View Full Version : Paying Off Big Debt - April 2018
Hi All - I've been on this site for almost 20 years, and about 14 years ago, this site was instrumental in me getting myself to live below my means, get out of debt, and begin saving for retirement. Then I had a baby, and for the last 7 years or so, I've been slowly sliding back into credit card debt. I was in denial for quite a long time, but the amount I owed just kept growing and growing, so I'm trying to really face it and deal with it.
I'm realizing that one thing that has helped me in many areas of my life is a little bit of structure and accountability, and this site has helped me with that in other areas (decluttering and other personal goals). So I think I'm going to start posting here regularly about the ups and downs of getting rid of this debt.
I'm too embarrassed to name the full amount, but I will say it's in the mid-low 5 figures (!!!). I've moved some of the debt to 0% credit cards which has helped a little. In the last several years, as I stayed in denial, the debt was growing every year little by little. The good news is that this year, as I've started to face the reality of it, it has decreased by 10% in the last seven months. It's a start.
I've written down some benchmarks for decreasing the debt month by month. If I more or less hit the benchmarks, I *could* pay off the full amount by April 2019, but I'm not sure how realistic that is. Nevertheless, I'm going to set it as a tentative goal and report here every month how I'm doing.
So today I paid all my bills, and paid down the debt a little more, so that it went down 4.4% from last month. I'd like to make a bigger dent in it, but for now, I am just going to take the attitude that a decrease is a decrease and that's something.
Anybody else out there trying to pay off big debt and wanting to share their progress here? I would love it if others were on this journey with me!
I'm not on the journey now but have been in the past. Anything extra you can throw at it like an income tax refund?
I'm not on the journey now but have been in the past. Anything extra you can throw at it like an income tax refund?
Possibly on the tax refund. Have to see what my tax guy says.
And also, I've been doing some extra work at my job so will get a little extra income from that.
Mostly, though, this is not an income issue. It's one of overspending, so I've been cutting back, especially on eating out and childcare. I've also cut back on magazine and newspaper subscriptions. One day at a time!
Chicken lady
3-31-18, 1:50pm
We are carrying a home equity loan and I have a car loan. Dh pays the regular bills, my income covers regular farm expenses, pottery expenses, my cc and other discretionary spending (things we can just choose not to buy because there isn’t any money) I only get paychecks 9 months of the year, so those 9 months I put an extra 500 toward the principal on the home equity loan. I keep a 4 month cushion in my account in the spring, and then draw it down one month at a time over the summer and build it back up in the fall. The interest on my car loan is higher than the interest on the home equity, so after I pay my bills for the month anything above my cushion goes toward the car. It’s a 4 year loan, but I am trying to see how fast I can pay it off. Do you want to race? (Or just help each other make spending decisions. ;) )
dado potato
3-31-18, 2:06pm
ejchase,
Kudos on the big dent you put in your indebtedness.
Consider the guy in the UK who ate an entire MGB roadster. He may have been misguided about nutrition, but he knew how to take things a little bit at a time!
Realistically there are huge numbers of folks who haven't seen their incomes increase over the past decade in proportion to the increases in their spending. I believe it is a minority who recognize that running up the credit card balance is only going to aggravate their budget problems.
Onward! Courage! ... and Good Luck!
I'm too embarrassed to name the full amount, but I will say it's in the mid-low 5 figures (!!!).
Hey, you're a lightweight! I had debt in the SIX figures! I still maintain it wasn't entirely my fault--it was the fates that conspired, plus my naive willingness to co-sign stuff that I shouldn't have was a major contributor. I can point to the recession, but I have to accept responsibility myself
I still have debt, but I'm working on it. I am a believer in the Dave Ramsey way--keeping it simple: 7 steps. NO credit cards. Assigning each dollar a job, eating beans and rice while working on a debt snowball. Using cash for everyday purposes. It's pretty much common sense. Some people (a LOT of the people here) are able to just go along and live beneath their means without thinking about it, but I'm not one of those at this point.
While I believe in DR, I'm also like the person on a diet who indulges in cake. I probably never should have bought that house in VT with debt, but I did. My rationale was: I'll live up there for a year and then sell my house, pay off the VT mortgage and all other debt, and THEN live simply.
I have to think about what my actions are saying about my values. I SAY I want to be a simple liver, but sometimes my actions don't align. The trick is to bring it all together and realize that debt is the most un-simple-living thing you can take on. As Mr. Money Mustache says, if you have debt you should pay it off as if your hair is on fire (something like that--a bad paraphrase). My problem I'm STILL a little too laissez-faire about it. My hair is not on fire.
While I believe in DR, I'm also like the person on a diet who indulges in cake. I probably never should have bought that house in VT with debt, but I did. My rationale was: I'll live up there for a year and then sell my house, pay off the VT mortgage and all other debt, and THEN live simply.
This reminds me of the lyrics from Baker Street:
"Another year and then you'd be happy,
Just one more year and then you'd be happy"
And
"And then he'll settle down
In some quiet little town
And forget about everything."
I have to think about what my actions are saying about my values. I SAY I want to be a simple liver, but sometimes my actions don't align. The trick is to bring it all together and realize that debt is the most un-simple-living thing you can take on. As Mr. Money Mustache says, if you have debt you should pay it off as if your hair is on fire (something like that--a bad paraphrase). My problem I'm STILL a little too laissez-faire about it. My hair is not on fire.
I'm not entirely convinced that debt is a fire-starter -- at least not for big-ticket items which are purchased with some prudence. I can see wanting to avoid a balance on the ol' Target CC (especially if someone has a couple of cards for expenses like that). But I truly don't have an issue with a (one!) mortgage on a house which was purchased responsibly (i.e., not overpriced for the area, purchased well within one's predictive means) or some other five-figure item (car, camper, etc.) when the purchase is not impulsive, is reasonably priced for its kind, and the terms are not usurious. Well-structured debt does not preclude paying it off early and it can free up cash for other things.
But, ej, congratulations on knocking down the debt you have, and I wish you the best of quickly getting rid of the rest of it!
I should have the truck paid off in June. had hoped to do that next month with a little tax return but instead we had to go into savings to pay off a big tax bill. I hope to have two cc's paid by Dec. Then I'll attack the larger one.
rosarugosa
3-31-18, 6:11pm
I am thankful to have no debt at this point in my life, but certainly have had some in the past and will gladly cheer you all on from the sidelines. Go team!
Off topic, but I love your new profile picture, Float On!
Wow, thanks, Everybody, for your support. It means a lot.
I should say the debt I'm tackling is credit card debt. I also have a mortgage and am in my last year of a five-year car loan. I don't worry about those loans too much, just make the payments on time. But I HATE paying credit card interest!
I will keep checking in to let you know how it's going!
Chicken lady
4-1-18, 6:08am
Credit card debt is definitely one of the worst.
it sounds like it’s going really well so far though!
But I HATE paying credit card interest!
I use YouNeedABudget to track expenses and it automatically imports from my CC statements, which means I have to make a category for Debt Service (Interest), and it kills me to see it in black and white in my budget. I think of all the stuff I could buy or save with the money that just drops into the abyss of high interest. But it's motivating.
Larry Burkett was a Christian Financial author/radio personality that advocated a thing he called the debt snowball method. His method was to pay the minimum on everything except the smallest debt. Pay all the extra to the smallest debt till it's paid off, then do the same thing with the next smallest one. When we had more than one credit card this seemed to work for us. He had plenty of other things in his books, but this is the one that I remember.
Larry Burkett was a Christian Financial author/radio personality that advocated a thing he called the debt snowball method. His method was to pay the minimum on everything except the smallest debt. Pay all the extra to the smallest debt till it's paid off, then do the same thing with the next smallest one. When we had more than one credit card this seemed to work for us. He had plenty of other things in his books, but this is the one that I remember.
Larry Burkett was a mentor to, or he at least heavily inspired Dave Ramsey, who also built his debt elimination "baby steps" on the debt snowball method. He often mentions Burkett in his podcasts.
ej: BTW, I LOVE listening to the DR podcasts. I know a lot of people get turned off by the evangelical Christian slant, but if you can overlook that, I just love the no-nonsense/common sense way he talks to people about their finances.
Chicken lady
4-1-18, 9:07am
I’ve never really understood that method. I know it relies on the mental “boost” of having fewer debts, but progress actually “snowballs” faster if you pay your minimums and then throw everything you have left at the debt with the highest interest rate.
in fact, increasing your number of debts by moving some to zero interest cards like ejchase did actually improves your situation. (But watch out that they don’t suddenly become your new, highest interest problem by not being paid off in time)
if the home home equity loan was mine alone, I would not make extra payments on it at all until I had paid off my car, but the $500 a month while I am working is the contribution dh and I agreed on. (Also, the standard payment on the h.e. loan is more than $500, so if it was mine alone, I would be paying off the car more slowly.)
I’ve never really understood that method. I know it relies on the mental “boost” of having fewer debts.
That’s exactly it. It's kind of like the 1800-calorie diet you can stick with and the 1200-calorie diet you can't. You'll lose more weight on the 1200-calorie diet, but not if you can't follow it. You get the satisfaction of totally knocking a card off your list without too much work, which makes it easier to take on the next one. Nothing like a little success to beget more of it...
rosarugosa
4-1-18, 10:26am
That’s exactly it. It's kind of like the 1800-calorie diet you can stick with and the 1200-calorie diet you can't. You'll lose more weight on the 1200-calorie diet, but not if you can't follow it. You get the satisfaction of totally knocking a card off your list without too much work, which makes it easier to take on the next one. Nothing like a little success to beget more of it...
Steve, that is a fantastic analogy! I also like what JD Roth says about it being more a matter of mind than of math. If it was all about math, a lot fewer people would have debt.
CL, I know that sounds reasonable, but people who feel overwhelmed by debt are more MOTIVATED by early, frequent successes. So say your highest interest rate debt is a $10,000 CC bill @ 17%, but you also have a $1,000 medical bill at 0 interest you're paying off and a $2,000 CC @ 12%.
It seems more financially sound to pay off the $10,000 first, but it is VERY overwhelming to start with such a high debt ($10,000). You feel you're getting nowhere and you give up. But if you can cross off a few low balance debts, it encourages you on with small successes. I think that applies to a lot. If you are trying to lose weight and you see you've lost 3 lbs in a month in it encourages you to go further. If you stepped on the scale but you knew you wouldn't see anything until you'd lost 40 lbs, you'd give up.
Chicken lady
4-1-18, 12:12pm
I’d throw out the scale.
i think it’s more to do with how your brain works - I understand what is happening in the brains of people for whom that works, but mathematically, it is not logical, so for me it would just feel stupid.
i currently put everything I can on the credit card and pay it off every month to maximize my cash back.
if I had a balance on it, i would set aside what I needed for bills I couldn’t put on the credit card every month, on payday, and then immediately put the rest of my paycheck to paying down the card. I would then need to use the card to buy things like gas and groceries, but i would be highly motivated to minimize that, and I would be paying the least interest possible.
to me, the reduced amount owed on the statement every month is perfectly good evidence of progress.
but, it would take a big emergency for me to carry a balance, so psychologically, I am unlikely to be the target audience.
Baldilocks
4-1-18, 12:26pm
Larry Burkett was a mentor to, or he at least heavily inspired Dave Ramsey, who also built his debt elimination "baby steps" on the debt snowball method. He often mentions Burkett in his podcasts.
ej: BTW, I LOVE listening to the DR podcasts. I know a lot of people get turned off by the evangelical Christian slant, but if you can overlook that, I just love the no-nonsense/common sense way he talks to people about their finances.
Ok I'm not sure who it was, It may have been Dave Ramsey. All I can remember is that we did it when we had multiple cards, and it was awesome to pay one off and move on to the next one. Looks like I have forgotten almost as much as I've learned. :laff:
Teacher Terry
4-1-18, 1:20pm
Echase, good for you realizing there is a problem and taking action. CL: I know you are part of a team but if it was me I would do the car loan first because once paid off you could put all that $ on the home equity loan. Our debt includes a very low mortgage of 400/month and a low car loan. The car is paid off in 10 months and since we don't drive a ton should last many years. That car is 10 years old with 42k/miles and our other one is 62k/miles on an 8 year old car. When one of them dies I am thinking we will try having 1 car since we can use Uber if we both need to go somewhere.
Chicken lady
4-3-18, 7:06pm
Got paid on Friday, so I went to the bank today and paid my $500 plus $500 more on the car loan. I should be able to make two more big payments on the car loan and then the minimum over the summer. If nothing comes up, I will finish paying it off before the end of the next school year.
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