Sunday, October 4, 2009

How I got myself in Debt?

If you already dont't know, a few months back, I found myslef sinking in a big debt (see prologue). Thanks to online records and excel, the presented pie graph shows back-of-the-envelope accounting of my expenses for the last two years. Although I didn’t start debtfree two years ago, I saw my debt slowly ballooning in my monthly credit card statements to near $30, 000.

My major expense for last two years was housing at 40%. According to National realtor’s association, the average housing expense is 28-35% of income for year 2006-2008 in the United States. My expenses are reasonable considering I am a single and live in an urban setting.

My second major expense was restaurants and bar at 20%, about a half of my housing expense. No-brainer here, I definitely need to cut down my gourmet habit. Since I consider dining out as my entertainment needs (see my post on Need vs. Want), I don’t want to completely forgo it. However, I need to limit it within my entertainment budget. One of my third major expense was interest payment, which can be definitely reduce to zero without sacrificing any emotional needs. Among my fourth expense was electronics at 6%. I upgraded couple of electronics in last two years and I admit to splurging unnecessarily. I recognize that I need to be vigilant about my electronics budget and limit it in terms of productivity rather than for its coolness factor.

After doing this simple accounting of my expenses, I have evidence-based knowledge of my major expenses and clue to root cause of my debt. In traditional twelve-step program, isn't recognizing root of your problem is one of the first steps?


  1. Nice pie chart, and a great story too. I am interested in presenting your posts on my web site ( Please let me know if you would like to do a collaboration. Thank you.

  2. After following your blog for a while, I have started keeping a log my expenses. I must say that the psychological control numbers have on you when you aware of them is a wonder!

    Another thing about:
    "..limit it in terms of productivity rather than for its coolness factor."
    Don't you think "coolness" is a productivity factor in itself? There is sort of an instrumental value in coolness which speaks volumes about you to a person who just walks into your apartment, runs a quick glance at what you're wearing/carrying etc.

  3. @HallyZ: I am always interested in collaboration. Could you email me with details at . Thanks.

  4. @Anonymous: I agree coolness does reflect somewhat increase in productivity. However, after a some point the gain in productivity diminishes i.e, the law of diminishing marginal returns. My goal is to find that optimal spot. In a same way, I don't sanction all the things many would consider as "wants", for other they may be "needs" (albeit emotional need). See my post on Need vs. Wants at

  5. That graph tells it--restaurants and bar 20%.

  6. @John: Indeed it's my gluttonous inclination for fine wine and dine.