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| Wed, 01-07-2009 - 3:26pm |
Hi all,
I am new-ish here and am trying to be debt free by summer 2010. So what we've been doing so far has been paying all our 12 credit cards + retail cards (yes 12! We have paid off 2 3 retail cards) $10 - 15 more than the minimum and then the extra money we have left at the end of the month ($300-500) goes to one of the cards. Initially we paid off a couple of retail cards which had low balances and higher rates to jump start our debt reduction plan and now we are concentrating on the one with the highest interest rate. However, it seems that in case I pay JUST the minimum on all cards and pool the extra money that I was giving each card($140) along with the left over per month ($300-500) and pay the card with the maximum interest, it will help us get debt free sooner by about a month. This information is per the debt calculator at bankrate.com. I was comfortable paying each card a little over the minimum as it gave me the satisfaction of seeing the balance of all cards reduce a little each month - especially since we had nearly maxed out on all our cards.
I have a faint recollection of Suze Orman talking about paying cards $10 more than the minimum and paying the extra per month to the card with the highest interest. So now I am confused as to what I should do since getting debt free sooner is definitely my first priority.
I would really appreciate any suggestions anyone may have or give me any other ideas to tackle our enormous debt.


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Sue
Yes I read EL postings.
Hi all,
So I have been doing some calculations as to my method of paying and how to save on interest and time to pay off our debt fast. Some nice soul posted a calculator a couple of days ago and it is definitely one of the most flexible I have come across so far: it made be increase/ decrease the extra amount I can pay each month etc.
So I put in all the figures and factored in the changes that I could think of (I know, I know – we cannot plan everything ahead of time but I did want to see the numbers on paper!). My method is not the most cost effective since I am not paying every cent of the "extra" to the card with the highest interest rate. What I do is, I pay $10-$15 more than the minimum to all my cards and then pay the extra I have to the card with the highest interest. The question that I had proposed earlier was whether it was better to keep paying the $10-$15 extra to each card or pay the minimum to all my cards and the entire extra money to the one with the highest interest. I had found out that by doing the latter I could expedite my payment by 1 month and now I see that I can also save about $110 by doing that. The actual numbers are as follows:
(1) Paying $10-15 above minimum to all cards + extra to card with highest interest: total interest amount - $ 4262. Time- 19 months
(2) Paying minimum to all cards + extra to card with highest interest: total interest amount - $ 4157. Time- 18 months
(3) Paying $10-15 above minimum to all cards + extra to card with lowest balance: total interest amount - $ 4957. Time- 20 months
(4) Paying minimum to all cards + extra to card with lowest balance: total interest amount - $ 4969. Time- 20 months
However, we all know that the best way to eliminate debt is by following a method which we, as individuals, are most comfortable with. It is from this message board I have learnt that there is no ONE right way of doing this. It seems that although the Dave Ramsey method is going to cost more, there is instant gratification in it and that is the motivation some may need. For example in 1 & 2 above, I will not pay off my first card till July 09 but in case I follow 3 or 4, I will be able to pay off 4 cards by June 09. So there is a trade-off here.
As of now I seem to be leaning more towards (1) since I am a little less comfortable about paying just the minimum – I like to see all my balances decrease a little every month. However, it is neither the fastest nor the most cost effective. I feel where thousands of dollars are paid as interest, would $110 be too much for peace of mind?
Also since I have paid of a few cards last year, I feel that that feat will keep me motivated for a while and I can, for the time being avoid the costlier but more human-friendly (if I can call the snowballing method that) path.
I just wanted to share my latest findings with you since you had been so generous with your advice. Sorry for the really long post. Let me know if I am missing anything crucial and would really appreciate any comments.
Best,
El
El
I do the same thing pay extra on all the bills not to save on interest so much because my cards are all around 3.9 or under but to save on payments Since we can go out and make more money. I have to find money with in what money we bring in. I went from around 475.00 11/2006 in monthly payments and I just got my amount of payments to day for this month I was off three dollars but they are now down to 301.00 That is more then just me paying
I don't think anyone can argue that paying off the debt with the highest interest rate will save money in interest paid. However, finances are really more than figures. Motivation plays a HUGE part in debt repayment. Seeing results right off the bat, imo, is very important.
Good luck and I hope you stick around!
Sue
El ~
nothing more to add, I just wanted to give you an "atta girl!" for taking control and doing the research needed to see it all on paper.
Teresa
http://www.affordingpickles.blogspot.com
Hey Teresa,
Thank you for the encouraging words. I do plan to stick around. I think this board can provide some kind of accountability for those who are looking for it - it is more a mental thing than anything else. But there is great advice here. Plus, I really need a support group to discuss this huge thing (this debt reduction thing is life changing) that I am doing. Dh is fantastic in following instructions and has become so proactive in spending money. I cannot imagine that he has not had a starbucks coffee since jan 1 - he used to have about 2 a day. he really enjoyed it but now he is sticking to the ones in their lounge. he also makes sure that he is brown bagging the days he cannot manage to go to the conference where lunch is served everyday.
btw, I need to lose some weight and I see that you are doing it. I will perhaps join in. Also can you tell me how to add multiple tickers to your message?
Best,
EL
Hey Sue,
Thank you for the kind words. I would have to totally agree with you - MOTIVATION is the main thing in this process. Whatever works for you is the best way to do it. I am glad that I was able to take an informed decision.
I see that you are in MI too.
Best,
EL
Hey Mary Ann,
I am so glad that paying all the cards something extra worked for you. your interest rate is so manageable. Some of ours run to about 28% and that really hurts. Your minimums have reduced a lot and I can understand the joy of that. Ours have too and a couple of our cards have reduced our interests based on it, I think, although not by much.
Best,
EL
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