I have to give full credit to my wife on this one. She is the frugal accountant type, and keeps a lid on our expenses in spite of my impulsiveness and attraction to shiny tools. She has always shopped for the lowest mortgage rates and twists the arm of our credit union to get them to be competitive and keep our business. No ARMs for us! We pay off credit cards - always. Pay ahead on the mortgage, no car payments, eat out seldom and not extravagantly when we do. I do as much car/home repair as possible to keep the leaks to a minimum.
What we're not good at is investments... Don't seem to have the time to research properly, and my dabbles in the stock market have been disastrous. That's what we're working on now.
I actually finished one of my tasks ahead of schedule this time. I chose the Dave Ramsey plan. I've read his books and watched a couple of DVDs by him. Great stuff.
I scheduled my wife's credit card to be paid off by the end of July. There's only around $800 on it right now. Then I'll take the extra $400 and dump it on my car payment every month. And then the "big" credit card that somehow got to a $14,000 balance.
I'm also in the middle of refinancing my house. I'm hoping to drop my mortgage payment about $200 a month. That will be great because right now I have a HELOC that I'm only paying the interest on so it won't get paid off for 25 years.
We've used the debt snowball method in the past, but now are working towards a hybrid plan. We've paid off three credit cards and are working to pay more debts off.
Our goal is the be debt free so that my wife can stay home with our son in a couple years.
Checkmark for the day. I've had a plan underway for quite awhile now. It is necessary for my wife and I to have our own vehicles; we've managed to pay one off. Receiving the title from the bank is quite satisfying. With our credit cards, we're paying them down, hitting the one with the higher interest rate hard, and paying just over the minimum on the other. The mortgage is the mortgage, not much to do there but hunker down and make the payments faithfully.
Right now, my only debt is student loans. I Pay everything on my credit card off at the end of the month, so I never pay interest. I never buy something I cannot afford. A new strategy to pay off the student loans is something I'll look into. I'm going to allocate more money to my student loan payment, I think.
Still working on the details, as we are going to throw mint.com into the mix with our current software and get a better picture. I estimate (roughly) that to pay off the credit card and two vehicles, it will be about 4 years (mortgage not included).
We had actually paid-off our former vehicles, but we ran them into the ground and had to buy new ones.
While I don't have a specific plan, yet, here are some principles for us for the rest of this year as we tackle this topic:
1. This is a joint effort -- my wife and I are in this together. We're both responsible for getting out of our current situation & encouraging each other along the way.
2. We have enough books, both for us and for homeschooling. No need to buy anymore this year.
3. Using all of our current materials, we have plenty of instruction for the upcoming school year. No need to buy more/extra curriculum.
4. Use what we've got & run it into the ground. We will use up what we have before we get any kind of replacement. E.g., we'll run our appliances into the ground. They're not necessarily the most energy-efficient, but it beats having to pay hundreds to thousands of dollars to replace things just because they're inconvenient.
5. DIY Home repairs. With the Internet, public library and current resources (personal library, family & friends), we can fix almost anything for much less than hiring it out.
6. Buy less. This takes honing our attitude of gratefulness and thankfulness -- we really do have ALL that we need.
7. While debt is certainly important to eliminate, it is not our top priority. So if, by our best effort, we don't reach our goal, we will not melt into a puddle and deem life and ourselves worthless or lesser beings. This is not an out; it's an important principle to keep us from feeling that we have to live in a cardboard box and consume unseemly amounts of Ramen noodles.
This is an important one for me, I let my debt go in college, and it ran wild. Now I'm paying for it, figuratively and literally. I just recently got notice that I am being sued for a delinquent credit card from years back, I couldn't afford to pay on it, not they are after me in the worst way.
I've gotta wise up about my finances, otherwise my girl will never be my wife.
I like the idea of the snowball, knock debt out one by one, seems like a plan with nearly instant results.
When I graduated from college last year I had around $40,000 of debt between my loans and credit cards (I used credit cards near the end, because I needed the money then and there). I then had to get another car because my old one (1986 Nissan Pulsar. Served me well) was dead and would cost thousands to repair. At first the debt really kicked me in the nuts. I despised it and I tried both of these options.
Neither really helped. I found that my best plan of action was to figure out what a reasonable date to be out of debt was and then to pay whatever was necessary on each of them to be out of debt on that date. The rest of the money is mine to live on. So far it has worked well and when my debt comes to the forefront of my mind, I can say to myself, "Yes, I am in debt now. But I will be out of debt in March of 2014." Having that set date is an inexpressible relief.
I also took the opportunity to buy into the stock market when it was low.. Now I own enough dividend bearing stock that, assuming there isn't another crash, I will not have to worry about a college fund for my children. When they are 18, there will be enough there to help them along.
I'm tracking my spending and have the ugliest student loans in my sights. With the new baby and a live-in nanny, things are as little tight these days.
[Now before my chops get busted for having a live-in nanny, I should point out that 1) we live in Korea, where it's not really that expensive to have one, 2) I have 11-hour workdays we also have a 16-month old, so it's pretty much necessary, and 3), we don't expect to need her for more than six months or so. Given that we don't plan on having any more kids, it's a once-in-a-lifetime expense that is well worth the cost.]
Anyway, I recently brought my student loan debt under the USD 80K mark (yes, that's an eight-zero), and that felt great. I'm expecting a large windfall within the next few months, and plan to put most of it towards taking the debt down a peg or two.
Everyone knows the economy sucks. So if your debts are incurring an interest rate higher than the rate of return on your investments, it may be worthwhile to re-direct your low earning investments towards your high interest long-term debts.
Already set one up with the Federal Government. I got about 5 months before my Interest on my unsubsidised (sp?) loans capitalize. I'll pay that off with money saved up slightly before hand (i end up paying 1500 or something like that, but saving about 500 more in the long run) and possibly a small part of the principle, depending on how much i have saved up towards paying that, and then theres already a monthly plan in place for payment collection from there on out. As stands, thats the only debt I have left to play
I am always working to try and lower our debts. I am not always successful, and we continue to see large educational loan debt that does not seem to get any less (which is frustrating). I always try and pay more than I owe on my loans to work to pay off the loans earlier than the length of the loan, but again, I long to see more results, but they are slow in coming.
I think as humans we crave results, we crave to see things alter in a better direction. It does not always happen, but we still wish for it.
Every now and again I find myself saying, "Maybe I'll win the lotto - but I'll have to buy a ticket first" as a humorous look at the fact that wouldn't it be nice if our financial situation changed for the better, but instead we continue to find ourselves being financially stable, but not moving forward with leaps and bounds like I would want. Yet, I must still say that we are stable and are able to do the things that we want to do, so I guess that is a positive thing, and it is something that I should not be complaining about as there are others that are in a much worse state of affairs.
So today, I am working to come up with other new ideas about how to bring in other money to try and pay down our debt slowly but surely.
How have you done it, what tricks and tips can you share?