We have credit card debt. We have multiple credit cards with debt. We decided to throw things up a little and do our own debt beatdown.
1) Never use the grace period on a mortgage or car loan. Or you will be trying to make 2 payments in the same month.
2) Pay off the credit card with the highest APR and pay minimums on all others and the mortgage and car payment.
3) Balance transfer all other credit cards onto the one that now has a balance of $0. We did this because we had a 0% balance transfer for 12 months offer. After that it will be 25.99% but we're confident we can pay it off within a year. Our other credit cards have interest of 26.99% and 17.99%. The balance transfer had a fee of 3% so the fee was much less than paying interest for another year. We now have one credit card with a balance and 0% interest. Our tax return will pay this credit card off (this balance includes our last tank of propane because we didn't plan on winter lasting so long and needing another fill).
4) We have medical debt. Bear spent 9 days in the NICU, I had an epidural, Hubs and I had surgery in December, Bear has been to the ER 3 times this year. Also our insurance switched in January (we had hit our out of pocket max last year with the NICU stay) so we now have to pay all our copays and coinsurance again. Bear sees at minimum 3 specialists (3*35=$105) every 3 months. Add to that the plague and winter illnesses (our PCP has a $20 copay), and the ER copays (3*100=$300) and medical bills add up quickly. The good thing about medical bills is that they don't accrue interest, they're not on your credit, and,as long as you make an honest attempt to pay, they cannot send you to collections. However, it's still debt so that is our step after credit cards.
5) We have a car loan and a mortgage left. We owe more on our house than it is currently worth. Not much about $6000 but that it still the wrong way to have debt. Also, our car is not very new and since we still have a loan on it we have to keep a low deductible and extra insurance on it. It costs us more every month in insurance and we estimated that over the time of the loan this will be more than the vehicle is worth in the end. We also only have 1 months of expenses in savings.
a) contribute to our savings accounts to add an additional 5 months of expenses.
b) try to cut our food budget and send the increased savings to our car loan
c) after step a is complete send extra money to the car loan and put food savings towards mortgage.
d) once we have no loan we plan to send our extra money towards our mortgage and to put $100
a month in a rainy day fund. We want to take a family vacation.
Paying off debt takes a lot of effort and self control. We have been working on this for the past 3 years. We have payed off about $30000 worth of debt and I get so angry at ourselves for all the money we've wasted in interest, fees, time and effort.
Our goal is to be debt free and to own our house. Once our house is paid off we will work on college funds. With Bear being as "needy" as he is we have decided to put off making plans for expanding our family until he is 5. So we have 4 years to perfect our spending before we even discuss our next move.
Maybe now that it's April we'll finally have nice weather and I can do my favorite activity!!!
We have an electric dryer so having an outdoor clothesline is the easiest way to cut our budget. We see a savings of about $4-$8/month in our electric bill when we are able to hang the laundry outside. I do at least one load of laundry a day (Bear is a refluxer/spitter upper/vomiter and a drool bucket) and it really adds up quick!
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