introduction -- my situation

[toenailzz]

Hey everyone. I just signed up for the site.

I've been in and out of debt to varying degrees for a lot of years. Right now I'm more devoted and working harder than ever to get all of my CC debt paid down for good.

I have finally developed some good spending habits and no longer use credit cards for anything at all. Now it's just a matter of paying off the debts I have accumulated in the past.

To do so, I took a second job a few months ago. I've never worked two jobs in my life before this. I was worried that it would stress me out to an unbearable level, but so far it's tolerable.

Right now, I owe a net of just under $13000 in credit cards that I hope to have paid off in early 2011. Part of the reason I'm so aggressive about this at this point is that I do not like my primary job and am looking for ways to free myself up to have the option of quitting and pursuing something I will enjoy more.

Here's the breakdown of my current debts and savings:

CC#1: -9200 @ 5.99% promo rate until 05/2011
CC#2: -6000 @ 1.99% promo rate until 04/2011

Savings account: 2200

I'm not asking for any specific advice, I think I have a pretty good idea of how I'm going to go about this and a plan to make it happen. More than anything I'm looking for some motivation to push me through. I'm about two months away from my net figure hitting $10k which will be a huge checkpoint.

So, yeah. Hello everybody.

[EconoMutt]

Welcome.
Looks like you have a good handle on your debt situation.
Good rates on cards too.
I try to stay motivated by rewarding myself everytime I break a new mile stone.
My mile stones are $10,000 blocks. Everytime I enter a new $10,000 block, I reward myself by going out to eat at a nice restaurant. Then I put my head down and attack the next block.
Good Luck. Keep us posted on your progress.

[jIM_Ohio]

welcome. I might suggest posting income relative to debt amounts. I agree 13k is manageable, and a 12 month payoff timeframe sounds about right (based on experience).

[toenailzz]

Net of all deductions (taxes, benefits, etc), I make monthly:

primary job: $2200
secondary job: $600
rent:* $250

total net icome: $3050


Expenses:

mortgage/HOA: $665
food: $400
internet: $30
phone: $35
electricity: $45
cc1: $200
cc2: $200
gas: $75
insurance: $30
misc: $400

total: $2080

Some of these numbers are estimates. A project to nail them down more precisely might be worth doing. I don't own a tv so don't have cable. I own my car, and (*) I rent half of my condo to a friend for the time being.

As far as paying my CCs. Right now I am paying the minimums rounded up to the nearest $100 (i.e. if minimum = $155 I pay $200) and saving the difference in a savings account. Then, I am paying the cards down in lump sums of $5000 each. It's almost purely psychological, but also gives me some wiggle should something happen to my primary job.

[jIM_Ohio]

Originally Posted by toenailzz

Net of all deductions (taxes, benefits, etc), I make monthly:

primary job: $2200
secondary job: $600
rent:* $250

total net icome: $3050


Expenses:

mortgage/HOA: $665
food: $400
internet: $30
phone: $35
electricity: $45
cc1: $200
cc2: $200
gas: $75
insurance: $30
misc: $400

total: $2080

Some of these numbers are estimates. A project to nail them down more precisely might be worth doing. I don't own a tv so don't have cable. I own my car, and (*) I rent half of my condo to a friend for the time being.

As far as paying my CCs. Right now I am paying the minimums rounded up to the nearest $100 (i.e. if minimum = $155 I pay $200) and saving the difference in a savings account. Then, I am paying the cards down in lump sums of $5000 each. It's almost purely psychological, but also gives me some wiggle should something happen to my primary job.

If you are single- food+misc=33% of your take home
and $400/mo is more for food than we budget for my family of 4.

Other than that, looks good.

Do you get a large tax refund each year (more than $1000)?

[disneysteve]

I agree that food is high. I'd also want to see a breakdown of Miscellaneous.

It really doesn't make sense to save up money in an account that is probably earning 1% or so when you are carrying debt that is costing you 6%. Send it all to the 6% card instead.

[toenailzz]

Originally Posted by disneysteve

I agree that food is high. I'd also want to see a breakdown of Miscellaneous.

It really doesn't make sense to save up money in an account that is probably earning 1% or so when you are carrying debt that is costing you 6%. Send it all to the 6% card instead.

I agree, it doesn't make sense over the long haul to save at <1% while being charged the 6%. Like I said, it's mostly psychological. As soon as I have $4k in savings I'm going to pay the larger CC down to $5000. Then I'll save again and pay the $6k down to $5k. I know it's costing me money but I think it's also helping me focus on smaller goals rather than feeling like I'm throwing small amounts of money at a big number each month and not seeing much progress.

The food number is somewhat of an estimate but probably not too far off the mark. I am single. I eat out a few times a week, maybe 2-4 times a week. When I shop, I buy pretty much the same things. Some fresh fruit, some healthful wheat bread, natural peanut butter, jelly, juice, cereal, soy milk, snack bars (e.g. Mojo bars), nuts, frozen vegetarian meals, and frozen vegetarian meats.

The frozen foods are pricey, but I'm a bachelor. Yes that's an excuse. No I don't accept it. I've given a lot of thought to changing my eating habits. I'm sure I could eat healthier for less money. It just hasn't happened yet. Maybe this is a good impetus to start.

As far as the miscellaneous category, I'd guess that a good chunk of it would be things like cigarettes (yes I smoke, yes I know how bad it is for me, yes I know how expensive it is, and yes I also have some specific plans to cut it out of my life) and booze. I don't drink a whole lot but when the weekend comes I do tip a few back with friends.

These are all great responses are pushing me out of my comfort zone. Thanks for that. If anything, I think if I can make a few small tweaks in my spending habits I can be free even sooner than I had expected. Keep them coming and I will keep the updates coming.

[Slandgie]

If you are good with Excel, I would suggest setting up two files where you keep track of your balances, interest amounts and payments.

The first one would be the way you are currently paying your two credit cards. The second would be by paying the minimum payment on the one card with the smallest balance or highest interest rate. Then make as large a payment as possible on the card you want paid off first.

Getting 1% in a savings account versus paying 5.99% on that one card doesn't make logical sense. But then again, what works for one person doesn't work for another.

[TheStreetCeo]

You seem to have a good start on paying down debt but are a little reluctant to make some moves to increase the rate to which you are paying down debt. I typically wouldn't do this but feel like if you read one of my blog posts about Crazy Joe and how much lunches, cigs, and the daily soda add up to you, will be amazed.

[jpg7n16]

I think EconoMutt was onto the right solution for your situation. But his $10,000 block is too big for your situation.

You need a reward schedule. But every 10k is too long for you. I'd say create a small reward for every $500 you are able to lower the balance, and a larger reward for every $1000 - then a big reward for eliminating the whole card.

Plan it out. Write it down in advance for the whole card. Then cross it off as you go. You'll see your progress, and what rewards are coming up for all your paydown efforts.

Sooo... once you get the $9200 card to $8500, go buy a movie you've been wanting to get. At $8000, a special round of golf. At $7500, (insert smaller cheaper reward here). At $7000, (insert larger reward here). At $0, you've finally paid off the card! Go celebrate! (using cash of course) Then start up on the next card. Then celebrate!

Then you'll be sad cause you've got no debt to reward yourself for paying off anymore... so start rewarding yourself for building up your EF. Then your retirement fund.



And I don't like the build up tons of cash in savings, then put it all towards the card in one fail swoop, then start over idea. Get like 2 or 3k minimum, and just everything over that amount goes towards the cards, and never go below it.

You can't get in a debt paydown groove - because your behaviors are sporadic. 1 month you're saving, next month you're saving, next month - you pay down a whole lot of debt, but lost all the progress you made in your savings. It's actually self-defeating. Establish the debt paydown habit every month with rewards, and you'll be more likely to stick to it.

[wincrasher]

I don't buy the "reward yourself" mindgames. Just make up your mind to do something and just do it. The reward is the lifestyle you'll enjoy when the debt is gone.

Without an adequate EF, you are probably smart to save up and pay the credit card in blocks. I'd probably do it in $1000 or $1500 blocks instead of $5000. Just keep plugging away at it, but I'd be building that EF ahead of paying down debt.

[jpg7n16]

Originally Posted by wincrasher

I don't buy the "reward yourself" mindgames. Just make up your mind to do something and just do it. The reward is the lifestyle you'll enjoy when the debt is gone.

Without an adequate EF, you are probably smart to save up and pay the credit card in blocks. I'd probably do it in $1000 or $1500 blocks instead of $5000. Just keep plugging away at it, but I'd be building that EF ahead of paying down debt.

Really? Cause there's an entire psychology of behavior modification based on it.

Amazon.com: Self-Directed Behavior (9780495093244): David L. Watson, Roland G.…

What you've pretty much said, is that "well I can do it, so - so can you" which isn't always the case.


It's like you're trying to convince someone who is overweight and struggling with maintaining a diet, "the reward is the healthy lifestyle of being thin. Just make up your mind to eat right and exercise. You don't need to reward yourself for progress along the way - because I don't need to."

For some people, that would work - but for others, that just won't cut it. People would benefit from creating weight loss rewards to encourage an appropriate diet along the route to a healthier thin body. Even though a healthy body is a reward in and of itself - the process that gets you there can be tiring.

A thin body is a result of the habits of healthy eating and exercise. Rewarding those habits can help lead to the thin body. (which is a reward in and of itself)


Getting out of debt is not really any different than getting fat out of your body.

Eat fewer calories than you burn, and lose weight over time. Being thin is physically healthy.
Spend less than you make, and pay down debt over time. Being debt free is financially healthy.

So, since being debt free is a result of the habits of spending less and paying down debt: rewarding those habits can help lead to being debt free. (which is a reward in and of itself)

[TheStreetCeo]

Originally Posted by jpg7n16

Getting out of debt is not really any different than getting fat out of your body.

Eat fewer calories than you burn, and lose weight over time. Being thin is physically healthy.
Spend less than you make, and pay down debt over time. Being debt free is financially healthy.

So, since being debt free is a result of the habits of spending less and paying down debt: rewarding those habits can help lead to being debt free. (which is a reward in and of itself)

Nice analogy! That makes sense and I agree with you. It's important to set progress goals. If not, how can you measure success during the time you are paying down your debt? I understand success is when you pay it all off, but the occational "win" is necessary in my opinion.

[toenailzz]

I took the advice and threw $2k into the higher balance, higher rate card. 6 of one half dozen of the other, but it does feel a bit better to see the cc balance hovering around $7k instead of $9k.

I think from here I'm going to continue making the minimums and saving up to pay off $1000 chunks. I should be able to pay a thousand about once a month, so the rewards will come with good regularity.

The comments about food spending opened my eyes. I'm focusing more energy on eating out less and not overspending at the grocery store. I think I can cut my monthly food bill to $200-$300 without much pain.

The biggest challenge for me, I think, is going to be sticking with the two jobs for long enough to pay the cards either altogether or at least to a point where I feel like the balance is manageable and I allow myself to pay them off more slowly with just one income. The total hours aren't horrible (50-52 a week) but the fact that they are both desk jobs is driving my body nuts. I've started running again every other day, I think that will help with my sanity. But it sure would be nice to have a bit more free time. I'm trying to focus on the fact that it will eventually be nice to have the free time AND to have the extra savings from not having to pay credit card bills every month.

My primary goal now is to have the $7k card down to $5k by the end of September. It's doable.

[toenailzz]

Another update:

I threw another $1k at the higher balance, higher rate card.

I'm now at:

CC1: 6169
CC2: 5732
----------
ttl: 11901

getting there

Short-term goal is still down to $10k by the end of September.

[DrSavin]

Wow! What a difference toenailzz. If you keep that up, you'll be out of debt before you know it.

Once you're done, you should pretend you still have to pay them off, except this time you should just throw it into a high interest savings and a retirement fund.

[bjl584]

Is your credit good enough to qualify for a balance transfer to a 0% card?

[DavidBibby]

Originally Posted by toenailzz

Another update:

I threw another $1k at the higher balance, higher rate card.

I'm now at:

CC1: 6169
CC2: 5732
----------
ttl: 11901

getting there

Short-term goal is still down to $10k by the end of September.

Toenailzz,

You are doing great! A lot of people ask if it's better to pay off debt THIS WAY or THAT WAY.. but the bottom line is... you need to do it in whatever way works FOR YOU!

Congrats for getting your 9k CC1 down to 6k. Keep it up and you'll be out of debt in no time!

[toenailzz]

Originally Posted by bjl584

Is your credit good enough to qualify for a balance transfer to a 0% card?

It is, and I get offers semi-regularly. But in my recent experience all of the offers charge at least 3% on the amount you transfer. So, I'm holding off. 5.99% isn't great, but it's also not outrageous, and that's the card I'm focusing fire on right now. That rate is good until April or May 2011. I may have it paid in full before then. If not, I'll start looking at other BT offers a month or two before this one expires.

[LuxLiving]

Can you transfer the 5.99% balance or a part of it onto the 1.99% w/o a big fee? I'd crunch the numbers. Good job getting that balance down. I agree w/the others about not saving up huge chunks before paying it down.

While I don't advocate debting, here's how my thinking went on this subject until I got things turned around. Yes, I was wishing we had a bigger e-fund at that time, BUT if, God forbid, there were some minor catastrophe, ie, hot water tank went out or frig went cablooey, tranny went out on the car) there is still the CC to fall back upon. (Disclaimer: ONLY do this IF you are truly committed to no debting for non-emergency items.) Get your e-fund up to a tolerable level and then blast away at those *&%! CC balances! And then pack that e-fund parachute fully.

I'll say what I've said here many times before, we put our income $'s into a 3 pronged approach, PAST, PRESENT and FUTURE.

PAST - debt paydown (here we threw as much as possible, while still covering the others)
PRESENT - a tiny bit of fun along w/daily living
FUTURE - savings/retirement

Good luck. I think you are on the right track.

P.S. re: Smoking. Hubster did it for 40 some years and tried many times & ways to quit - and quit he finally did (YA-LA-LEW-YAAAAAAAAH!!!) using Ondamed technology. Many haven't heard of it, so putting it out there as a possibility for you and others.