Inevitably we all have to deal with the question of how long will it take, and can we make it. I have my debt on a 0% credit card and the 0% part is due to end July 2007. That means, I believe, in August that they will begin assessing interest on the amount I have left to pay based on the fact that I transferred it last year. More on my plans later.
For some of you, you may have so much debt and so little income that you’re wondering when or if you’ll get through. There are many ways to shorten the length of time you have to make payments:
- One time contributions: You get a bonus from your job, you receive a gift from a friend or family member, or you collect a bank error in your favor (like they always seem to be doing in the game of Monopoly!).
- You lower your expenses: You take a look at your budget and see what can be cut so that you can pay more to debt. This may mean sacrificing something that you “always buy” or “always do” like that annual vacation or buying the latest fashion.
- You get another job: Either you find a second job, start a business, negotiate for a greater paycheck or find a new job.
All of these can increase your pay, and decrease your amount of time in slavery to debt. At this point in time, you can also get more money from not contributing to savings, college savings and retirement– but only if you can get the debt paid off within a year. You see, the greatest asset you have as far as retirement savings is time– contributing money over time. So, it’s important that you are using 401ks and Roth IRAs and the like to save as much as you can– but you should get out of debt first.
So, back to the question… How long is it going to take? Sit down and take out your calculator or spreadsheet and your budget. Figure out what you can cut and how much you need and then take your debt and divide it by the amount that you can send to debt every month. If this number is between 24 and 36, then take out the retirement and other savings (don’t touch the $1,000 emergency fund!) and see if you can get that number lower. If you’re within 24, then make the arrangements and start killing off that debt. If you’re still outside the bounds, then my advice is to keep the retirement going and pay off as much as you can.
Again, this is my advice, and I’m trying to live by it. At this moment I’m down to $3,400 left on my debt, and I have to have it done by July 2007 or else start paying interest. I have the $1,000 emergency fund that I’m willing to spend if it’s the last $1,000. So that takes me down to $2,400. The question left is what will I be able to raise between now and the deadline. I’ve got $300 waiting for the next bill, with another paycheck between now and then. Only time will tell.