First Three Steps

iVillage Member
Registered: 02-11-2006
First Three Steps
11
Tue, 09-18-2012 - 3:54pm

As I posted below in my "intro" I have $32,147 in debt, which includes 4 CCs and a hospital bill.  I have decided to break that down into five separate steps, to keep my motivation high.  Step 1 will be paying off the smallest credit card $1665.93.  Step 2 will be the hospital bill $4587.87, and step 3 will be the next smallest CC $4222.43.  The hospital bill is larger than the step 3 CC but emotionally I really want that hosptial bill gone.  I will tackle the larger 2 CCs later. 

So how do I calculate a timeline of how long each step will take?  I hope to get step 1 done by the end of October.  My husband gets paid twice a month, and I get paid weekly (although he makes way more than I do :smileywink:)  In the past, I've been really aggressive at paying down CCs but then run out of money for regular bills.  I'm not very good at this and need all the help I can get!

Thanks!

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iVillage Member
Registered: 05-08-2006
Tue, 09-18-2012 - 4:29pm
The first, make a big pot of coffee or tea...then gather everything you can that will help you write own what you spent in the last year...if you keep a check book or pay bills on line, that is a start. You should have housing costs - rent or mortgage, insurance, property taxes. Utilities - lights, heat, water/sewer, cable, phone(cell, Internet, any other connections),internet, cable. Car payment. Gas. Bus or train pass. Parking Car insurance. Medication anyone in your family takes regularly. life insurance. Health insurance. bank fees. School fees. Food. Entertainment. Gifts. Haircuts. Minimum credit card payments. Some bills might be the same every month, like rent. Others you might only Pay once a year. The objective is to both figure out the average costs per month, and also the highest month. And know that you won't get everything the first time. Then ask yourself what costs you can cut. Land line? Cable? Can you bundle? Are you eating out a lot.? You want to get the monthly number as low a you can. Then you look at your income,, and match the amount that you need for the bills to a paycheck. If you have a bill that one chek can't cover..like rent, then you need to se aside money the week before to pay it. If you are paying late fees, see if changing the use date on a bill will help, and call the company and ask. If you have extra money after you have paid all bills, first build a $1000 emergency fund. That way, if something unexpected happens, you don't have to reach for the credit card. Then call the credit card companies, and ask for a lower interest rate. Talk to at least two people at each company. Call every month. Then, when you are comfortable that you have a good budget, pay the extra money to the credit card you are targeting. If the minimum payment is more than the interest, calculate the inference, add it o the amount you can pay extra, then divide the amount you owe by that...(you owe 1600. You pay $40 per month, interest is 25. You can pay 85 a month extra. So you are reducing the debt by 15 +85 or $100 per month. Divide 1600 by that..it will take around 16 months, actually a little less because the interest will o Dow so you are paying more towards the debt, but you get the idea.). Then keep track of your expenses to see how close your budget was, and keep tweaking each month. Hope this helps. SJ
iVillage Member
Registered: 12-31-2010
Tue, 09-18-2012 - 7:26pm
I Would suggest the initial first step should be to get $1000 in an emergency fund in place - SO you do not have to use a credit card again!!

Also work out a budget and remember those non-monthly expenses like birthday gifts, Christmas, and annual payments, so they do not catch you off guard.

Then you can just create an amoritization on Excel or Google Drive.
I can help you create an entire sheet, if you email me the initial numbers and how much you are paying off each on on each - email is marketingvirgo at yahoo dot com.

Good job making the plan!!
-Marie
#Marie
iVillage Member
Registered: 04-08-2008
Tue, 09-18-2012 - 10:12pm

Like VM wrote, if you do up a realistic budget with ALL your expenses than you will know how much you can devote to debt repayment. As you pointed out, if you get too agressive then you will leave yourself short. Only be as agressive as possible :smileyhappy:

Also, as you look at ALL your expenses (track them so your budget is accurate) you might see easy places to cut/reduce expenses.

Good luck and keep us posted,

Dee

iVillage Member
Registered: 03-15-2012
Wed, 09-19-2012 - 8:57am

I agree with the rest.  YOu must sit down and write down all your monthly and yearly expenses.  use your credit card statements, bank statments and categorize as much as you can to determine what you have spent.  The key to getting out of debt and staying out (of bad debt like cc's) is to budget for everything including those unknown things like car repairs, house maintenance etc plus all the other stuff previous poster mentioned.  Don't forget vacation money. .even if you do weekend get aways, you must have it in your budget.

Then what I do to keep me on track - I transfer money to what I call FREEDOM FUNDS take from Mary Hunt's book DEBT PROOF LIVING.  She has a website - look it up.  When pay day comes I transfer all those budget amounts I have into a savings account immediately (on pay day) that I don't spend monthly.  For me this includes gifts (birthdays and xmas), car maintenace, home maintenance, medical costs, kids activites (I do have monthly fees that come out of our checking but SEpt is the time of year for all those sign up fees, one time admin fees etc before regular monthly payments), clothing and  miscellaneous (for me is for things like buying a new coffee pot when ours breaks or much needed sheets for the bed etc).  I transfer most of this into one account and keep a spread sheet as to how much I have for each category.  The categories are whatever you want them to be.  Keep in mind that your budget is a working document which means it is forever changing, and you may have take from the clothing budget to help pay for a car repair etc. 

For me this is an important step to do even if it means paying a bit less on your debt. YOu will feel better knowing that you have the money for car repair or that all those extra school and registration fees in SEpt are covered (if you have kids - I can't recall right now but you get my meaning).  I personally don't think $1000 in an "emergency" account (what I call Freedom Funds)  is enough but it is a start.  YOu have to do what feels right to you and what helps you sleep.  I also have an "emergency" account seperate from my Freedom funds that I would only ever use in case of loss of income - nothing else.  I treat it like the money is not there. 

Then you tackle the debt.  Cut back where you can to save money.  Pay minimum payments on everything else and put extra money on the first credit card you want to tackle.  When you pay that off, take all that money you were putting to that card and put it to the second debt you want to pay and keep moving down the line.  The point is keep making the same payments even though you  have paid off debt.  This will get you out faster. 

I also started paying with cash for some of my expenses like groceries.  NO matter what I did I couldn't seem to lower my grocery budget until I paid with cash.  EAch pay I take out all my grocery budget in cash, keep it in a jar at home and only take what I think I will spend with I go shopping.  It has kept me on track and I lowered my grocery bill by about $400 a month!  And you wouldn't know it if you saw my fridge and pantry.  My hubby and kids have not noticed any changes in what they are eating!  Some people will pay cash for things like gas (for vehicles), entertainment etc.  Perhaps this is an idea that might work for you.  There are many ways to do this.  It is about tweaking these ideas, reading some books or websites and finding what works for you.  Another financial gal I like is Gail Vaz -Oxlade - google to find her site.  She has great ideas on budgeting and I use some of her tips and advice as well.

 

Good Luck

Sandra

iVillage Member
Registered: 11-14-2008
Wed, 09-19-2012 - 9:45am
Hi,
Glad you are tackling your debt. I didn't read the other posts but there are online calculators you plug amounts in to see how fast your pay your debt off with extra money. But keep in mind a $1000 efund is the way to go. fund that first. Also paying more than 15% of your income towards debt can run you into problems with the rest of your budget. Think about Christmas too and those quarterly expenses that come up. Don't let any of that discourage you. Keep at it!
iVillage Member
Registered: 02-11-2006
Wed, 09-19-2012 - 11:02am
Thanks for all of the input. I think I am doing some things right, it's just the debt repayment is moving at a snail's pace. We use ING and have separate savings categories for emergency $1000, life insurance, vacation, medical fund, car, home repairs, school fees, Christmas, clothing, piano lessons, summer, and birthdays. Some of those accounts don't have much in them, but I do try to stay on top of all non-regular expenses. We haven't used our CCs in a long time. I have a notebook with each pay day (DH) listed on the top of a page, and all the bills that must be paid under it. After the bills are paid and savings accts are paid, I use whatever is left to pay on my target bill. My problem is it's not a consistent amount. This past year we've had to replace our garbage disposal and we had a pipe issue that needed to be fixed. Each time it takes a while to rebuild that emergency savings and I feel like no progress is being made. Maybe it's a motivation issue. We currently eat out twice a week--$20 every Sunday after church and $18 every Sat. night for Chipotle. The rest of our meals come from home. With all of my son's allergies and all of the cooking I do, I really really look forward to those two meals out. Maybe I should stop feeling entitled, though, and realize people who are $32K in debt don't need a lunch out.
iVillage Member
Registered: 07-24-2001
Wed, 09-19-2012 - 12:32pm

You know I've had some success in treating my target debt repayment as a standard amount deducted weekly/monthly from my budget (for example; $310 weekly toward LOC and $350 monthly toward CC).

In general I keep a $240 weekly "discretionary fund" which needs to cover my groceries, vet bills, clothing, ect . . . (everything that is not specifically budgeted - there are only two of us).  So if a pipe needs fixing, it comes first out of this fund and I won't be eating out that week (or for several weeks)  and/or I will get only the bare grocery basics (and go on a "pantry diet").  If that fund just can't cover it, then I would either find something to sell or a new way to generate some income (scrapping - everything, from my neighbors gutters (left on the side of the curb) to misc metal scraps found around my parents farm).

Only twice since I started (11 months ago) did I alter my debt repayment target set amount to cover something unexpected, and I caught back up to my goal by repaying what I missed by taking it out of upcoming discretionary funds - meaning for several weeks I had only $140 weekly to use, and the other $100 went toward catching me back up to my target debt repayment goals.

And I until recently I would also use absolutely every single penny of left over money (after budgeting) or extra money (like mileage allowance from Dh's work) to pay extra toward the debt.  Now that I feel I have a bit more breathing room, I'm using this left over money to save for things like car tires, clothes, vacations.

It's definetely a "rice and beans" approach, and it hasn't been a whole lot of fun always feeling broke, BUT it certainly got the debt snowball rolling for me (and helped me pay down $28,000 in 11 months).

 

iVillage Member
Registered: 02-11-2006
Wed, 09-19-2012 - 2:38pm
Thanks for sharing, bumbling, that is very inspirational! I will sit down with my budget and see what I can come up with for a payback amount out of each paycheck.

I need to fine-tune my weekly spending amount, and use cash for that. When it's gone, it's gone.

Great ideas!!
Community Leader
Registered: 08-25-2006
Thu, 09-20-2012 - 7:16pm
All I can really add is not to forget to allow for a bit of fun money.

It may range from one Starbucks treat a week, or one pedicure a month, or whatever it may be for you. I think we all need a little treat in our budget. If not, it is too easy to get discouraged and give up and pull out the CC and play "catch up."

As far as eating out, my thoughts are maybe cut one of the trips out every week. Or rotate them both EOW. If not, you may need to cut back somewhere else.

I started coloring my own hair, but I still color my hair. I quit going to the fancy salon for hair cuts, but I still have a professional cut my hair. KWIM?

Just some things to consider so you make progress but don't feel like a pauper.
Serenity
iVillage Member
Registered: 02-11-2006
Thu, 09-20-2012 - 7:28pm
Thanks, Serenity....this is an area I struggle with because I don't really do anything special for myself. I don't drink coffee, I only got my nails done once in my life, for my wedding, I get my hair cut maybe 4 times a year at the cheap place and have never colored it, I don't like to go to the mall or shop for sport. Eating out really is my treat, but it sure does add up. I like your idea about rotating every-other week. I'll have to give that some serious thought. My husband gets $20 "blow money" each pay day (twice a month). I used to give myself the same, but I didn't really ever need it for anything and I figured it was better to use it for a budget item. I will really need to think on this one....

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