How in the World Do You Start Paying Off Debt?

Debt Repayment Documentation

Getting started with getting out of debt - This first month addresses what is being paid out, how much is actually reducing the balance and how much debt is remaining. Start a budget and stay on track of your monthly bills. How to stay motivated and keep the momentum going.

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This is the first *official* post documenting my family’s debt journey.

Who’s excited?? Haha

Through this, I’m trying to get a grasp on and form some structure around:

–  What we’re paying out each month

–  How much of that is actually reducing the balance

–  What amount of debt is remaining

First off, I’m finding the amounts are not balancing out perfectly.

But I’m hoping this will all make more sense & be a little easier going forward.

And really, the bottom line is to make sure the balance is going down and not up.

Because if I’m doing this experiment so that others can learn from it, I better be darn sure my numbers are going in the right direction! (Downward!)

Notes:

The credit cards being tracked here are ones owned by myself, as well as by my partner. Some cards we have in both names, but most are individually owned. I am tracking all of our cards here since our income is combined and we pay all of our bills together.

This is the tool that I’m using to track our debt:
Getting started with getting out of debt - This first month addresses what is being paid out, how much is actually reducing the balance and how much debt is remaining. Start a budget and stay on track of your monthly bills. How to stay motivated and keep the momentum going.

The Undebt.It website is like 500 steps above the bare bones Excel spreadsheet I had been maintaining to track our debt.

It not only tracks payments and totals, but also calculates the different options you can use to pay down the debt.

And it shows you which one will save you the most money long term. It compares snowball to avalanche methods, plus many others in between (highest to lowest monthly payment, highest apr, and any number of customized views.)

In addition, the site has calculators where you can play around with your numbers, and lots of charts and graphs to view your progress. So if you’re a visual person, you can see the progression of your payoff plan.

I am typically the one who determines how much should be paid on each account. But I always keep my partner in the loop (and I think he generally prefers that I be in charge of the bill payment and tracking anyway.)

Also note that at this time, we pay more for our combined credit card bills than we do for our mortgage payment. (Is that terrifying, or what?)

The debt being tracked here is solely for credit. In addition, we have a home mortgage, 2 car payments, and upcoming student (Parent PLUS) loans that will be entering repayment shortly.

My main motivation for beginning this debt repayment journey is to position us for the management of these other “normal” things.

What I mean by this:  Many, if not most, people have a mortgage, a car loan, and student loans (unless you’re filthy rich, or insanely smart & proactive about your money management.)

Maybe we will get there one day — or maybe we won’t. But at this point in time, our main goal is to get rid of the debt.
Once that is accomplished, we can reexamine our overall personal finance strategy.

 

Interesting factoids about our credit card charges

Here are some examples of how we got to where we are with debt:

  • 3 years’ worth of Christmas presents, when we had no cash to buy presents in December
  • 2 summer vacations (rental house paid with cash, but meals and recreation put on credit cards)
  • 1 not-so-necessary out-of-network ER visit for adult child who had minor dehydration from over-drinking the night before, while on vacation
  • 2 years of car taxes for 3 vehicles (2 fairly new, 1 not so new)
  • Installation of black wrought iron fencing for ½ acre back yard. Best investment we could’ve made on the house, but unfortunately put on credit
  • 1 ER visit for dog who swallowed the nose of a stuffed animal, which eventually came out the other end
  • 4 cords of seasoned firewood – delivered and stacked
  • 3 heating oil deliveries, when we were strapped for cash. First year of living in house, did not have usable firewood, or even know how to start a fire
  • Fancy new snow blower when moved into first house 3 years ago
  • Accompanied by fancy new riding lawn mower, due to same occurrence as above
  • 1 epic college grad party, including monogrammed ice luge (yeah, I didn’t know what that was either — it basically delivers an ice-cold shot of choice to recipients waiting at the bottom of the structure)

These are just some ofthe items I’m grabbing off the top of my head — I’m sure I’ll think of more.

But ultimately, the above excuses are just that…

I could probably argue the necessity of almost all of them, and then round back to argue how we could have handled each of these transactions differently (or not at all).

 

And finally…

One other comment — in reference to why I track the random types of purchases above. Guess I’m trying to show how easy it can be to accumulate a total that you don’t quite expect.

When the amount owed is spread out over multiple credit cards, you don’t initially realize how possible it is to wind up with such a high balance. Because when you charge a little here, then a little there — all of the sudden it begins to be much, much more.

And then *boom* — you realize you’re in a pickle. Or at least, that’s how it’s been for us.

But the bright side of this is — you acknowledge where you are, and that you will make a concerted effort for improvement. And as they say, the only way to go is up!

So what do you guys think? Since this is a new endeavor for me, do you have any words of wisdom on how to approach this?

Is there a particular debt payment method that has worked really well for you? How do you feel about debt snowball vs. avalanche methods?

What personally motivates you to cut down on spending? (I’m willing to take any and all suggestions!!)

Until next time,

Diana : )

 

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