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Answers to Your Questions…Part 1

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Thank you to everyone who asked a question in my post over the weekend. There were some great questions in there. I’m answering a few today and the answers to the rest will follow tomorrow.

Pat asks:
Hi, Tricia. I wondered what you felt were the 3 most important things you did to have more money to put toward your debt? I also wonder what you feel is the best route to take to make more money in order to pay off debt faster? Thanks!

P.S. I’m a stay-at-home mom and have already cut back on groceries, no cable, cars are older and have been paid off for a while. We eat at home and the kids/husband brown bag lunches.

There were so many things that we did that contributed to the extra money to put towards our debt. Boy, it’s hard to think of three that were the most important since I think everything came into play. By golly, you stumped me LOL. So, I’m going to modify your question a bit and list three things that I think were helpful that most people could try.

Stopped going to stores as often. I can look back our spending (pre-debt reduction) and see debit card charges almost every day of the week. We went to the store way too often to pick up a few things. It all adds up so quickly and most of the times things were purchased that we didn’t need. Stores are very good at encouraging impulse buys. By curbing our frequent visits to the store and replacing them with thought out occasional visits, it cut our spending.

Decided that stuff is stuff. We had too much stuff and most of it didn’t serve a purpose. Our multiple garage sales really showed that. I haven’t missed anything that we sold. With that in mind, I really think about something before we purchase it and make sure it will get used and if we really need it.

Tracked our finances. We use financial software to do it, but you can also do it with pencil and paper. The important thing is to keep yourself accountable for your spending and to add up all of those receipts. Tracking your finances also is helpful to get an idea of how much you can pay towards your debt since you will have a better understanding of your finances overall.

As for making more money to pay off debt faster, if you can, look to your current employer first. Can you get a raise? Can you work overtime? If that’s not possible, can you get another job? I say that hesitantly because you do have to be careful. For me, I am an emotional shopper and when I get stressed I think about some retail therapy. The last thing you want to do is find yourself going on a shopping binge or deteriorating your health to the point where money doesn’t matter. You can try to push yourself, but find a healthy balance.

Regarding your P.S., if you haven’t already, make sure you check out WAHM.com forums. I’ve found a few work at home jobs there 😉

L asks:
I was wondering how old your son was? You talk about him a lot and he sounds adorable.
And….WHOO HOOO on paying off the credit cards!!!!!

Thanks for the Whoo Hoo! Our son is approaching eight years old, although sometimes it seems like 14 LOL.

Marie asks:
I’m wondering if your student loans bother you and if you could tell us what % they’re at for some context. Are you going to accelerate your payment on these or are you content to pay as agreed.

We have no consumer debt no car loans even, just a mortgage and student loans. Our student loans don’t bother DH but they drive me crazy – all are below 2% interest though.

Good question Marie. To think of it, I’m not sure if I even noted the interest rate on our student loans at all on here. They are all a little over 5% right now. While I’m not happy about the student loans, I do like that we can deduct the interest on our tax returns. We are unable to do that with our mortgage. We are not planning on paying extra right now but I will be looking into changing the payment plan. We are currently on a graduated plan which gave us a longer payment term and a lower monthly payment. I still need to dig into that, though.

Maria asks:
Hi Tricia, I have a question for you- I’ve noticed that there are certain times in the month when you are able to pull out extra money for debt reduction and or savings but how do you determine when that time is? Is it more towards the end of the month when all of the monthly expenses are paid or at the beginning? What is your cash flow like? Do you keep a few dollars in your checking account? How does that work? Thank you in advance.

I know how much we can pay off at any given time since I project cash flow in real time. It’s hard to explain, but I have three months of future regular expenses (overestimated) and income (underestimated) entered into our financial software. I can see by entering a transaction exactly what a payment of $500 would do to our future cash flow. If I see us going into the red anytime in the next three months we scale back the payment. If I see a healthy balance, I increase the amount. I tried to keep a buffer in our checking account for anything I may have missed (filling the car with gas, urgent trip to store for medicine, etc.) but for the most part we ran things really close. I do plan on keeping a better buffer in our account going forward. We had some very close calls over the past three years.

Debt Free Dan asks:
Now that you are credit card debt-free, what remaining debts do you have and what do you plan to do about them?

What are your future plans for credit/credit cards? Are you going to swear off of them or keep them around “just in case”?

We still have our mortgage debt and our student loan debt. Our plan is to pay extra towards our mortgage right now. It has the highest balance and we are unable to deduct the interest on our taxes. We can deduct interest for our student loans. There were also other things that contributed to that decision as well.

We are not going to swear off our credit cards. In fact, we have been using one for purchases to earn cash back. But we have rules in place, like never charging when we do not have money in our checking account to turn around and pay it immediately. We will also keep them around “just in case” at least through the shaky economic situation the US is currently in. After things look brighter, we will start closing some cards.

Michelle asks:
I have only been reading for the last 6 months or so. So what I would really like to know is all of the strategies you used to eliminate your debt – and to be as specific as possible. A kind of “how I did it” post. Love your blog. It’s already been a big help.

I’m glad my blog has been helpful to you 🙂 As for that post you are looking for, it is in the works! I wrote way too much the past three years – but I’m almost done with a recap post. Here are links to the recap posts for 2006 and 2007.

More answers will be coming tomorrow! I also did an interview at Ask Mr. Credit Card in case you would like to read the questions and answers over there.


9 Comments

  • Reply Pat |

    Hi, Tricia
    Thanks for the great answers and tip about WAHM.com. I tried going to that website/link and it said that it was not found. Do you have another URL? I know that if I could find some side jobs it would help us out immensely. I appreciate your help 🙂

  • Reply Pat |

    One more question – I want to apply our tax refund to one of two cc balances we have which are on an RBS and a Chase card. You mentioned in your interview with Mr. CC, Tricia, that there are some companies you consider to be worse and/or sneakier than others. Since the interest rates on both these are the same which would you pay down first?

  • Reply Tricia |

    Unfortunately, I don’t have personal experience with either of them (although I’ve heard plenty about Chase which makes me leery of them). But, if I had two cards with equal rates, I would flip a coin of sorts – I’d call them both to ask for a lower interest rate. If one says yes, I don’t use the extra payment towards them 😉

    If they both say no, then I’d go with my gut – what company was I more comfortable with.

    Congrats on the tax refund 🙂

  • Reply Pat |

    Thanks, Tricia. I’ve heard plenty about Chase as well. Fortunately I’ve had decent dealings with them; but, like you, am very careful to pay on time every month. I like the advice about lowering the rate. I’ve never called to do that so it makes me a bit nervous but the worst they will say is no. I also thought that since our credit limit is different on both it might be better to pay the one down where the limit is lower so the debt ratio on that one isn’t as bad. I have to say that since I began reading your blog and a few others I have learned so much and it has really helped me get in gear. Like you say, “I can be debt free!” too!!!!! Thanks!

  • Reply Margot |

    I hope that eventually, you’ll stop thinking of credit cards as being there “just in case.” Getting rid of that thinking will help you on the path to financial freedom. You really will be fine now that you have learned how to be financially responsible, knowledgeable and mostly in control of your spending, saving and other financial habits. With that in place – plus the willingness to do anything that’s legal and moral to bring in money when necessary – you’ll never need to rely on credit cards for living. I know I’ll never be in true dire straits because I’ll do (and have done) whatever it takes to get by if times get lean, like babysitting (even though others would think I’m too old and too educated for this), pet sitting, yard work, whatever.

  • Reply 165k |

    I agree you should pay the mortgage first. Also student loans will go away if the holder passes away, so the spouse would not be responsible, nor would anyone else. The tax deduction is not all that much, so if there’s no other debt I don’t believe it makes sense to keep them around for that purpose. BUT if there’s other debts to tackle in the meantime, then the tax deduction makes sense. All my debt is student loans, but it gives me peace of mind to know no one will be responsible for them if they’re still around when I kick the bucket!

  • Reply Maria |

    Thank you for answering my question(s) Tricia. I really appreciate it and am implementing something very similar.

    Great job by the way! 🙂

So, what do you think ?