Blogging Away Debt Our Journeys to a Debt-Free Life

by Tricia

I’ve been receiving some comments and emails asking where do you start when it comes to reducing debt so I thought I would write a post telling what we did.

First things first, we calculated the total damage. This is a sobering step, but once you finish it you have a better idea of where you stand. We listed all of our debts with columns for creditor, balance due, interest rate and minimum monthly payment. This can be done on the computer or with pencil and paper.

I also took a look at how much we were paying for finance charges. When I first started this blog, we were paying over $400/month in finance charges. That was $400 a month that we could have for other things in life if we didn’t have our credit cards. I used that as motivation.

Once you have all of your debts listed, there are two popular ways to start paying them off.

1.) List your debts from the highest interest rate to the lowest interest rate. Pay the minimum payment for all debts except for the one with the highest interest rate. That debt you pay as much as you can towards. Once that debt with the highest interest rate is paid off, you tackle the next debt in the list.

2.) List your debts from the smallest to the largest balance. Pay the minimum payment for all debts except for the one with the smallest balance. Pay as much as you can to that debt. Once that debt with the lowest balance is paid off, you takle the next debt in the list.

If you choose to go with #1, you will end up paying less interest in the long run because you are getting rid of the balances with the higher rates first. But sometimes the balance with the highest interest may be your largest balance. It may seem like its taking forever to get it paid off.

That’s the appeal of #2. By paying off the smaller balances first, you are seeing progress quickly by paying off entire balances. That can be a big boost to your self-esteem with your debt reduction plan.

For us, we are doing a combination of the two. For the most part, we have been tackling the debt with the highest rates but we have paid off other debts first. I think the main thing is to decide on a plan that works for you and you stick with it. Committment to becoming debt-free is a big factor. Without that, both of the plans above will not work.

I’ll talk about where my motivation comes from in a later post. I started making a list, and I am amazed where all I am pulling inspiration/motivation from.

by Tricia

Anytime that you, my readers, would like to share your debt story, feel free to send it to me in an email and I will post it on here. It’s not easy reading all of the stories, because there are so many people struggling. But with sharing our stories, we know that we are not alone. Debt can affect anyone.

“Eight years ago I had a hundred and fifty thousand bucks. Now I’m 25 thousand in high interest debt and struggling. To pay it off, I’ve allowed myself 10 dollars a day for food and gas, refuse to use the cards, use advances from work to handle emergencies.

What I did wrong: I bought a fixer-upper with a man who turned out to be a total flake. Then we had a baby. To get out of owning real estate with an unstable person, I lost my shirt on the house. With about $10,000 left, I moved back to Seattle with my son, got a job, enrolled him in preschool. The preschool was expensive, but child support helped us get by, until child support ended, and it looked like it would be gone for a very long time. Ran through the savings, started using the credit cards to pick up the slack. Just three more years til kindergarten, then I would stop with the credit cards. We were getting by until I was robbed, stalked, had to move to a different, even more expensive preschool, had to change apartments. This might have been manageable except that kindergarten isn’t as cheap as I thought.

So now I’m in debt, living day to day until I pay down this debt, which I calculate to be about a 5-year haul if I suck it in and keep to my $10 per day budget. When the lease on my apartment is over, I’m moving to a cheaper apartment (I moved to a more expensive one when I was running away from the stalker, not thinking straight because of fear.) I might even try living without a car.”

Thank you for sharing your story. I think yours is one that many can relate to…things were going well but then a series of unfortunate events created the spiral downward into debt. Which reminds me. There is a banner on the left hand side of my blog that will take you to Modest Needs. People can go there to apply for help with such expenses and others can go there to donate to help others. I support this organization 100% (take a look at their financials – they are very impressive).