30 Days to a Better Man Day 25: Start a Debt Reduction Plan

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Permalink Reply by Steve Vanderlinden on June 25, 2009 at 8:20am

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.

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Permalink Reply by Craig Lloyd on June 25, 2009 at 8:42am

I'm on it. I listed all my debt the other day, when I costed things I want to do. It's a bit painful! Ignoring my student loan for now, and if I get a job tomorrow, it may take up to 18 months to pay off my debt before I can start saving. It's not huge, but I'll be getting average paid work, I won't have much to show for it, and the things I wish to save for are rather expensive (training and travel). There are a few things that might come to fruition and help clear the debt earlier, but that's just a bonus if it happens. I'll work off worst-case scenario unless it changes.

My overdraft has to go first - it's big and highest interest, plus it's getting bigger by funding the monthly payments on the other debts. Bank loan second - biggest debt, but average interest. I have business equipment on a credit card purchased @ 0% and now balance transferring to another @ 0% for the next 16months for breathing room. My bicycle is a 0% finance deal and it will be paid off in 1 year anyway (at least it saves me money that would be spent on gym/petrol/bus).

Seeing the figures, you can be realistic and formulate a surgical strike to work towards your goals. INCOME-ING!!! ;-)

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Permalink Reply by Will on June 25, 2009 at 8:52am

The only debt we have is the house. We'll just keep paying it off, but with an extra payment a year, which should significantly reduce the time frame.

That, and keep the credit card bill to under 600/month, except when we put major expenses on. If that works, reduce it further.

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Permalink Reply by Sam Spade on June 25, 2009 at 9:01am

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.

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Permalink Reply by The Plainsman on June 25, 2009 at 9:26am

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.

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Permalink Reply by Paul on June 25, 2009 at 9:49am

I agree, Dave Ramsey is good. My parents bought me one of his books before I went to college so I could learn to be wise with my money.

I guess it worked- the only thing I have ever gone into debt for was my fiancee's engagement ring, and that will be paid off before they tack on the interest.

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Permalink Reply by Matt Kimber on June 25, 2009 at 11:16am

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.

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Permalink Reply by John Clanton on June 25, 2009 at 12:57pm

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.

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Permalink Reply by Ross Moore on June 25, 2009 at 2:27pm

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.

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Permalink Reply by Paul on June 25, 2009 at 2:46pm

Your last point is an important one, I think. I can be so concerned with penny-pinching and saving money, that I am working to learn the lesson that it is ok to spend money on things that I need.

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Permalink Reply by Chris Partida on June 25, 2009 at 5:23pm

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.

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Permalink Reply by Josh Gibson on June 25, 2009 at 6:18pm

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.

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