New idea - paying off quick

[supercar]

As everybody knows paying the minimum payments on cards or any other loan for that matter doesn't take one anywhere. You keep paying the interest for almost until you get too old to have any money left to enjoy.

I was just working on trying to figure out what should probably be the payments every billing cycle. Unless I have a specific target I don't pay serious attention. So, I came up with paying 10 times the minimum payment every time an amount is due.

This way I can pay off my payments very quickly.

Pay check $2500 after 401k, medical, social etc.

Debt - 15,800 across two cards.

Balance on one is 7500 --- Minimum payment is $75
Balance on the other is 8300 --- Minimum payment is $125

My target was to pay off around $1000 every month. But if I try a little harder I think I can come up with $750 + $ 1250 = $2000 every month which is $1000 every paycheck just for payments before my school payments come up.

New budget: Everything is for 15 days.

Income:
Paycheck (15 days): $2500

Expenses
Paying Guest cost : $350
Gas : $150
Expenses : $200
Investment Account: $400
Mortgage : $400

Total Expenses: $1500

Money left: $1000

I will barely meet the target.

Any thoughts/comments?

[photo]

Do you have some cash stashed somewhere for unexpected expenses? I'd make sure you have some tucked away first before using all your money to pay off cc debt.

[jpg7n16]

I see an 'expenses' category. But $400/month can't cover everything...

Are you planning to eat?
Do you need clothes?
Do you have insurance? (car, home, life, disability)
Where are taxes for the home?
Why do you pay $700/month for guests?
Why are you putting $800/month into investments, if your goal is to pay off the debt?
Do you tithe?

Other considerations:
You said 'before you school loans come up': what is the balance on the school loans? what are the interest rates?
What is the rate on your mortgage? Should you refi?
Can you get a 0% balance transfer while you pay these cards off?


I like the plan to pay significantly more than the minimum payment. I don't like the vauge budget.

[snafu]

More questions whose answers needed to give intelligent/practical advice. What age group? What is the interest rate on your CCs? Have you stopped adding charges? Can you transfer existing CC balances to 0 % CCs? Can you temporarily put your investment a/c contribution plan on hold and use $400. to further lower the CC sum. Does your employer contribute matching sums for 401K? What interest rate will be charged to student loan? How stable is your employment? Do you have an emergency fund?

[Frugal]

I think it is best to have an emergency fund before making massive payments in the thousands per month on debt. Smaller payments are possible, but it is still best to have savings in case something unforeseen happens.

[greenskeeper]

When are your CC payments due?

If possible I would satisfy all my other bills and savings, then with the remainder of cash leftover at the end of the month put all towards the CC payments.

My mortgage is my only debt, and what I do is allocate funds to my bills and savings, then the remainder is put towards extra principal payments on the mortgage. At my current rate my 30yr note should be paid off in at most 12 years. IT CAN BE DONE!

[supercar]

Wow...thanks for the replies gentlemen. I'll try to answer most of the questions.

I see an 'expenses' category. But $400/month can't cover everything...

Are you planning to eat? yes... lol
Do you need clothes? Yes.. but don't need to buy for another year.. just bought a huge stash.
Do you have insurance? (car, home, life, disability) I don't own a car as of now. Live about a block from work.
Where are taxes for the home? This is a good point I forgot.
Why do you pay $700/month for guests? --This is my expense.. I stay as a paying guest in someone's home
Why are you putting $800/month into investments, if your goal is to pay off the debt? This I was thinking of considering as the Emergency Fund.
Do you tithe? no idea what this is. Tried looking up... No I don't

Other considerations:
You said 'before you school loans come up': what is the balance on the school loans? what are the interest rates? $27,000 Due Nov 2012. Rate is 7%
What is the rate on your mortgage? Should you refi? 5/1 ARM at 4.00 APR
Can you get a 0% balance transfer while you pay these cards off? If I pay these off by when the 0% ends on these cards .. which is around Aug 2012.. I am sure I'll get 0% as my utilization rate would be near 0%


What age group? 27 years old. Single

What is the interest rate on your CCs? 0% until aug. 18% after that.

Have you stopped adding charges? Keep adding around $300 per month and paying off.. That is the 400 expenses category I put.

Can you transfer existing CC balances to 0 % CCs? This is in 0% cards now.
Can you temporarily put your investment a/c contribution plan on hold and use $400. to further lower the CC sum. No. I don't want to because employer match is 5%
Does your employer contribute matching sums for 401K? Yes. 5%
How stable is your employment? As stable as any normal job in this recession scared environment.... not a govt job if you are asking that. I do programming.
Do you have an emergency fund? I was hoping I would use my Investment Account in case of emergencies. That's why putting $400 in to it every paycheck

[supercar]

I don't own a car as of now and don't have plans to get one in the next one year. I still have the Gas charge, because that is how the deal is with my home owner who is my cousin. (For Food and stay) I pay $700 every month and fill the gas which comes out to be around $300. I drive distances than they do because I drive 3 times a week to school about 35 miles one way.

Normally I shouldn't have any other expenses, but they never buy any fruits, never make any breakfast...etc so I will have to assign some to other expenses which is the $200 expenses I have every paycheck

[jpg7n16]

The point of my questions was more to say - "there are several necessary expenses that I do not see in your budget as presented above."

You said you plan on eating (obviously ) so where is your budget for food?? You have a mortgage, but where is the expense of taxes and homeowners insurance? Life insurance? Utilities? Where is the water bill? Electricity? Cell phone? TV and internet??

Soooo many categories are absent in your budget (or are lumped in 'expenses' which is a poor way to budget). By asking those I hoped to either get some clarification on how your costs of living are paid for, or alert you to a gap in your budgeting strategy.

And I believe I read this right, but - you have a mortgage, but are living in a different house? Why are you not living in your own home? <You said you pay $700 to the 'homeowner' but you have a mortgage, which means you're the homeowner, so my mind understands that to mean you're currently living in someone else's home. Please correct me if I'm wrong on that. I don't fully understand your arrangement, so I don't know how to give you advice on reducing your cost of living>


Given your other answers, I would continue to do the 5% match but no more than that at this time. Pay off the rest of the CCs as fast as you can. If you can make your original plan work, that's fantastic. But you'll have the cards gone well before they'd start charging interest, so there's not a real rush there.

I would also plan to keep the 401k @ 5% until the SL's are gone. 7% - although tax deductible - is still pretty high.

[artwest]

Quit using a credit card. Since you are trying to pay them off, quit using them.

"Invest" the $400 into a savings account or money market account and use it for an Emergency Fund. Build that up to $1,000-$2,000 then start attacking your debt.

I would attack the credit cards by making the minimum payment on the $8300 card and throw everything else at the $7800 card. Once the $7800 card is paid off, throw everything you can at the $8300 card. Wen that is paid off throw everything at the student loan and get that paid off.

I would also refinance your mortgage to a fixed rate, preferably 15 years.

That's my opinion for what it's worth.

[supercar]

Originally Posted by artwest

Quit using a credit card. Since you are trying to pay them off, quit using them.

"Invest" the $400 into a savings account or money market account and use it for an Emergency Fund. Build that up to $1,000-$2,000 then start attacking your debt.

I would attack the credit cards by making the minimum payment on the $8300 card and throw everything else at the $7800 card. Once the $7800 card is paid off, throw everything you can at the $8300 card. Wen that is paid off throw everything at the student loan and get that paid off.

I would also refinance your mortgage to a fixed rate, preferably 15 years.

That's my opinion for what it's worth.

Kind of in agreement with this.