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Getting out of debt - the beginning
Posted by Michael,
13 October 2008
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63 views
Personal Finance
OK, so this is the first entry in my blog for this new Personal Finance category. The idea behind this grew out of a discussion Nichole and I had after work on Friday night.
She and I, like many Americans, are pretty deeply in dept. We each have student loans for our educations; she has about $90,000 and I have something like $46,000. She has two Masters degrees and is working on her PhD right now, I just have the Bachelors but went to a much more expensive (but not necessarily better!) school. We have many credit cards, none with an insane amount of money on them, but it's several thousand there all told. We also have our mortgage on our old house which is being rented, and our mortgage on the current property (3 houses, 14 acres, horse boarding buildings, etc.). The horse boarding business itself and the rent on the 2 houses on this property just pays the mortgage on that business, so for all intents and purposes we should consider all of that balancing out. There are also lines of credit we have, one of which is up to $30,000. We don't live in the lap of luxury, neither one of us has a new car, our house has no nice furniture in it, we don't have a lot of gadgets, etc., so it's not like we've gotten in dept by buying jet-skis on a whim or something silly like that. Life is just very expensive, and stuff comes up that you have to throw large sums of money at every so often. She and I both work for the State (as we both work at State Universities) so we have some retirement money coming there eventually, but that's all we have for our retirement; there's never enough money to actually set aside for that.
Frankly, with the way the economy has been lately, our condition scares us to death, and we're trying to come up with a plan to deal with our mounting debt. I decided to create this blog category to track our progress, to maybe bounce ideas off of others, and maybe help give other people ideas on how to fix these problems they may be having.
One of our first goals is to sit down and figure out what all of our debts are. The way we can best reduce these debts is by 'snowballing' payments to them. The idea there is to pay off the individual debts with the lowest balance first, and then cancel that account. While you are making large lump sum payments to those lower balance bills, you make minimum, or even less than minimum (as long as you pay something) payments to all the others each month. As you pay off individual accounts, that becomes one less payment you have to make each month, giving you more to pay the others with, thus the snowball metaphor.
Another goal of ours to give us more money to play with is to see what expenses we can cut. Do we really need cell phones and a house phone? Can we get by without cable TV for a while? Do we need the Blockbuster monthly membership? These are sorts of things that if you can cut will give you more money to pay bills with. So we just have to sit down and decide which of our expenses we can cut.
Once we have sat down and figured out all of our monthly expenses and what can be cut, and our total debts, I'll post a new entry detailing these numbers so we have the baseline to work from. Wish us luck!
She and I, like many Americans, are pretty deeply in dept. We each have student loans for our educations; she has about $90,000 and I have something like $46,000. She has two Masters degrees and is working on her PhD right now, I just have the Bachelors but went to a much more expensive (but not necessarily better!) school. We have many credit cards, none with an insane amount of money on them, but it's several thousand there all told. We also have our mortgage on our old house which is being rented, and our mortgage on the current property (3 houses, 14 acres, horse boarding buildings, etc.). The horse boarding business itself and the rent on the 2 houses on this property just pays the mortgage on that business, so for all intents and purposes we should consider all of that balancing out. There are also lines of credit we have, one of which is up to $30,000. We don't live in the lap of luxury, neither one of us has a new car, our house has no nice furniture in it, we don't have a lot of gadgets, etc., so it's not like we've gotten in dept by buying jet-skis on a whim or something silly like that. Life is just very expensive, and stuff comes up that you have to throw large sums of money at every so often. She and I both work for the State (as we both work at State Universities) so we have some retirement money coming there eventually, but that's all we have for our retirement; there's never enough money to actually set aside for that.
Frankly, with the way the economy has been lately, our condition scares us to death, and we're trying to come up with a plan to deal with our mounting debt. I decided to create this blog category to track our progress, to maybe bounce ideas off of others, and maybe help give other people ideas on how to fix these problems they may be having.
One of our first goals is to sit down and figure out what all of our debts are. The way we can best reduce these debts is by 'snowballing' payments to them. The idea there is to pay off the individual debts with the lowest balance first, and then cancel that account. While you are making large lump sum payments to those lower balance bills, you make minimum, or even less than minimum (as long as you pay something) payments to all the others each month. As you pay off individual accounts, that becomes one less payment you have to make each month, giving you more to pay the others with, thus the snowball metaphor.
Another goal of ours to give us more money to play with is to see what expenses we can cut. Do we really need cell phones and a house phone? Can we get by without cable TV for a while? Do we need the Blockbuster monthly membership? These are sorts of things that if you can cut will give you more money to pay bills with. So we just have to sit down and decide which of our expenses we can cut.
Once we have sat down and figured out all of our monthly expenses and what can be cut, and our total debts, I'll post a new entry detailing these numbers so we have the baseline to work from. Wish us luck!
I think this is a UK specific site really (I have heard of it a few times but not really looked) > http://www.moneysavingexpert.com/ , but it might be worth a quick read, if nothing else it might give a few ideas etc.
And this I hear is a good one > http://creditboards.com (although I am not sure if it's what you want)