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Budget Talks.

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The talk went well.  There was good news and bad news.  The good news is we are going to put the “found” money in savings…so our emergency fund should increase by $400 by the end of April.  That keeps us on track for the goals I set forth back in early March. We decided on $1600 as our emergency fund goal.  It’s a long story how we got to that number but we are both happy with that goal. 

And now the bad news…as to our debt payoff approach, it’s a “snowball hybrid” of sorts. We have decided that we will pay off the second line of credit of $145 this week.  That’s just to motivate us to scratch one more off the list.  Then we are going to work to knock out the debt with higher payments–not the highest, but not the small $25 minimum payment accounts either.  More specifically, we are going to snowball the minimums from the two we’ve paid off (the $60 something first one and the first line of credit= $45 freed up) to the Dad debt.  That will pay him off in June.  That will then free up $145 in minimums to go to that heinous 24.9% store credit card with the approximate $2000 balance.  That card has a $105 minimum payment.  By increasing the payment to $250 in June we estimate that one will be paid off in 10 months.  Let me take a moment to express just how much that sucks!  I was sure those calculations were wrong but that is the beast called “denial” creeping in again. Hello.  It’s a 25% interest rate!  What would I expect?!  Totally stinks. 

Next, we discussed tackling the Discover card that sits right around $7,000 @ 18% and with a $140 minimum payment.  Using the snowball we’d be paying $390 per month toward that and using a very basic calculation that would result in a 1 year, 10 month payoff timeframe.  That’s looking pretty far down the road but that is good to keep all of this very, very real.

On the upside now–digging deep to find an upside–these numbers do not reflect any additional income we can put toward this mess.  We aren’t considering an income increase,we aren’t consider any additional money we free up by cutting monthly expenditures and we haven’t taken into consideration the $400 extra per month that we will be putting into the emergency fund for now.  I have to keep those numbers at bay in the calculations but I can allow myself to keep them in mind so I don’t go running out into traffic!  🙂  Good thing I’m a pretty upbeat person or I could see me spiraling into a very dark place! 

Until next time…

 

Claire

Born and raised in Texas.I've at least driven through every state in the US courtesy of a roadtrip loving Dad.

I'm single with two children and a good parenting relationship with their father.

I am a "life is just half full of funny" kinda gal.Humor is my saving grace and I am thankful for it every single day.I have a strong Catholic faith and am thankful for that foundation.
I read a lot for a living but still enjoy a good book.I love biographies but in recent years have found the need for fun fictional books--sadly, for a long time I just didn't enjoy fiction!
I love live theatre of any kind--from local productions to Broadway.
I love to scrapbook and pride myself in my kids' albums.
I love being a mom but also love my career.I'm blessed to have found a balance allowing me to be at everything my kids need and want me to be at--while also having a career.
Favorite Quotes:Well behaved women rarely make history.
Behold the turtle.He makes progress only when he sticks his neck out. -James Bryant Conant

Latest posts by Claire (see all)


31 Comments

  • Reply Matt in CO |

    Seems like you have a good initial plan and I reckon that is a big part of the battle.

    Also, like you say, this doesn’t factor in likely pay raises or spending cuts. As such, it’s a somewhat pessimistic estimate and reality will hopefully be a bit better!

    Good luck!

  • Reply Suzanne |

    Sounds like a good plan! Doesn’t the thought of a 25% interest rate just make you sick? I’m sure you will love to see that card hit the deck- the blood sucking parasites! Keep up your great start.

    • Reply Claire |

      Suzanne–I woke up angry about that stupid 25% card and that just isn’t a good feeling! I’m taking reader Adam’s advice and sending that stupid $32 I saved in coupons to that card today! 🙂

  • Reply margot |

    I am mystified by how slowly you project paying this stuff off. You have giant incomes – CUT your expenses. Dial back lifestyle. Big-time. It really is a much better option than working to get out of debt for years and years and years. Cut enough that family members actually feel it and kids complain – you’re still paying for a lot of things that are luxuries but that you’ve come to assume are necessary or that the kids “require.”

    • Reply Matt in CO |

      Hmmmm…from Claire’s post, it sounds like she IS planning some unspecified spending cuts. These aren’t accounted for in her estimates (neither is her potential pay increase).

      • Reply Claire |

        Thank you Matt. Yes, spending cuts have happened and will continue to happen. You are correct in that what I posted last night is worst case scenario. The overall plan for the $55,000 in credit card debt is actually right around 2 years. I had to do worst case even though I didn’t want to but it is a benchmark if you will and will serve as motivation.

    • Reply Joe |

      I enjoy reading the blog (although I am not one who typically leaves comments), and do admire the determination and perseverance. However, I tend to agree with this comment by margot. It really seems like the _entire debt_ should be a 3-4 year problem given the information one can glean about the situation from reading the blog so far. I’m surprised to read about a (projected) almost 2-year payoff time for just a single one of the more moderate debts. I’m sure that over time you will reveal more about the overall budget and so maybe some of the mysteries will become clearer. My guess would be some of the ‘mystery budget items’ will turn out to be kids’ activities which I agree would be so difficult to decide to curtail. Hopefully indeed these projections will turn out to have been simply extremely conservative and the actual payoff time will be considerably shorter!

      • Reply Claire |

        Joe–I hope my reply to Margot helps a little bit. I really do hate being cryptic in my explanation and perhaps with time I can reveal more of those details. We are in the early days of this blog and I will respect that some areas are simply off limits re: sharing with the world. No, the children are not in an excessive number of activities but we do still have childcare expenses for afterschool given the age of our youngest–as just one example of an expense that I haven’t listed. As I said–what I posted is absolutely the worst case scenario and I think it was necessary that I start there so the reality sets in. It will motivate me to find even more cuts to make. Thanks for posting and I’m glad you’re reading!

    • Reply Claire |

      Margot,
      Please keep in mind that there are always going to be additional details and facts that either I haven’t gotten to on the blog and some things that I simply cannot disclose on the blog. Keep in mind our marital histories–some of which are uniquely my husband’s and some of which are uniquely mine. What I am saying here is please keep in mind that there are monthly expenses that are fixed and that I choose not to disclose on this blog. My husband and his ex-wife make some financial decisions about their sons that I have a different amount of input on and vice versa re: my own children. It is a tightrope but rest assured the children are feeling it and we continue to look for opportunities to tighten the belt. These are not luxuries but often legally binding agreements that can’t be eliminated in the manner you suggest. No, we aren’t talking about tennis lessons or etiquette classes…not by a long shot…I hope this helps a little bit in your understanding. Sorry to be so vague (you know by now that isn’t my nature) but some of these details are not mine to share.

  • Reply Sarah |

    During the time you project to pay off the $2000 and $7000 balances, won’t you also pay off the smaller balances just by paying the minimums each month? In ten months, hopefully, you’ll have more than just the $2000 balance paid off.

    • Reply Claire |

      Yes Sarah–I provided worst case, doom and gloom, extremely conservative post just to set the benchmark–more for me than anything else. I won’t be blogging for 20 years, I promise.

  • Reply Pamela |

    It seems like snowballing the smallest debts first to give you a sense of accomplishment is the industry norm but I see the wisdom in your plan as well. If getting rid of those high interest rate debts works for you, then go for it. And any debt to family member should be first in my book. I am really enjoying reading your blog and give you a great deal of credit for putting it all out there. Take the tips and suggestions from your commenters and use what works for you – debt reduction is not a “one plan works for all” effort.

  • Reply Bobbi |

    At least you are on the right path and taking control of the situation. I am working on getting rid of my debt and believe me, this will never happen again! I am over it all. Good luck, you can do it!

  • Reply Becca |

    I think that the modified snowball is the perfect approach! You’ll get enough of a head start that you’ll have a decent amount of “extra” to throw on the snowball but you won’t let the high interest linger for so long that they set you back seriously on your overall time goal. Good choices.

  • Reply Adam |

    seems like a good plan, although i agree with others that it seems like it could go faster. i’m not going to live your life but many (as you’ve seen here) take extreme measures to pay off their debt faster.

    25 minutes well spent: http://www.daveramsey.com/fpu/preview/

    here’s my hope – generally people in a corporate job at your income level have the opportunity for annual bonuses. maybe the “not all shall be revealed” bit alludes to an extra shot in the arm of income that you can dedicate solely to debt reduction. that’s our plan. i have a bonus target every year and about 2/3 of it for the forseeable future will be put toward paying off my degree. in the intervening time it doesn’t feel like we make much progress.

    your modified snowball will be fine, just make sure you resist temptation not to snowball the payments together.

    also, i LOVE how much you are now saying “we” instead of “i.” maybe this is signifying good progress between the two of you on this communication aspect (or maybe you’re just doing it to get us commenters off your back). anyway, this is an accomplishment in itself!

  • Reply Sheila |

    You have a plan. Good place to start.

    Also, I’m curious. You mentioned trying to lower the interest rates on some of your debts. Have you made any progress on that front yet?

  • Reply Alice @ Dont Debt |

    Blogging about your income and expenses and mountain of debt is hard. It opens you up to all sorts of criticisms because folks don’t see the whole picture. Remember, it’s so easy for them to imagine what you should be doing.

    I think you’re doing a great job! I can tell that you’re really loving the experiences of learning new things. I, too, have a sort of snowball system planned for paying off my debts. Keep up the good work and keep on learning.

  • Reply JMK |

    Good sjob having a plan of any description – too often the best intentions fail with the critical first step of deciding what to do about the problem.

    Maybe I missed this in your reply to a comment in another post, but is there a reason you wouldn’t transfer all the credit card balances at high rates to the line of credit? I took a quick look back at your post with all the details and see that the line of credit rate is 12.25% and you have 6 credit cards with higher interest rates. If you haven’t been able to renegotiate those rates down, then transferring the balances to the lower rate line seems the logical choice. I’m assuming of course that there is sufficient headroom on the line, but if not start with the highest interest cards first until the limit is used up. Also, 12.25% for a line of credit seems high, so I’m assuming this is an unsecurred line of credit? Ours was at something like 9 or 10% many years ago when it was unsecurred. We securred it against our house and the rate dropped to 4% (prime plus 2 or 3% I believe). We were paying off the final balance incurred while building our home and the lower rate meant we were done a year earlier. Yes paying off that card at 25% interest is slow and painful – much better done at 12.25% don’t you think? If you can get the rate on the line down there may be several other credit card balances that could be moved over for the lower rate. Just my 2 cents.

    • Reply Marianne |

      I was wondering the same thing. Is there any way you could get a line or credit or balance transfer for a lower rate? 25% is enough to make a person mad! I know we had a balance on a high interest credit card for awhile and it was crazy! Maybe you aren’t able to find any other lenders able to help you out because of your high debt but I was just wondering if you had looked into these options.

    • Reply Claire |

      oooh those lines of credit only have $200.00 limits and are more like overdraft protection that I’ve abused. We are looking at options with other cards but don’t want to create a situation where creditors close accounts b/c of new activity. We want to keep lines open that we do have open just in case something dreadful requires the need for $ fast.

  • Reply Katie |

    Big cheers to you and your husband for talking about this and coming up with a plan TOGETHER. Feeling like you are a team in working toward these goals will help a lot on those days when it feels like a long slog toward debt freedom.

    I know what you mean about running the numbers and feeling surprised that it will take such a long time to pay something off. Sometimes I felt like “I’m working so hard! How can it STILL take this long to be done with this?”. But having a plan and sticking with it will get you out from under this way sooner than ignoring it and paying minimums. You’re doing great.

  • Reply Walnut |

    I like your ‘worst case scenario’ approach. This gives you a baseline to benchmark and a goal to beat. You’re doing great. Only three full months into full on debt-repayment mode and you’re down two debts, have a handle on your spending, and a plan to knock out a couple of painful debts.

  • Reply GrannyAnnie |

    Great plan! We are doing similar things, and so far have knocked off a couple of smaller debts. Makes you feel more motivated, doesn’t it? Word of caution, though. Life happens. Something will come up that will derail a month’s plans. And sometimes you might get tired of it all and just spend on something unnecessary. Don’t beat yourself up, just get back on the horse as soon as you can. And automate as much as possible. Then it feels like a bill, not an option. Good luck friend! I’m following your progress!

  • Reply Janelle |

    I’m happy to hear that you’re going to pay off your father first. Way to go.

    I also think that this debt will go away a lot quicker than you can imagine. Yes, you did worst case scenerio, and I understand way. I tend to be the opposite, best case scenerio which has bit me back many times! In any case, keep up the good work and cut, cut, cut! You’ll get there.

  • Reply Angie |

    It’s great you have a plan. It will be great to pay off all those annoying debts first. We are really trying to stick to an actual budget this month and you are totally motivating me!

  • Reply Melinda |

    I love this blog. It’s quite inspiring. I commend you on taking the initiative to get out of DEBT.

    My husband and I have done the same. Our debt numbers are something very similiar to yours and we have put a plan of action together as well.

    I will continue reading and keep up the great work!

  • Reply Claire |

    Our starting numbers already reflected my bonus for this year–sad, I know. On the upside-thank you for noticing the use of “We” instead of “I.” I had not noticed and as I said in tonight’s post I sort of just let it flow when I type. That’s a very good sign b/c if I am typing “we” more it means that is what my brain is starting to say!

  • Reply kim |

    Hey, you have a plan, that’s a great thing! The worst case scenario planning is the best. As has been discussed, progress is part psychological. Thus any extra payments will be a cause to celebrate and motivation to continue.

So, what do you think ?