How much did you pay off?
As it was some years ago, I don't remember the total now. A lot.
How long did it take you?
It took me about three years to pay everything but the mortgage off.
How has your life changed?
Doing this gave me confidence in myself. I came up with my own plan, stuck to it, and succeeded. It's one of the things I am most proud of.
Why did you decide to become debt free?
I had just bought my first house and suddenly had large new expenses in the mortgage and utilities. In addition, my car needed expensive repairs just at the time I moved in and, of course, I had to buy furniture because I'd been living in a furnished apartment. I owned one chair, a coffee table, a bedside table (I bought the previous owners' waterbed with the house), a curio cabinet, a bookcase or two, and a piano. I was already paying financing on the piano, a television and an encyclopedia. Credit card debt mounted for new furniture. I couldn't stand it!
How did you do it?
I made a list of all the fixed monthly expenses first - mortgage, utilities, finance payments, etc. Then I took expenses that were paid regularly but not monthly and divided those by the number of months in the interval. For example, car insurance came due every six months. I divided the projected total by six to come up with a monthly amount I had to put aside for that. The minimum monthly payment for the car repairs was higher than other credit cards, so I budgeted a fixed amount for that, as well as for weekly groceries and gas.
This gave me the amount I knew I would HAVE to spend or put aside each month. Since I got paid every two weeks, I had a fixed amount I'd receive each month, and every so often I'd get a third paycheck. I subtracted the total from monthly income and that gave me how much I had to distribute between credit cards.
Finally, I allowed myself $5 a month to spend on myself and a minimum amount to put aside for emergencies.
At the beginning of each month, I filled out a chart that gave me the discretionary amount. I used that to pay as much as I could on each credit card - at *least* minimum plus interest.
The formula for the first half was: Income -monthly fixed expenses, -monthly money set aside for irregular fixed expenses, -minimum emergency fund set aside, -$5.00 for myself.
I then took the balance from that formula and applied the remaining money to credit cards. Once the credit cards were paid off, I used the discretionary money to pay extra on the financed purchases.
Tips and Tricks
- This method works well if you have a regular monthly income. When I got a third paycheck, I used it to pay off more of the credit card debt, and once that was eliminated, extra on the finance charges.
- I had a baseline amount I had to keep in the checking account no matter what that did NOT include money set aside for irregular fixed bills and the emergency fund.
- $5.00 was ALL I could spend on myself. No clothing. No toys. It was amazing how I looked forward to choosing what I'd spend $5. One month it was a big box of Crayolas and I *loved* it.
