by, 05-29-2009 at 11:05 AM (1228 Views)
Okay, so I mentioned yesterday that I would come back and make an entire post about #10.
Here it is.
*My* take on paying off our debts.
So if you've done a budget, the next step would be to bring everything current and that may take anywhere from a couple months to an entire year.
But I feel like this step has to be done in order to ever feel like you're getting ahead.
There are basically 2 ways I look at paying off debts.
1~Starting with the account with the lowest amount due.
Once that account is paid off, then continue on to the next debt along with the extra money used to pay off debt #1.
This is considered the 'snowball or snowflake affect'.
Works for most people, but not all.
2~Starting with the account with the highest interest rates, first.
Then work from there.
This system can work for some people, but for most it gets discouraging too fast because we don't 'see' our progress as quickly as with step #1.
Because most of the accounts with the highest interest rates, also have the highest balances.
I don't have the answer as to which system will work best.
But for us, we only have 3 debts to pay off (not including our mortgage), one of which will be paid off next week.
So for us, we've decided to go with the smallest to largest system.
Our three bills are listed in my siggie, but I will list them here again:
2~Military Star Card~$3366.00
3~Navy Federal (personal type loan)~$23,544.00
Right now, I have not made out a pay-off schedule for #3, because I am focusing soley on the first two.
I would love to get the Star card account paid off by the end of this year, but realistically, it will probably be sometime around April of '10.
Because in order to pay it off by the end of this year, would mean we would have to go from paying a $140.00 minimum to a $561.00 per month payment.
No matter how I crunch the numbers, there is no way we can do it.
So for now, we will have to settle for increasing it to a $336.00 per month payment, and any little 'windfalls' that come our way will go into paying this debt off.
By that time, we should be very close to the $20,000.00 mark on debt #3, just by paying our regularly scheduled payments.
But figuring out how long it will take us to pay off that last debt is just too much to consider at this point.
But I would like to strive for sometime around April 2012, sooner of course would be better, but if we can get it paid off two years after debt #2, I will be happy.
I know our debt load doesn't look nearly as bad as some, but you have to remember that the larger debt is paying back something we have nothing to show for it.
It's basically like paying off a brand new car that we won't ever get to drive.
How sad is that?
But I try not to dwell on it and just continue on, because eventually, we will be debt free!!