I began this debt blog, which I called Debt Reduction Formula, in September of 2007.

That happened to be the same month I sold my home in Highlands Ranch, Colorado, and moved into a rental home in Parker, Colorado.

At the time, I owed $75,286.38 in debt. I was really feeling the pressure of the debt I owed and felt I needed to do something proactive to get it under control.

So I started this blog.

I proceeded to pay down my debt consistently, reporting on my progress each month.

From September 2007 until May 2009, I reduced my debt by $45,192 — a 60% reduction in 18 months. In May 2009, I predicted that I might be out of debt by early 2010.

My prediction has not come true.

I’m still in debt, and the amount I owe today in September of 2011 is actually more than what I owed in May 2009. As of today, I owe $39,289.89 — about $9K more than I owed two years ago. (This figure includes my car debts. I still have no mortgage.)

This is a little bit embarrassing to admit because I really thought I would’ve done better. But I haven’t.

You see, in 2010, I shifted my focus from paying off debt to growing my business, raising my three kids, moving my family to another rental, and various other things. I stopped publishing my monthly debt update. In fact, I stopped tracking my debt altogether.

As a result, my debt has bounced up and down and ultimately increased.

Which brings me to the primary point of this article: Tracking and reporting how much you owe on a public debt blog keeps you focused on becoming debt free… and… actually helps to reduce debt. My results from September 2007 through May 2009 are proof of that.

But without the accountability that a debt blog provides, it’s quite easy to slip back into old habits. And even if you don’t slip back into old habits, it’s still easy to grow complacent and simply lose track of your debt.

When it comes to debt, a little bit here and a little bit there can add up to a whole lot.

Today, I finally updated my outstanding debt and was shocked to discover that I had not updated my spreadsheet in 13 months. And so I’ve realized that I need to continue updating this debt blog to continue my journey to become debt free.

And that’s what I plan to do.

By the way, here’s the latest spreadsheet with balances I’m carrying. My debt in August 2010 was $25,460.82. I bought a second vehicle in October 2010, which is why there is a substantial increase from then until now.

Outstanding Debt as of September 14, 2011

If you’re looking for inspiration to get out of debt, then you would definitely not want to look to the U.S. government.

They’re setting a horrendous example… and then trying to pass it off as “no big deal.”

In my opinion, it’s only a matter of time before the U.S. debt load comes crashing down.

But hey — I’m just a citizen. What do I know about economics and finance?

Good question. I’ll answer it in just a second. But first, from the article:

Mr. Obama’s budget said 2011 will see the biggest one-year jump in debt in history, or nearly $2 trillion in a single year. And the administration says it will reach $15.476 trillion by Sept. 30, the end of the fiscal year, to reach 102.6 percent of gross domestic product (GDP) — the first time since World War II that dubious figure has been reached.

Here’s what I know about economics and finance:

When you’re total consumer debt exceeds your gross annual income, you’re pretty much screwed. To get out of debt, you’ve got to make huge gains in your annual income — which for most people (and governments) is not realistic.

Get the full story here and see if you agree with my conclusions:

Federal debt now equals total U.S. economy

Welcome to this week’s Carnival of Debt Reduction!

My favorite submission this week is from PT Money. He shares how to opt out of credit card offers and junk mail in general.

This is an excellent idea, and I highly suggest you follow this advice. Because the more offers and advertisements you receive in the mail, the more likely it is that you’re going to spend money you shouldn’t be spending.

My second favorite submission was from Mighty Bargain Hunter. He suggests kick-starting debt reduction by selling your stuff.

One tip he shares was new to me. He writes: “A nice collection of DVDs can be sold as a lot on eBay for a few hundred dollars (or more).”

I hadn’t thought of selling small items in lots before. This would probably work well for many different kinds of collections. Just something to keep in mind if you need to raise money quickly to pay down debt.

Here are some other good articles worth reading:

• Free Money Finance has a credit card beef with Dave Ramsey.
• Debt Relief Options has a post on, well, debt relief options.
• Christian Personal Finance gives five reasons why you may not be out of debt yet.

That’s it for this week. If you’d like to participate in an upcoming Carnival of Debt Reduction, please submit your post here:

Submit a Post to Carnival of Debt Reduction

Thanks!

Tax debt relief is rare, but is sometimes awarded to individuals who’ve overextended themselves and are unable to pay their taxes by the time they are due.

Unfortunately, getting Uncle Sam to cut you a break is not easy. That’s because all the laws are written to favor the federal government.

Sure, the government provides bankruptcy laws. But going through bankruptcy does NOT discharge your tax obligations!

In other words, the government will forgive your debts to others, but will not forgive the tax debts you owe to them.

If you think this is a hypocritical double-standard, you’d be right. Nevertheless, it’s just the way it is, and we have to play by the rules our legislators make.

Tax Installment Plan

The most common kind of relief the government will offer you is some kind of installment plan. They may allow you to make four or five equal payments over four or five months. Or they may spread out your payments over 60 months.

Every situation is unique. Different terms are offered to different people.

If you have a huge tax obligation, an installment plan will at least break down the payments so they are somewhat more manageable (although certainly no less painful).

Offer in Compromise

Although it is extremely rare, the IRS may offer you what’s called an Offer in Compromise. This is basically the same thing as settling a debt.

If you owed $20,000, the IRS may evaluate your situation and decide you will never be able to repay that tax debt. And so they may allow you to make a single lump sum payment for less than what you owe.

By making this reduced lump sum payment, the IRS then agrees to wipe out the entire tax debt.

In a perfect world, an Offer in Compromise would be more common. But the federal government is quite greedy, so this kind of settlement is very rare.

How to Seek Tax Debt Relief

Anytime you face a tax obligation that you cannot pay, then your best course of action is to contact the IRS and talk to somebody. Do not try to hide from the IRS; be transparent with them.

Many times you will be able to negotiate some kind of installment plan. In fact, there are four different kinds of installment plans depending on how much you owe and your past history of filing your taxes.

You can find out what you qualify for by searching the IRS web site or calling an IRS agent directly.

If you are facing a genuine hardship involving a disabled child or insurmountable medical bills, the IRS may be willing to forgive a portion of your debt through an Offer in Compromise.

But in order to see if you qualify for such an offer, the IRS would need to thoroughly evaluate your financial situation.

Remember: Tax debt relief comes in many forms. Don’t procrastinate and try to hide from the IRS. Call them and work something out. You will feel less stress and you’ll be happier when you resolve your tax debt as quickly as possible.

You might think a retail credit card would be harmless. And you may be right. But my good friend told me a story about his wife that left me speechless. (Well, not really, because here I am now writing about it.)

In this particular case, the retail credit card actually got his wife fired from her job. Here’s the scoop:

My friend’s wife (we’ll call her Liz) has been working at Lane Bryant for a couple years now. She’s had glowing reviews. The customers love her. But there’s one little problem.

Liz does not like to push the Lane Bryant retail credit card as hard as the company would like. Sure, she asks each customer if they would like to open an account. Most either already have an account… or decline because they don’t want a retail credit card.

No matter how the customer responds, Liz never gets pushy and usually accepts the customer’s response at face value. Under normal circumstances, Liz’s behavior would be perfectly acceptable. Except there’s a little detail called a quota…

Minimum Number of New Retail Credit Accounts

Apparently, when you work at Lane Bryant, you’re actually not in the business of selling clothes. You’re in the business of getting people to open Lane Bryant retail credit cards… and then getting them to buy clothes. Kinda.

Because you don’t actually want customers to buy clothes with cash or anything other than a Lane Bryant credit card.

This is why each employee is required to open 6 new retail credit card accounts every 2 weeks. That’s 3 new accounts per week.

If any employee fails to hit this quota, they can be let go immediately. Fired. On the spot.

Unfortunately, this is what happened to Liz. Not even her glowing reviews or positive customer feedback could make up for her unwillingness to shove credit cards down the throats of Lane Bryant customers.

Lesson: If you don’t feed the beast, the beast will devour you instead.

Mixed-Up Priorities

During the last few years, strange things have happened to the business landscape.

Cash is no longer good enough. Credit is king because stores can make so much more through exorbitant interest, late fees, and fees assessed when you try to pay your bill by phone or the Internet.

Let’s be honest. These are no longer retail stores. They’re credit card companies disguised as retail stores.

This can’t be good. It’s not good in the short term, and it’s definitely not good in the long term.

One retail credit card I recently canceled charged $10 to make a payment over the Internet.

Worse, they put the fee on my NEXT statement in the hopes I’d forget about it. That way they could charge me a late fee on top of a fee that shouldn’t even have been assessed in the first place!

But, hey, this is American business. Anything to keep the shareholders happy, right?