables near the stores and university, however, a few tables are advertising credit cards.

this is especially true during welcome week, the week before the school term officially begins for any semester. during this week, students are getting prepared for classes by shopping for books, taking care of paperwork, moving, etc. the perfect traffic for luring unsuspecting, money-starved college students to the world of credit cards.

sometimes they try to offer you ‘free t-shirts’ if you sign up for a card. unfortunately, it seems to me that many young people in their early young adulthood just aren’t equipped with the knowledge on personal finance to understand how credit cards work, and their consequences when misused. i certainly didn’t get much wisdom in high school or at home from my parents! all i understood was that you apply for a credit card, use it to pay for stuff, pay back the money by a given date. if you don’t, the company/bank charges you a fee of sorts for being late, and/or borrowing the money longer than one billing cycle.

in my naivete, i thought, ‘couldn’t hurt, right?’ and something about getting free stuff was often exciting in the beginnings of college. it doesn’t help either that the excitable crowd of students that would surround these tables seem to be having a good time. so i too would visit these tables, and fill out the forms. in time i received my first credit card, (let’s say the mbna ucb mastercard for now).

weak beginnings..

things were going well for about 3 billing cycles. i was able to pay off what my bill stated. and it felt fun and ‘adult-like’ to use a credit card. i had already made use of savings and checking accounts during high school, so the next natural stage in my adulthood rite of passage seemed to be obviously the ownership of a credit card.

at some point, however, i couldn’t come up with the money anymore to pay for what i needed to with every billing cycle. i had a part-time job as a retail sales clerk at a bookstore after school hours my first semester, but i made far from enough to pay off my bills. somehow, i got into the bad habit of buying things i shouldn’t have been, such as excess shoes and clothing. since it was such a while ago, i can’t really remember what made me believe that i can just ‘pay if off later, eventually’.

over time, as expected, i collected additional credit cards for no sensible reason, and accumulated more debt. every now and then i believe i made use of the 0% balance transfers to help myself. however, i would get behind on my payments, or not understand that purchases could still be charged interest! with trying to balance my heavy academic workloads, still adjusting to the lonely college life, and being unable to truly figure out my major area of study, the debt problem became burdensome.

the various credit cards included but were not limited to: a citibank visa card, a wells fargo visa(?) card, an mbna mastercard(?), an american express blue for students card, an mbna linux fund mastercard.

drowning in debt..

over the decade, i found it challenging to recover. bad habits of ‘wanting’ things or believing i would eventually pay stuff off would often times take over common sense. i was also going through periods of depression with respect to my academic (lack of) progress, financial woes, and social loneliness that often times interfered with sound judgment. i resisted seeking counseling both for my finances and my mental health. somehow i kept plodding along, making the same mistakes over and over again, both financially and academically. my parents and i were never close, so i did not even once think about asking them for advice.

after college, when i started working, i tried to get my finances in order. now i had a college loan to pay off gradually per month. this would maximally take 10 years. i even saved for my first motorcycle a year after i started working full-time, rather than taking out a motorcycle/automotive loan for it. i paid my balances for credit cards monthly as much as i could. but it all still felt unending.

i think i’m in denial!

i made a big mistake in taking out a car loan for my first car, a mazda miata. i don’t know what i was thinking. well, obviously i wasn’t thinking. i put down less than $1000 for a down payment, and received about a 5% interest rate loan for the difference. i never had a chance to pay off the car, as a year later, i totaled it on the freeway in a freak accident in the middle of the night. it was quite scary. i was lucky that i had chosen to buy gap insurance for $500 such that if the car were to be totaled before it got paid off, i could just wash my hands clean of the remaining payments. real lucky.

a few years later, i decided to upgrade my motorcycle. i had paid cash for my first motorcycle, but i had owned it for about 5 years, and i wanted a bit more power. (sometimes, underpowered can be disadvantageous, and on the dangerous side.) i still didn’t have much money or sense. i still had mega credit card payments. i took out a personal loan from my own 401(k) plan at work for a few thousand dollars at 9% interest rate. i paid about $3500 for a used 650cc motorcycle i found on cycletrader online.

a few months later, i sold the first smaller motorcycle for about $1300 to a coworker’s brother for cash. i decided it didn’t make sense to own two vehicles when i barely used the older one, and i still had much debt. i applied that to my loan payment and credit card payments. i also decided that since i only had one bike and no car, i didn’t need the $50/month garage space with my apartment unit — i could just park outside near the stairs and cover/lock the bike as desired.

somehow, money seemed to be lacking, and i found myself barely being able to pay myself the 401(k) loan back on time.

am i learning.. yet??

this was about 3 years ago. since then, i have still struggled with yo-yo attempts at paying off my credit cards, closing accounts, balance transferring, still purchasing things, using money that i don’t have. it has caused me so much stress, anxiety, depression, frustration, disappointment, grief.

over the summer, i decided that i would stop my own madness once and for all — i would finally take true responsibility for my poor financial situation and debts. i started this blog at FWP to be constantly aware of my spending habits, to share with and learn from others, to be held ‘publicly’ accountable. i have more regularly been reading books and online articles on personal finance. i have adopted healthier spending habits, finding ways to earn additional income, i have made some online personal finance pals for moral support.

i decided that i would become debt free for real this time. i will succeed — i just know it. and it will feel so wonderful.

do you have a debt-beginnings story? what is your debt story? how did your debts all begin?

larry winget's* book

a few months ago i wrote, crafts as a source of income? as i toyed with the idea of selling my handmade, crocheted products in order to earn extra money to help pay off my debts.  i knew that this would be small supplemental income from a side hobby, that i would not be able to earn serious income from any sales.  well, not yet at least.

admittedly, i was a bit skeptical that anyone would actually buy my products.  similar accessories can be had for cheaper prices most often than not, easily factory-made and mass-produced.  also, while looking around the etsy site, i noticed the plethora of amazing handiwork there.  as such, i did not feel that as a relatively new crocheter, i could even compare or compete with the other sellers.

much to my delight and surprise, i made my first crochet sale last week online! my first real customer!  she was a girl in another state who bought a crocheted purple ninja amigurumi toy/doll from me!

only several hours before, a friend of mine in the east coast noticed my ninja somehow also, and requested an order of 4 ninjas of various colors!  the next day, someone bought my multi-pink bamboo-handles fringed handbag!  wow!

admittedly, i did not make very much at all in terms of profits.  at $7.77 for the ninja with shipping, i made about $3.  this is after i took out the cost of supplies.  as for the handbag, i took quite a loss.  i estimated the shipping so incorrectly — it turned out to be $6+ for shipping instead of $3.  as a result, while the customer paid about $8 total, i had to dish out an extra $3+ for shipping, and the dollar of two remaining is immediately gone because it cost me about $10 to make the bag in the first place (cost of supplies)!  it was like giving it away as a gift, really.  since the shipping miscalculation was my own fault, i did not press the buyer for the shipping difference.

i have priced the 4 ninjas to my friend in the east coast at $5 each.  i suspect offhand that shipping might be $5-$7 at most.  so $20 minus the cost of supplies at $6? leaves me around $14.  i guess that’s not too bad — i’m learning!  i will get the package weighed at the post office before billing her.

a few days ago, i sold my first pair of black armwarmers at $10 including shipping!  after shipping and supplies costs, i would say my profit is about $5.  not much at all, but it is something.

i also have another order for a ninja doll for another of my friends!

when i initially had posted the ninja and pink handbag for sale, i had them priced higher: the ninja at $3 more, and the bag at $7 more.  but they sat around in my store for about a month, before i decided i might try reducing the price.  i didn’t mind too much for the ninja, but i knew that i was losing money on the pink handbag.  why did i even bother selling that one then?  if someone else found it appealing to own, i would much rather that s/he use to to his/her heart’s content, whereas at my place it would just sit around gathering dust awaiting use.  and i was doubtful that any of my few friends who like pink would like and use it.

i should also mention the $ i lost for fees i paid to etsy and paypal.  i had to ‘upgrade’ to the paypal ‘premier’ account too, in order to accept 2 of the buyers’ debit/credit card payments.  in the past, when i used to sell things online at ebay, i would request the buyers to not use debit/credit card payments, to please make payments via paypal from their bank accounts.  but alas, it was inevitable that i would have had to ‘upgrade’.

here are the money-related details, in cents and dollars:

so far then, it appears i am in the negative (or, ‘in the red’), at a total loss of -4 (when including the costs of supplies).  with the other two ninja orders, i will be able to go into the positive numbers.

i’m learning a lot while entering the world of entrepreneurship:

• fees bite, but are somewhat inevitable
• i must sell at prices that reflect the state of the eonomy and appealing lower prices from consumers’ point of views
• selling crafts CAN be done!
• positive feedback from customers is coveted
• items may occasionally be sold at a loss
• handcrafting things for sale is a slow-going business (it takes time to make each item)

this small endeavor is preparing me for the world of freelancing my web coding skills hopefully in the near future!

the holiday season is coming up.  although i’m not personally that big into the christmas spending sprees these days, i know that there are many others that still are.  i want to ramp up my ‘production line’ so that i can have a handful of products ready for selling before december.  at this time, i only have this one red handbag available for sale.  i’m actually quite proud of this bag, what with my painstaking effort with the lining and the macrame fringes*.

due to the state of the economy, i suspect that i must price my crafts at lower than optimal prices in order to entice buyers.  perhaps someday later on, once i have a rhythm going and many more customers and feedback, i can raise the prices a bit thereby making closer to minimum wage :p

* did you know that larry winget, author of you’re broke because you want to be, used to sell macrame for extra income??  that is awesome.

how about you?  have you also been selling stuff you’ve made or built for a bit of extra income?  how have you been faring in that endeavor?  are you enjoying the journey?