Tweaking budget - need advice

iVillage Member
Registered: 11-21-2008
Tweaking budget - need advice
5
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.

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
iVillage Member
Registered: 11-17-2007
Fri, 07-17-2009 - 12:43am

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

iVillage Member
Registered: 03-27-2005
Fri, 07-17-2009 - 11:22am

It sounds like you are on the right track.

iVillage Member
Registered: 10-01-2008
Fri, 07-17-2009 - 12:51pm

Sounds to me like your really trying to reduce your debt.

Norma


"Patience is the best remedy for every trouble"- Plautus


iVillage Member
Registered: 09-20-2004
Sat, 07-18-2009 - 9:29am

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

iVillage Member
Registered: 11-21-2008
Sun, 07-19-2009 - 12:18am

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.


~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~