A friend asked what exactly were the steps I was taking to fulfill my Debt Reduction Plan. Overall, my plan is be mindful of my money. Here a few things I'm doing to accomplish that.
First, I'm making and keeping a monthly budget. Basically I know I need X amount of money to pay my bills. There's a bit left over, and from that bit, I put a set amount into my savings account (emergency fund), then I put a set amount aside for spending money, and the rest goes to one credit card to pay it down. (I should pay that credit card paid off this December!)
Second, to keep my budget and stay within my limits, I've stopped carrying a credit card completely. I used to carry one that I held for "emergencies," but I've discovered that I'm willing to declare an emergency if I'm a few dollars short when buying something I don't need at WalMart. It's better than I don't carry one around town and pay only cash for my purchases. That way I know I've got the money. (If I went on a trip, I would carry one because you practically have to, but that's the only reason I'm going to do so.)
Third, I carry only $25 with me. That $25 has to last me all week for spending money. Any other purchases I use my checkbook or my debit card. I'll tell you that I ran out of spending money very fast the first few weeks, but now I actually have a few dollars left over on Friday. Why not carry more cash? I can't afford to do so, for one thing, and for another, cash is easy to spend. I want to be forced to consider my purchases.
Fourth, I've stopped eating out for lunch. Instead I bring a sandwich or go home to eat. I used to eat out for lunch at least three or four times a week. Now I eat out once a week, my set lunch with a friend of mine. Fast food is bad for your health, anyway.
Fifth, I pay my bills immediately. I have a tendency to let them pile up and end up with a couple of hours of work to pay them all. It's better to pay them as they come in, always supposing I have the money to do so. If not, I prepare the bill, write out the check, put in the envelope, and then when I get paid and the money's in my account, I mail the bill. I subtract the bill even though there might not be money in there. Which means I have a negative balance in my checkbook a lot, but that keeps me mindful of my finances and what I'm trying to accomplish.
Sixth, when I pay off that credit card in December, I will take that money and apply it totally to the next credit card with lowest balance. I should pay off the next card in September of 2006. After that, I will pay off another one in May of 2007. It gets hard to predict exact months after that point, but if things go as planned, I will have all my debt paid off (except for my home) in 3 years and 8 months from this month. Naturally I hope to make more money along the way and pay off the debt sooner than that. And then I will concentrate on paying off the second mortgage and then the first. I haven't figured out how soon I can pay off the second, but I know it won't take long with the money that I can put on it that used to go to those vampiric credit cards. And finally I will pay off my first mortgage as well as start pouring more money into my savings. In seven years or sooner, I should be completely out of debt, a state I haven't been since before I entered college.
Of course, this is a long range plan, and a lot can happen in seven years, but it's a goal. The old saying goes that a journey of a thousand miles starts with one step. These are my steps.
9 comments:
Excellent plan and glad to see you putting it into action. I think you mentioned you got the plan from Dave Ramsey, is that right?
The only point I disagree with him about is selecting which bill to pay off first. I know he promotes paying off the smallest balance first. IMO, it's best to pay off the highest interest rate first, even if it is not the smallest balance. Other than that, his snowball payment plan is a good one when there are a lot of outstanding credit payments.
You will make it because you've made this a priority in your life. That's all it takes -- knowledge and determination. Keep up the great work!
Actually, Trixie, I did the math on it. If I pay the highest interest card (which also happens to have the highest balance) it takes 4 years and 9 months to pay off my credit cards. I have been paying on the highest, but I'm unable to put enough money on it to speed off the payoff. By clearing the lower balance cards, I free up money to put on that card. I did it several times and several different ways, thinking it had to be wrong, but turns out it's right. And Dave Ramsey actually didn't come up with the plan, just his name of it. The Tightwad Gazette, according to Crystal, also had this plan many years ago. I've also found it with different names on various websites and in various books. It seems counter-intuitive, but it works and will save me over a year of debt.
I have always counted it a blessing that my late husband kept us from falling into the credit card trap. He was stictly a pay-as-you-go man. It was just another of his sterling qualities.
I know you will do this, Tech. I have faith in you.
Good Ideas and plan. It's good not to carry credit cards around if your in debt. I heard a radio personality suggest taking your credit cards placing them in a plastic bag and then into a container of water and then place it in the freezer. That way the card is there if it is truly an emergency, but inconvienent enough to avoid emotional purchases.
Randall
I can't begin to say how much I admire you for having the willpower and dedication to stick to this long-term plan, but it is the only way, and you are going to make it. There must be enormous satisfaction every time you get through a week with a positive balance in your pocket...good on you!
sounds like a great plan. I have to pay a little on each bill each week cause i never have enough to pay them all at once every week but i am beginning to catch up. my only problem is i keep having emergencies and that amkes it hard to save any
Good for you Tech. I paid off my credit cards myself, I got rid of them permanently, however. My only is my Bank card. If the funds aren't there to begin with, then I can't buy it until I save enough to get it. It drove me nuts knowing I had spent what I hadn't even earned yet. It was hard to pay them off, I had to "Bite the Bullet" a lot. You can do it!
Credit card debt is a nightmare for an incredible incredible of Americans. Credit card companies prey on the poor and lower middle class as they tout the benefits of having a credit card with little or no mention of the negative aspects of having one. Don't expect relief from our government. Credit card companies give millions to election compaigns. Until consumers stop using them, we won't see reform, certainly not under this Republican president who has already made his stance clear.
Hre. I haven't left you even a morsel of a comment lately. Here's one. :-)
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