Set the plans in motion- this is fun!

[Tonto Goldstein]

Hi all,
I think this might be my third total post...please excuse my low post count as I have spent time reading most of the posts since I found this site. I love it here and can only express gratitude for everyone telling their stories (even though it is probably hard for some to bare their truths) and others for weighing in when appropriate.

I'm not really sure why I am posting- Not so sure I want help or advise, or maybe I do? possibly a little encouragement? I'm not sure, but I find the desire to post this...

Been separated for 5 years, divorced for two. In debt to the tune of 47,000. I make good money and have plenty left over from where my actual costs including debt service end and my take home finishes at. The difference has been partied away in my second youth (pre-mid-life crisis I guess you could call it)

I switched locations and made a promise to myself to fix it. Got to washington state and started to really look at my bills/debts/income. I got really angry with the guy in the mirror...wow am I stupid!!! I've had the means, knowledge, intelligence, etc. but never acted on it, even though I knew better!!!
That realization sent me on a bit of a search, and here I am now.

Here is what I have learned and begun to do and plan to do...

I focused, set limits, and picked a number that I was sure I could be comfortable with- and then added it to the amount I pay towards debt service. (basically cutting out "partying" on weekends at bars and stuff). I used that "extra" per month along with the basic min-payment for each debt/balance/interest rate in the calculators at bankrate dot com. That gave me some idea of what each bill would take to pay off in terms of months.

I have one loan that the min payment is 420 a month.
The rest are credit cards with various levels of interest. two at about 24%, two at about 9.9, and one at 4% for the next year then goes to 9.9.

I decided to focus on the 420 a month loan. It will be gone in total inside 8 months (really sooner, more on that later). I chose it because it will then yield an "extra" payment factor that is very large so each month when I use it towards the other cards I will see a significant drop in the balance.

My magic number turned out to be 600 a month. When I build this plan earlier this month I was thinking all along that I would start it in September...I also built it using a month here and there between the finish of one cc and starting on the next. The initial plan had me finishing in just under 2 and 1/2 years.

Then my check came in and I couldn't hold myself back. I dumped what I could on the loan, designated portions of it for next months bills and managed to cover all expected issues and at the same time start the 600 plus up one month early.

This motivates me more. I have seen that significant drop in the first balance. I see that I am doing ok with my typical daily spending and do not see a crunch at the end of the pay period. Basically, I am comfortable with the cash I have for the remainder of the month and I was able to score an additional 600 towards bills, pretty much directly from the second paycheck of the month.

This has led me to look at my next paycheck, where the money will go and what will be left over. You know what? I found that I will have extra money that I did not expect in the first round of calculations- what I am afraid of now is that I will get too eager too early in the pay cycle to push that "extra" into the bill and then be stuck with less in my checking than I actually need.

That is new for me- worrying that I will pay too much on a bill?

What I did not reveal just yet is, every year I receive a windfall bonus on October 2nd. It comes like the sun- predictably. BUT- I didn't factor it in at all in my calculations/budgeting...

Some of it will go towards bill reduction. Some of it will go towards the kids presents. Some of it will be paid forward for yearly type bills (that are already factored into my budget, but will release that line item to allow for it to be added to the plus 600). Insurance for the car, registration, etc.

All told, I am extremely excited. I think I have a plan that gets me to debt free in two years, less if I use the bonus money more in the process of getting debt free.

My next dragon to slay will be the concept of "emergency fund", what I call "big purchase fund", IRA and TSP contributions. Striking a happy medium to satisfy those will be my goal.

Thanks again for such a warm board and helping me (even though we didn't specifically talk!)

be good!

[LuxLiving]

Hoooo Tonto!



Welcome to Saving Advice.

Congratulations on deciding to 'get it together'!!

Sounds like you have a more than decent plan going forward. Momentum is a wonderful thing, isn't it?

Only advice I'd give is to set a minimum for what you NEED in the checking/cash to last till end of month to feel secure, for some it's $500, for others $2500 or more, whatever that magic number is? Set it in there and keep that balance in there as your buffer then throw down all else you can free up on that debt!!

Congrats on having a plan, and working that plan!! Go YOU!!!

[Brad]

Tonto,

What a success story. You have certainly taken the first steps in becoming free of your financial burdens. These stories a certainly inspirational to the rest of the forum. Please keep us up to date on your progress.

Best of Luck,

Brad

[tulog]

Excellent story. Keep up the progress.

Also, don't regret your second youth. It is best to leave the past to oblivion, since one cannot change it.

[kork13]

Only advice I'd give is to set a minimum for what you NEED in the checking/cash to last till end of month to feel secure, for some it's $500, for others $2500 or more, whatever that magic number is? Set it in there and keep that balance in there as your buffer then throw down all else you can free up on that debt!!

This is a great idea. Personally, my "buffer" is no less than $500, preferably keeping at least $1000 in checking at all times. That buffer has saved me many times from overdraft.

The other side of making sure you don't over-run your accounts is to know exactly how much you spend each month. Save receipts for absolutely everything over a 2-3 month period, and keep track of them on a spreadsheet at home (at least, this is what I did. Alternately, you can just carry a running tally in a notebook you keep with you). Once you know how much you spend each month on everything from housing to groceries to soda at the vending machine, you know how much of your paycheck you need to live on. The rest, you can allocate to savings and debt repayment.

One final note -- make sure that you are saving. Debt repayment is great, but if you don't have savings to back you up, you can find yourself going right back into debt if an unexpected expense comes up. Allocate a certain percentage (start small, and eventually build up to at least 20%) of your gross income to savings (this includes your EF, IRA, TSP, and also general savings and investments). If you need help figuring out how to allocate your money between expenses, debt repayment, and savings, post the details of your situation and we'll be happy to help you out.

Welcome to the boards, and congratulations on starting to eliminate your debt! Keep it up!

[whitewater30]

Congrats on your plan. My wife and I paid off her car last month, and it felt great not having that payment burden anymore. We are going to be debt free by the end of March, ie $45,000 paid off in 8 months.

[whitewater30]

Plans in motion

Congrats on getting your battle plan together. My wife and I paid off her car last month and it feels great having an extra $350 per month to put on other debts. We will be completely debt free in 7 months.

[Tonto Goldstein]

It is really nice!
Thanks all for the votes of confidence.

Further details-
I managed to drop down to 300 in the checking and 100 in the savings (have also a pair of 'blind' checking accounts both with sufficient funds if I draw these to zero as I experiment)

I was able to put slightly more onto my designated bill. Not much, but a little more than I had drawn up in my blackboard plan. I was also able to consolidate three credit cards into one loan. I dropped a 24.24% and a 24.99% card (took a 9.99 with it) and got them all into an 11.5% with minimum payment below what the three combined were to begin with.
Doing the bank rate thing, it looks like that might not save me much time, but it will save me money.

I think a big difficulty I will have is keeping control of my desire to push money to the "designated" debt. I have set up a few safety nets for myself, but I would rather not test them. I find myself watching like a hawk for the electric bill or what ever bill it is. I know I checked online for the power bill and phone bill like 5 different days in the last two weeks. I could see the last time they came out they were issued around the 2nd of August. There I was on the 25th trying to find September's bill. Then, as soon as they came in, I paid them. Funny thing is, both the phone and electric bills are not due until the second paycheck. Since the rent comes out the first check, and I dont keep a big float in the account, the first two weeks of the month can get dicey if I dont control myself on things like this.

On the other fronts, I am no longer watching TV (with the exception of golf on the weekends). It is working out for me in a big way. I find I have alot of time and now can see what needs to be done. And, as I look back on the last three weeks, I can see I have really gotten alot done.

I am also getting up at 4:37 am every day, sleep in allowed on Saturday/Sunday. I woke up Sunday morning without an alarm at 5:50. I am tired at 8:30 at night and have been in bed/asleep by then nearly every night. Believe me folks, if you have trouble getting to all the things you want to get to in the week, try the no TV and getting up early thing. You will be amazed!

Be Good!

[Sian]

sounds like u're doin an awesome job!! keep up the good work but be careful not 2 get 2 enthusiastic or u could find urself in a bit of a bind financially. good thinkin of settin up safety nets.

the main thing i worry abt is ur plan 4 when u've paid off all ur debts. do u have an idea of fundin ur retirement more w/the extra monies? fundin ur emergency fund further? ur savings? savin towards certain things like vacations or other big purchases? what r ur plans or have u thought that far yet?

[Ima saver]

Congratulations!! You will be out of debt and have learned a lot in the process!

[kork13]

Believe me folks, if you have trouble getting to all the things you want to get to in the week, try the no TV and getting up early thing. You will be amazed!

That's no joke, I'm doing similar right now. No TV, and I start waking up (no alarm) around 5AM (though sometimes I hate that, like today on the morning of a holiday!), going to bed between 9 and 10. It's great. I never totally realized how much time can be wasted watching TV until I no longer have it available. There seems to be so much more time in the day to work out, read, and generally just to do more useful thing with my time. Now if only I could pry myself off of the computer! HA!


....Anyway... It's great that you're on your way to being rid of your credit card debt. You've gotten over the inertia of doing nothing, and it's going to get even easier for you as time goes on. But as you've brought up yourself, don't let you get caught up in it. I'm often guilty of the same thing, but you can't let your finances (even the good financial practices!) take over your life. Balance in everything, no? Enjoy the newfound time, and do something productive with your time (checking for new bills every day doesn't count here) -- a new hobby, a good book, or whatever makes you happy. Remarkable, isn't it? When you start to get your money matters taken care of, it's easier to be happy and content with your life.

[Tonto Goldstein]

After Debt Free-

Good question. I have some ideas. Well, my mind is made up to a certain extent...

My end state would be-

Emergency fund- 6X monthly take home pay (not 6Xbills, or 6Xgross)- will probably CD ladder this one as the general expectation is to use this only if I lose my job and need to project myself 6 months into the future.

"Large purchase fund"- Not sure the value, but it will be large...think in the mid 20's. This will be for yearly one-off things like car registration, insurance, tires, car repairs, etc. and will also be for potential future huge purchases such as a new car or something like that. Will probably CD ladder a substantial portion and money market enough to cover the worst of emergent car repairs.


IRA- max out every year

TSP (like a 401K)- the rest of the retirement money

eventually, all extra money will go to the retirement funds- when the EF and LPF are built...

When I get debt free, all the extra will go into the EF. Initially it will cover an emergency car repair if needed. Once the EF is built I will max out an IRA and the remainder will go to the LPF. When the LPF is complete, the balance will go to the TSP.

There are certainly many details to work out, but that is over 2 years out I think...so I will be taking quality time to research it all. (and with all the time on my hands, and the ways I have been organizing my efforts, you can be sure that I will complete that research well in advance of needing the knowledge!)

be good!

[thefamilyfinanceguide]

Emergency Fund - A MUST!

First things first. Get an emergency fund in place. If you have no debt (not including the house) get 3-6 months of expenses in place now. Don't touch it! Refill it if you tap it. If you are still paying down debt. Get $1000-%2000 in place first, pay the debt, then build the 3-6 month fund. Wait and see how financially secure you'll be.

-Sincerely,

The Family Finance Guide

[littleroc02us]

Great plan, knock the debt crap out of your life. I too have made many mistakes into low 30's before I got my act together. By doing so, I feel financially free due to the fact that I have managed to make my work for me and not living paycheck to paycheck. All my debt is paid off except the mortgage, but every morning I wake up and don't worry about money. What's fun is that I do a zero out budget where every 2 weeks my wife and i sit down and budget out every penny that goes to a name. So, for example we have $600 that goes extra towards our mortgage every month, we have $200 go towards increasing our emergency fund, we have $200 for a vacation, etc.. The Excel spreadsheet is calculated so that every dollar has a meaning and we stick to it pretty tight and reallocate funds constantly if there is something that pops up. Also, we keep a $100 buffer just in case that we don't touch. Our emergency fund is around $3000 right now and we are working towards getting that to around 10k. This part of the stage has been fun for us, because we don't worry about debt anymore because it's all gone. I plan on reducing our mortgage to about 70% here in the next year and that will feel good. Go kick some butt.