Our way of paying down our first "debt"
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  1. #1
    Registered User MomToTwoBoys's Avatar
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    Default Our way of paying down our first "debt"

    DH and I decided that we were going to focus on one bill at a time to pay off and after some consideration, we decided on the computer debt. It's the smallest and carries the biggest interest rate (under 1k @ 28.9% interest). We had wanted to put money into savings but at the same time, we want that bill gone. Therefore, we're going to keep putting money into just my savings account and put 100 per payday onto the computer debt on top of the 53 dollar minimum payment in the middle of the month. We'll be paying the 53 dollars first and then after that payment is made, we'll be putting 100 every two weeks on it at the beginning of that week. I figure that with putting 200 onto the computer extra will get the debt paid off before Christmas, which will be a good thing for us.

    I know I've read that we should put every penny we can scrounge on our debt, but this is new for us and I want to take it easy at least for a little while to see if we're not burying ourself into another hole.

    I'm just wondering if this is a good or bad thing for us. I'm always second-guessing myself and well, it's a bigger thing because it's money related.

  2. #2

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    I'd always recommend paying off debt with the highest interest first. Saving interest is saving money.

    That said, I'd still consider a minimal emergency fund before becoming aggressive with the debt.

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    Registered User Wendy99's Avatar
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    I have to agree ... maybe divide up your payments pay double on the computer (instead of an extra $100) till your basic EF is funded, then go full force ?? that's a pretty high interest rate though .. so I'm not sure on that .. personally I'd be tempted to do as your doing as well, but I can see the benefits of having even a bit of EF .. i really want that dave ramsey book ... library is taking a life time to get it for me!! (or i'm just really impatient )

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    Registered User Greebo's Avatar
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    While I agree that paying off higher interest sooner pays off better in the long run, I understand why DR does it his way. Its to build momentum, and generate enthusiasm as you see debts starting to vanish.

    Also, paying the smaller ones first gives you more wiggle room in the race between month and money.

    Finally, I got a kick out of what he said about interest first vs. balance first. "Well that doesn't make sense mathematically." "Yeah? Neither did going into debt, did it?"

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    That's a pretty hefty interest rate. I would pay that off first. You are doing a good job. Paying the smallest is smart and you feel like you are getting somewhere.

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    Registered User Greebo's Avatar
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    Quote Originally Posted by Palooka View Post
    That's a pretty hefty interest rate. I would pay that off first. You are doing a good job. Paying the smallest is smart and you feel like you are getting somewhere.
    /agree - in your case its a double win - lowest balance AND highest rate.

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    Registered User MomToTwoBoys's Avatar
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    Thanks.

    I think we have a bit more wiggle room to actually put some money into an EF but our main focus right now is to get rid of that debt. I have to do some more number crunching and see what I can stick into savings. I had planned on putting any extra cash that was in both mine and DH's accounts into savings anyways (and just leave the amount he gets paid in his checking account to pay bills).

    For instance, he has 170.74 in his account right now. If that amount is still in there tomorrow morning, then I'll be putting that into savings. I'd do the same thing in two weeks, and then every two weeks after that. I really wish I could just stick like 500 a payday into savings and have this huge amount in the account right away, but that won't happen until at least tax time in April/May 2009.

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    Registered User FrugalMomof3's Avatar
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    Thats how I did it when I had debt... paid the smaller amount first (higher interest rate) and then went to the next CC/debt, etc... your doing the right thing, and if you get money in savings at the same time your right on track.

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    Registered User PrairieRose's Avatar
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    I absolutely with DR on the smallest debt first thing. It just really motivates you when you get that snowball rolling and you see how fast it goes. WTG, I'm thrilled for yaProgress for sure

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    Registered User itlw8's Avatar
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    28% interest is an EMERGENCY get that sucker paid off.

    I would still put $50 a month into an emergency fund but at that hight of interest you have got to get that down.... how much is added each month for interest.

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    Registered User Greebo's Avatar
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    Quote Originally Posted by itlw8 View Post
    28% interest is an EMERGENCY get that sucker paid off.

    I would still put $50 a month into an emergency fund but at that hight of interest you have got to get that down.... how much is added each month for interest.
    $28 per hundred.

    You want motivation to kill a credit card?

    Every month, really LOOK at your CC statement. Find the "finance charge" section. It'll be small, and hard to read, and have a HUGE FREAKING NUMBER IN IT.

    Scratch out whatever they call it, write in "STUPID TAX", and put that on your fridge. Every month.

    Hmm, I should have thought of that years ago! I'd have saved boatloads.

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    Quote Originally Posted by Greebo View Post
    Hmm, I should have thought of that years ago! I'd have saved boatloads.
    You are not alone.

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    Registered User Cricketlegs's Avatar
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    Sounds like my old dell credit card--NEVER AGAIN will I get a puter off a card.

    I hate hate hated that card and the interest.

    It was the first to go........

    You kick that baby to the curb and don't go back!

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    Registered User missyali's Avatar
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    Am I reading your signature correctly; you have around $200ish to pay off each credit card? If that's correct, could you pay off those with your additional money and then snowball those payments into the Dell or EF ~ whichever you feel is more important?

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