Getting Out of Debt, July 2010 - Page 3

[leigh2006]

debt payoff vs. EF?

DH really wants to payoff some cc debt that we have before building up an ef. The problem is, we keep getting hit with unexpected expenses each month, so progress has been slow. DH thinks this plan will be faster in the long run. Has anyone successfully reversed these two steps? Thoughts?

[MyTwoAs]

Okapi - I hope your husband recovers quickly!

leigh2006 - If unexpected expenses keep coming up, how are you paying for them? The purpose of that BEF is to cover these unexpected expenses so that you don't resort to using your credit cards (not saying you are). Even if you can cash flow some of the unexpected expenses there may be something larger that needs to be fixed that goes beyond your cash flow abilities. If you end up charging it then you're taking one step forward and two back. I know people mix other steps but for the most part everyone that I've seen discuss the program sets up at least the $1k BEF...some prefer more...before paying of CC debt that isn't past due.

Good luck!

[proudmamanow]

I've been away from this thread & we've been been backsliding...not back into debt, thankfully, but we haven't been reigning in our spending & applying it to debt as much as we should. Still plugging away at BS2 here. I started another thread for budget critiques and have got some good feedback.

My Two As I really like your method of setting specific goals for paying off debts. I think I will take a look at that, it helps it feel less overwhelming!!

[leigh2006]

MyTwoAs - We're paying for the "extra" expenses with the money set aside in our monthly budget for paying down cc debt. DH's arguement about saving the EF, is that if we keep using it each month and having to replenish it, we're not getting any closer to paying of debt. We don't charge anything except monthly expenses, and that gets paid in full each month, so we don't keep contributing to the debt.

Right now, we're trying to focus on ways to par down our monthly expenses so there is more money available to save and apply to debt. Off to look at the thread on being frugal and buying organic

[-Resque-]

Well, I posted once in March and didn't post again, LOL! That doesn't mean we haven't been working on our debt though. We aren't hardcore Dave Ramsey-ites in that we're getting married in a little over a month, and have been putting some of our income towards that. I guess the responsible thing to do would have been to wait to get married until our debt was paid off! Since January, I would say we have put about $7,000 towards our wedding, and my parents have matched that amount. (Can I honestly say, I can't wait until we're married to start making SERIOUS progress on our credit cards??) Neither one of us has used a credit card in one year now.

So, back in March, we had about $22,000 in credit card debt, and owed $17,000 towards a car. Here's where we stand now:

Card 1: $2999 (This is the only card that we are currently paying interest on.)
Card 2: $4119 (This is interest free until February.)
Card 3: $7520 (This is interest free until next July.)
Total: $14,638

So from March through July, we have paid off $7,362 in our credit card debt. We have also brought the car down to $15,275, although the only extra we're currently paying on it right now is to round the payment up to the nearest hundred... so $4 extra a month. We're doing the Debt Snowball and throwing all of our extra money at Card 1 currently. After we're married, this will be between $1600 and $2100 a month.

I'm going to list our goals to each pay-off date to keep myself honest.

Card 1: Paid off in October
Card 2: Paid off in December
Card 3: Paid off in March

Car: Paid off in September of 2011. I know Dave would recommend us selling it and getting something cheaper, but it's the one area my fiancee won't budge on. And I feel like, to keep a happy home, I need to let him have that... we have gone out to eat 3 times this year. We work, and we come home. We haven't had an entertainment budget, or spending money for ourselves in one year. The ONLY time we have strayed from our budget has been to splurge on a $150 desk for his daughter. It's been a pretty boring year, and he hasn't complained once. He tells everyone how amazing I am at managing our money. So... we're gonna keep the car, and I'm not gonna complain about it a bit.

[mtm]

Okapi, sorry to hear about your dh. I hope he is released soon and feels better.

leigh2006, I really like the baby ef first then if something comes up, you have the money handy. It made a lot of difference to us to have that dedicated money there. Make sure you write down your unexpected expenses though so you can add them to the budget for next year if they are annual things. Can you sell some stuff or work some extra hours to get the snowball started? How tight is your budget? Are the expenses necessary or could they wait?

Resque, in my opinion, if you did/can do the wedding with no new debt you are doing great. Especially when you look at the debt you've paid off. Sure it would be faster to pay off the debts first but really, I don't think DR would advocate waiting to get married if you can cash flow your wedding and still have a good snowball.

Re the car, I may be misremembering but I think DR says if you can pay it off within 2 years its okay. And keeping your soon to be dh on board is so helpful.

[leigh2006]

Originally Posted by mtm

Are the expenses necessary or could they wait?

This month, yes. We have several medical bills that came this month from DD 1's ER visit a few months ago.

DH is working some overtime to bring in a little extra each month. We have a date this week to go over our budget and see where we can trim. Hopefully that will help. I'm (DH already is) really trying to go hardcore and forego all the little things that we don't need, but aren't truly necessities. I know this is pretty elementary, but it really gets me every month. This month will be different!

[hollytheteacher]

Plugging away at BS2 and now with a vengence. Dh and I sat down and re looked at our finances and we are just more determined than ever to get past step 2 (we have a baby due in Feb and i'll be staying home for 6 months).

[Ellien C]

Celebrate with me - the CC debt hit a new milestone of "below $2K." I was trying to get it all paid off before last christmas (but didn't) then before the baby was born in March (but didn't) and now it's looking like this Christmas at the latest.

[leigh2006]

Originally Posted by Ellien C

Celebrate with me - the CC debt hit a new milestone of "below $2K." I was trying to get it all paid off before last christmas (but didn't) then before the baby was born in March (but didn't) and now it's looking like this Christmas at the latest.

That's awesome! How encouraging for the rest of us. YAY!

[hollytheteacher]

just sent 500.00 extra to my student loan

[Softmama]

Originally Posted by hollytheteacher

just sent 500.00 extra to my student loan

that's one heck of a snowball you've got going there!!

[MyTwoAs]

Originally Posted by hollytheteacher

just sent 500.00 extra to my student loan

Grats, that is awesome!,

[hollytheteacher]

Wahooo!!!!!!!!!!!!!!

We just got a completely unexpected check in the mail for 800!!! We apparently overpaid in our escrow this year!!!

WAHOOOOOO!!!!

our debt snowball is pretty this month I am actually going to completely eliminate one of my student loans with it and it was the highest interest rate of all our debt (7%) so i'll be glad to see it gone!!