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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.
MIN, are you sure that your 0% card only starts charging interest on the amount remaining? I thought that some of them are retro active, so that if you have not paid the whole lump sum, they tally the interest back to day one. I’d check that.
Another thing I’ll mention. IF you get stuck and can’t make the whole payment before the interest starts to accrue, use another 0% card and transfer the debt to it. That will at least give you another year, which it seems unlikely you will need.
CUT CUT CUT… Here are few places that could boost your “income” by cutting out drastically for a very short time (like the month you have left)
Groceries: cut the budget in half and eat like a pauper for a month, PBJ and Mac n Cheese won’t kill you or the kiddos in a month!
Eating Out: zero sum for one month can save hundreds of dollars
Going Out: cut that gas! Don’t do anything but work, groceries and church!
Entertainment and Gifts: for one month forgo all extras, you can always give a belated gift next month if it is someone’s birthday
Give up Diapers: or go cloth for one month.
You can do anything short term like that. If you know it will end at the end of the month, and that you will then be free, or much much closer, then you can cut back drastically. Call it a family adventure!
Just some ideas,
Mrs. Meg Logan
Well, there’s yet another wrinkle. My brother is getting married next week about 10 hours away– so that’s what’s basically the problem as far as making it to the end of the year. I would think that even with the cuts you suggest I don’t think we can make it in a month. Now, we’re going to try our best to make the trip as cheap as we can (we’re going to be put up in someone’s house while we’re down there) but there’s no good way to miss this. It’s not like I can reschedule his wedding. 🙂
As for the whole card thing– I believe the interest is based on the whole year, but I believe that it’s also only on the current balance– not on what the balance was last year at this time. If I get another 0% card, I do run the risk of hurting my credit score (and since we’re also looking at a house, I don’t know how well that would fly. Of course, I could try to run some 0% game and also get rid of the debt, but I don’t know if I’m that risky.
Thanks again for the pointers, we’ll prayerfully consider them!
$2,400? You can do it! Thats nothing! If I were you I’d get a commitment from my family to stand behind me and I would spend about every waking moment from now until the deadline doing something that generated extra income.
1) Go through everything in the house. If you haven’t used it in 6 months (and its not seasonal) e-bay, yard sale it… just remove it. This is probably worth $300-$800
2) Start doing computer training/repair and charge $50 an hour. Post adds on every free bullitin board you can find and at your church. Let the people you know be aware that you’re trying to eliminate a debt. ($100-$2,000 depending on how focused you are)
3) While you’re at it… post signs for setting up people’s blogs. Charge them $50 to setup a blog, install a selection of themes. If you set it up so even the least tech savvy person is good to go people will be happy to pay it. You can probably even host them too for a fee 😉 ($100-$2000 depending on how focused you are)
4) Find a way to take any other skill you have and leverage it. Do yard work, help people fix their houses (want to come to NC?)
5) Cut out every service you can do without for a month (cable, internet, netflix, etc) $50-$200.
6) Don’t eat out at all. Don’t visit the vending machine. (Though you’re probably not doing this much anyway) $20-$150
6) If your work will allow it, fill in your time thats not being spent on one of the higher paying activities with overtime at work.
If you absolutely can not pay it in time try to get it off credit cards and into a static loan. Even a check protection line can often be lower than credit cards. Please also verify that your interest is not retroactive if you don’t pay it off completely… a lot of cards have that stipulation. If your’s has that stipulation you do not want to leave a balance and have to find a guaranteed way to get the money off.
Thanks for the ideas Doug. We just sat down and did our budget for the next two months to see if we could make it. If our calculations are correct AND we can stick to our budget, we have enough money in all of our savings (emergency, kids, medical, auto service) from the pay checks, and by cutting back on things that we should have a $80 cushion to make it by the 15th of July– the last day for the 0%.
It’ll take some cutting back, and adhering strictly to the budget, but I think that we can do it with the Lord’s help.
What this will mean is that we’ll have nothing saved if something were to happen after the payments, but we will be DONE!
(As soon as we make that last payment, you can be sure there’ll be a post, the chipin widget will come down, and we’ll start tackling the next steps together.)
It’s great that you are not careless about your debts and you are trying to pay everything off. I wish I was like you))
You mentioned the 0% period expiring soon. Don’t get new balance transfer cards, as it involves into debt even deeper! Pay everything first, then you can be free to apply for any card!
Thanks for the encouragement, CCC. There’s another reason I was trying not to go for a new card– we’ve been looking for a new house and that would really effect my credit score.
It took us a few tries, but we did it, and we were in much deeper than you. You can do this. The blessings and freedom on the other side are tremendous. Go MIN go!