We’ve all seen it before countless times. A person decides to rid themself of their debt, gets a budget all set up, makes a good start, blogs about it, and within a month or two, disappears from the blogosphere. The presumption, of course, is that the person found out what kind of sacrifice that it would take to get rid of the debt and decided not to follow through. That the sacrifice now was judged not worth the rewards later in life. Or of course, that the person just “didn’t have what it takes” to get out of debt.
I’m pleased to say that this is NOT what happened to me. While I did set up a debt blog and made a pretty good start at getting rid of the debt for a month and a half and then disappeared from the blogosphere entirely, I did not stop paying off the debt. In fact, in the three months since I’ve blogged, I’ve paid off just over six thousand dollars in debt, all the while incurring zero new debt. I paid off my Fry’s card, and canceled the account. BofA, too, is paid off. I haven’t canceled it yet, because even after these months, I am still weighing the pro’s and con’s of balance transfers to save interest. But when in doubt, leave well enough alone. So the BofA account sits with a zero balance. The student loans are down to just over four thousand dollars remaining, which is on track to be paid off at or about Halloween. The only setback is the usurious interest rate that the Air Conditioner finance is charging, which accrued during the deferral and the balance is now higher than when it started. This, however is the highest that it should ever be, and it will eventually be gone, too.
Since January of this year, I’ve paid off over seven and a half thousand dollars in debt, and I’m still as excited about it as I ever was.
I just had gotten a bit burned out with blogging is all.
I’ve kept a blog for quite a few years in one place or another, and face it, it can be hard work. Sometimes the rewards for keeping a blog are less than the effort involved. And sometimes we just don’t have that much free time. Or sometimes blogging is just hard work.
But I’m back for a while. I hope you enjoy my blog, if there is anyone who still checks it after three months of inactivity.
Right now I have two things in the works.
The first is that I intend to take a 1.99% cash advance on the BofA Visa card to pay off my student loans. This will save me money in interest over the course of the payoff, and it will ensure that Sallie Mae stays off my back. In addition, it will move the $850/mo that I am currently paying Sallie Mae over to may debt snowball, less the new BofA payment.
The second thing that I intend is to use my income tax refund to drastically pay down the Air Conditioner finance. The income tax check is due on the 19th, and payday is on the 21st. Between the two of them, I can knock $5k off the AC.
But then I started thinking….
If I transfer the Sallie Mae onto the Visa, the outstanding Visa Balance of somewhere around $2000 will still be there, and because of the overall low interest rate (1.99%) on the transfer, I would want to hold that debt until toward the end of my debt payoff. But that would mean that I would be paying the 18% interest on the $2000 the whole time.
Wouldn’t it be better to use the income tax check to pay off the BofA account and then when I transfer the money from BofA to Sallie Mae, use a “convenience” check to simply take it in cash, and add $2000 back onto the amount to pay on the AC? This would have the net effect of transferring $2k from the AC to the Visa without any additional transfer fees. In effect, this would be the same as if I were to have called BofA and they agreed to lower the interest rate on the outstanding balance down to 1.99%.
The only difference is that the student loans will be getting another payment on the 21st, so the balance would have dropped somewhat and I wouldn’t be able to use that payment on my debt snowball for that payday (in a sense). The AC people would still be getting $5k and the student loans will be transferred. The balance on the Visa would not have gone up any higher than if I were to simply pay it off today. The only real longterm difference is the interest rate on the outstanding balance.
Damn, I’m good.
I’ve been working quite a bit lately. But now I’m off. Or at least mostly off. I have to go in for a few hours on Tuesday, but after that, I’m off until Friday night. And although it helps the money, it is pretty boring to write about on a blog.
I’ve been playing around with the numbers a bit lately though. I’m wondering if I should pay off the BofA account entirely when my income tax refund comes in next week and then pull the money back out on a balance transfer when I am paying down the AC unit. That way, for the same transfer fee as I will use to transfer the student loans around, I can eliminate the interest that I would have to pay on the current BofA balance, without increasing the amount owed.
Other than that, the new student loan balance posted to my account and I updated the sidebar.
Besides that, the wife has a dentist appointment in the morning. I think she lost a filling.
And now I’m going back to bed. I’ve been working too much lately and I’m just plain tired.
OK. I’ve finished all of my debt payments for this paycheck and I have the final results.
The first thing that I did was to replenish the EF from the $100 that I moved to checking to cover the front door repairs. Actually, I later moved another hundred over, just to be safe in case something auto-posted to my account. I didn’t want anything to bounce, so I parked an extra hundred dollars there as a buffer. I plan to put an extra hundred in the account sometime in the near future to keep a permanent buffer there.
But anyway, I brought my EF back up to a thousand dollars.
After that I made all of my minimum payments, and something bad happened. Something deferred posted to a CC and it raised my balance to higher than I started. So I actually am moving backward in my debt payoff. I now owe almost two hundred dollars higher than when I began. And that’s a bad feeling. The other thing that added to it is the transfer fees from moving the BofA account money around.
I’m good with it though. In the long run it will work out better this way, but in the short term I haven’t made any progress as far as the numbers are concerned. In effect, I bought the interest rate down on that account, but I will make out better as time passes.
Then I paid my car note. My balance has now broke through the nine thousand dollar mark. It may go back up through the nine thousand dollar mark over the course of the month though, as the monthly interest is calculated and added to the account, but as of right now, the payoff for my car is less than nine thousand.
After that I sat for a very long time and debated. I can pay off the student loans with the BofA account if I want to. But I also have a very nasty Air Conditioner payment coming out of six month deferment this month. If I don’t pay it off this month it will post the accrued interest and that’s about an extra five hundred dollars. So if I wanted, I could pay off the AC instead, and continue to pay the student loans with the Tax Refund Check and pay Sallie Mae off in the next couple of months. It was a very hard decision to make.
In the end, I decided to take the hit from the AC people and pay off Sallie Mae. It’s a five hundred dollar decision, and I didn’t take it lightly. But in the end it came down to cash flow. If I pay off the AC with the BofA, I will be adding a BofA payment to my already excessive student loan payment. If I pay off the student loans, I will be adding a payment for the AC, plus accrued interest, in addition to the BofA payment, but I will be losing a monthly payment of $888.00
I will still come out with a greater monthly payment in order to pay off the AC and the BofA in just a few months. Well, actually, I wouldn’t pay off the BofA that fast, because it will be at a low interest rate, so I will pay something else off instead. But I will pay off the AC with the accrued interest, by the end of March or so. It may be the first payday of April though. I haven’t done the math yet. But if something were to happen in the meantime, I would like to have the available cashflow to handle it. So even though from a strictly mathematical perspective it doesn’t make sense to pay off the student loans first, from a security standpoint, it makes a lot more sense. And that doesn’t even take into account that I really hate Sallie Mae. So in the end, I will take the accrued interest hit and get rid of Sallie Mae. Other people may have done it another way, but I’m satisfied with my decision at this point.
And that leaves me about $750 after taking out for living expenses to pay on my debt snowball. Valentines Day is coming up in a week, so I want to keep out a couple of hundred dollars to keep my wife for another year. So I want to send off about $550 to pay off debt. And this is where the decision making got very easy.
I really like Home Depot. I shop there for most of my home improvement supplies. When I needed a doorknob last week, that’s where I went. They have such a wonderful selection, great prices, and helpful sales people. It’s a great store.
But it’s a bad debt.
Home Depot:
Beginning Balance: $502.23
Today’s Payment: $502.23
New Balance: ZERO
Goodbye home depot. I appreciate you being there when I needed some emergency repairs. But from now on I will be paying cash.
(I also sent in my very last payment to Fry’s Electronics to cover the interest that had accrued prior to my final payment last time.)
So then I updated my sidebar, and as I expected, my CC balance has gone UP. That’s not the direction that it is supposed to be going. But that’s what happens if you are stupid enough to choose a deferred payment. But nevertheless, I have one less CC and I can pick myself up and dust myself off easy enough. The good news is that my overall debt balance is still lower than when I started, and it will go down even further next week when the payment that is auto-posted to the student loans credits to my account. But it sure will look funny when I transfer the student loans to the credit card and the CC balance is $7,600 more than when I started.
Next on the agenda is “Little Shopping” where I will get the small food items that need to be replenished in between the “Big Shopping” days. We need some bread, cereal, and little items like that. I don’t expect it to be too bad.
It’s payday today. I’ve been working on the bills for about three hours so far this morning.
It really is a roller coaster, all of this bill paying. I see myself making progress in one area and being set back in others.
I spent a lot of time today going over balances and interest rates. Making plans for which bill will be paid off when. Making tough choices.
I’m figuring out that there isn’t always a right answer. Sometimes it is simply a matter of making a decision and sticking with it. But overall, I am pretty satisfied with how it is going. This blog will be a month old this week (on the 10th) and I am glad to just be better organized than I was before. But I can see that I have a long way to go. A lot of my problem is that I like to pay my bills manually, online every month. This forces me to look at them. Sometimes I’ll spend ten or fifteen minutes on each one, looking it over and seeing where did each charge come from, what I may be able to do to decrease future charges, and wondering how I could have been so stupid in the first place. Nevertheless, I’ve done my budget for the next two weeks and I will be posting my progress (or lack thereof) shortly.
BofA has changed its mind. Now they love me after all.
It’s amazing how when you drop your balance down a month away from zero they suddenly take interest. Was it really only a week or two ago that they decided that I was only good for 18% interest? Ahhh, but now my balance has dropped by over $6k they love me again. I got a letter in the mail from them today with the cash advance checks included. If I use the checks, the amount I use them on is 1.99% interest until Jan, 09. Even if I make them out to Cash.
That means that I could pay off my Student Loans with them, effectively freeing up about $600 per month in extra Snowball Ammunition. That means that I could throw a SmackDown at the Air Conditioner with my Income Tax Refund, followed by a thirty day payoff (or thereabout).
I can only see two problems with this idea though:
1) The proportion of debt to balance would be about 90% on that card, and it would hurt my credit rating until I brought it down.
2) The balance that is already on this card would be paid off after the 1.99% portion, so I would be stuck with the interest on it every month, although it only works out to about 20-30 dollars per month for it.
and potentially, 3) If I were to be late on a payment the entire balance would go up to the current 18% rate.
The benefits include: 1) Adding an immediate $850 per month to my debt snowball, minus the new payment to BofA (rough estimate $250 per month) for a net increase of about $600 per month added to my debt snowball.
and 2)Getting rid of Sallie Mae once and for all. To me, Sallie Mae is one step under the IRS, because if you should ever default, they can put a hold on your state license, which I need to work. To be honest, I would rather pay a higher interest rate to be rid of dealing with her. But in this case it is much lower than what I was paying her, so I still come out ahead.
Neutral is: 1) The balance transfer fee is $90 maximum, but the monthly debt interest payment to her is over $100. This not only neutralizes the balance transfer fee, but also the interest that I would have to continue paying on the current BofA balance.
I believe that this is really a winning situation for me, and I intend to initiate the cash into my bank account tomorrow, and send in a giant payoff on Monday or Tuesday, whenever my current Sallie Mae balance posts to my account.
That is, unless someone on here can explain why this would be a bad idea to do. I don’t really see a downside to it though.
I’ve been doing a lot of thinking about which debts to pay first and which ones to keep paying the minimums. For the most part, there doesn’t seem to be a right answer so far.
Of course, Dave Ramsey says to pay the smallest balance first. The logic is that this will give you some good, positive results early on so that you will see results and it will give you a psychological boost. This gives positive reinforcement so that you are more likely to continue to make cuts and increase your debt snowball payments. As a general rule to be given to such a wide audience as he has, this is good advice. It is something that is easy to grasp and it answers the question, “I want to pay this off, but where do I even begin?”
But of course it may not be the best for everyone. There are some people who are very inclined towards the mathematics of it all and will insist on paying off the higher interest first. By eliminating the highest interest, you can pay off your debts in the shortest period of time, all things being equal. You may even pay them all off a month or two faster this way.
But there is a problem with both of these ideas. With the lowest balance method, what would happen when you get toward the end? That is to say, what happens when you have your last debts remaining and they are all high balance debts? It seems to me (and I am no expert on these things) that as time goes on, there will be a time when you will face burnout. To maintain a frugal budget even while working overtime and delivering pizzas on the side, while seeing no benefit in your personal life is a good recipe for burning yourself out. It seems that there could come a time when you have simply reached your limit of what you can endure. Especially if you are facing your highest balance debts. I would think that by paying down your highest limits when you are most excited about paying your debts off and especially motivated to do the work and sacrifice necessary, you can preserve your easy targets for when things get less motivating.
Then when you are facing burnout, you can start paying off some of the smallest debts and that will make you more motivated at that time, when you most need it.
And again, if you are paying the highest interest debts first, you will come to a time when you are finished paying off the worst ones and are left with a bunch of zero interest debts. I can all but guarantee you that if you are so number-oriented as to start with the highest interest debts that when you are down to zero interest debts only, you will think that it would be better to put that money in savings and draw interest on it until the zero interest period expires. And while mathematically this would make a lot of sense, psychologically it would not. When you pay off the zero interest debts and become debt free, that will make you even more excited, even if you are a numbers person. Or so it seems to me.
And of course there is a third possibility. You could pay off the debt that you hate the most. The one that kept calling you and asking if you wanted credit protection. The one who wouldn’t adjust your payment due date to what worked better for your schedule. The one who was rude to you on the telephone. And of course, the one that raised your interest rate to 21.9% 18% interest. That’s the one that I am most inclined to.
However, over the weekend, I’ve been thinking a lot about it, and it occurred to me that there is no 100% right answer. You have to do what works best for you. And with this income tax refund coming my way this year, I want to know before it gets here where it will be going. So I’ve been working out different payoff plans for my debts.
I started by saying, “What if I paid off the BofA account with it, and took what’s left and put it towards the next CC in the stack. If I were to transfer the balance of the Air Conditioner to the BofA account after it’s paid off, I would be able to pay off all of the CC’s that would be left with any sort of interest on them by the end of summer.
And I tried variations of this, too. What if I just paid the next CC with the Income Tax Refund and then made payments on the BofA until it’s paid off by way of the debt-snowball. The time works out the same, except that I would be paying more interest on the Air Conditioner. So that’s a no-go.
And then it occurred to me. I could put the Income Tax onto the student loans.
As it stands, Sallie Mae is getting right at $850 a month from me, and will be paid off at or about the end of October.
But if I simply put the Income Tax onto the student loans and then made my normal payments, it would be gone at the end of May.
But then I thought, what if I left BofA alone for a little while and put the debt snowball onto the student loans? They would be gone much faster. AT THE END OF MARCH.
Now of course, I would still have an interest payment on the BofA account because of this. But because I’ve transferred a lot of it to zero interest cards, I could handle it for a couple of months. Because after the student loans are gone, my debt snowball would grow by a whopping $850 a month, putting it up near $2500 per month. This means that I could pay off BofA in April, and because of the third paycheck that I will get in May, I could actually pay off the Air Conditioner in one month, or at the latest, the first paycheck of June. Factoring in the zero percent CC’s that I’ve picked up, minus the AC and the BofA, I would drop about another $90 or so a month after that into the debt snowball, putting me up well past $2500 a month extra to pay off the remaining debts. At that rate, not one of them would last more than two months, with the exception of the car, which I intend to leave for last anyway.
Right now, this seems like the best all-around plan for me. I’ve been dancing with Sallie Mae for too many years now. And although I’m hating BofA, I could handle three more payments. And actually, when I put in the transfer to the zero percent, this months payment had already posted as due, so the transfer actually satisfied my payment to BofA for February. That makes it easy to pay back the Emergency Fund with the money that I’ve already budgeted to this month’s BofA payment.
So somebody let me know if they see an obvious hole in this plan. I think that the benefit of knocking out the student loans is great enough to justify making the extra interest payments for a few months, because then my monthly obligation is lower and if work should slow down again, it would be a lot easier to hit my break-even point every payday.
But maybe I’m overlooking something. I am still learning, after all, and tend to make this all up as I go along.
So feel free to put your two cents in. Good, Bad, or Ugly, it doesn’t matter.
The recent payment to Sallie Mae has posted to my account. My balance is now officially below eight thousand dollars. Way below. The new balance is 7662.08 which I have updated the sidebar to represent. I don’t intend to update the rest of the sidebar totals until next payday, when I will be making my normal monthly payments, since this takes so long to do and I will have to do it all over again in a week anyhow. I think I will update the balances on the credit cards once per month whenever I make my payments, and I will update the student loans twice per month whenever the payment is posted to my account.
The overall current balance, however, will not reflect the changes to my student loan payments until the next time I update the credit cards.
Heck, that sounds confusing even to me, and I’m the one that wrote it. I have it all straight in my mind though. 
Today is Payday and I worked some good overtime during the payweek.
After paying my mortgage payment and my insurance premiums and taking out for our living expenses, I actually have money left over. I have a whopping $1488 left over.
So let’s do this.
I transferred $542.00 into my savings account bringing my new balance to ONE THOUSAND DOLLARS!!
My Emergency Fund is now COMPLETE!!
(happy dance)
But what is this???
There is still money left over. In fact, there is still $946 left over. Something is going to get paid off today.
Let’s see. Who looks lucky? I want to put it all on my B of A account, but there is a debt that I have where you have to mail the payment in every month. It’s a major pain, because I usually don’t have stamps around the house, and they have mailed my payment coupon later and later every month until finally it is getting here so late that I only have one or two days to make the payment after I get the coupon. It drives me nuts. So then what are my choices? Let’s get rid of this sucker once and for all.
I’M MAD AS HELL, AND I’M NOT GOING TO TAKE IT ANYMORE!!!
Fry’s Electronics. Wonderful Products. Competitive Prices. Bad Debt.
Balance Owing: $632.71
Today’s Payment: $632.71
New Balance: ZERO! PAID IN FULL! KAPUT!
Goodbye Fry’s. Don’t let the door hit you on the way out.
That leaves me just over $300.00 in cash. Normally I would want to pay on another debt, but Sunday is my son’s birthday. I am going to keep this money out for his birthday. Last year we were paying off debt and the birthday’s were all very small, and I told him that I wasn’t going to spend a lot of money on birthdays, and he was very good about that. But at the time, I promised him that it would just be that one time. And since I promised, I will keep this money out for his birthday.
On another note, my birthday is tomorrow. I will be 29 again. And what do I want for my birthday?
Well, I just got it. I want to have a fully funded Emergency Fund. That’s my birthday gift to myself. $1000.00 in savings. And I got one less credit card, to boot.
That’s the best birthday present I have ever gotten.
I got a letter in the mail today from Dodge. It said, “Important information about your vehicle” on the front.
I thought it must be some kind of recall or something. Or at least that it could be. But no. It was an offer.
“We will give you 100% of the amount that you owe on your car if you trade it in on a new vehicle. You will have zero out of pocket expense, and your payments will remain exactly the same as they are now, for the same amount of time, because your credit is better than it was when you first bought your car and we can offer you such a lower interest rate.”
Or something thereabout.
It sounded like a pretty good offer on the surface. Two weeks ago I would have taken it. Or at least looked into it more.
But not this time. I can see the fallacy plain as day. Can you spot the problem?
The problem is this: I have no intention of paying on my loan for the duration. I am going to pay it all off ahead of time, so if I were to get a new car at this time, it would increase my balance owing, and increase the time it takes to pay it all off. Not to mention that it would be stupid for me to buy a new car at this time in my life because it depreciates so quickly.
So no thank you, Dodge. I’m good.
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