Tweaking budget - need advice
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| Thu, 07-16-2009 - 8:38pm |
Hi ladies,
Ever since I created my budget last weekend, I've been going back to look at it every day (with fresh eyes) to see if there's anything more effective that I could be doing.
The one thing that I wanted to do was to start an education fund for my daughter. But, as many of you pointed out, I really can't afford to do that with 60K of debt. The reason I felt strongly about it, is that I wish someone had done it for me. Now, don't get me wrong. I also think it's important for kids to understand the value of money and I fully intend to make my daughter pay for some of her schooling, but I also want to be able to help her out so that she doesn't start out with a bunch of debt. Anyway, I've decided to take your advice and hold off for a while. If I can pay this debt off in 3 years (my goal) then I will have 11 years to save for her education and I will be able to afford to save more. This will save me $50 in my current budget which I intend to add to my M/C payment.
I also decided to only pay $75 instead of $100 a month to my visa and also adding that on to the M/C.
Between the two, it will increase my M/C payment to $300 a month.
Lastly and where I need advice, I have decided to renegotiate my loan. I originally had a 35K loan with the bank at a 5.75% interest rate. My payments are $704 a month. That loan is down to about 22,500 right now. I've been approved to raise that loan to $25,500 to pay of a card with a $3000 balance whose interest rate will be going up to 19% in a couple weeks. This would also make my payments about $500 a month (since the loan amount is smaller than the original amount). However, it will add a couple years to the loan. The reason I want to do this is so that I can add the extra $200 to the M/C payment (Which is at a little over 11%). That would make my payment to the M/C about $500.00 a month. Once I'm done paying the M/C, I could snowball that payment to another card or loan. I would still finish paying off the loan sooner than 5 years, but in the meantime I think I could get more bang for my buck with the M/C.
It is also my intention to put any snowflakes toward the M/C. My goal is to try and get to as close as $600 a month on the M/C so that $500 of it could go to the principal each month.
Phew - hope that all made sense. Please weigh in on whether or not you think I am making the right decision.
Thanks in advance!
T.


I think you are on the right track Some times it takes a few times moving money around to get it down to were everything is
It sounds like you are on the right track.
Sounds to me like your really trying to reduce your debt.
Norma
"Patience is the best remedy for every trouble"- Plautus
Often, when you renegotiate a loan, there are fees involved, and that would eat into your potential savings. I wouldn't do it if I didn't have to. Slow and steady wins the race here, I think. Unless the bank is offering also to lower your interest rate, I wouldn't bite, but that's me. Good luck!!
Heather
Thanks for the tips ladies.
And just to clarify. There are no fees for getting the loan re-negotiated. The loan is not tied in to a mortgage. I'm only getting the loan re-negotiated so that the payment will be smaller and so that I can pay down a higher interest rate card first. Like Norma mentioned, the biggest risk is to make sure not to spend money on the credit card once it is paid off. I am very determined to pay things off, so I believe I will be able to resist that urge. The desire to be debt free and create a financially secure future is really strong. So, I need to believe in myself and try and pay this thing down.
T.