Doing the big thing!
We have been talking about paying off our debt. We calculated the amount owed and stopped using the cards. After years of blindness, we actually made a budget! We started paying the cards off.
The past year has been rough. I have been steadily working, but one year ago, the Dude was still in recovery. He has had a couple of temp jobs since then, but had another surgery in March and everything has been like moving through molasses. Although we have stemmed the tide, we haven’t been gazelle intense in our pay back strategy. In fact, we didn’t even have a strategy.
After one year of this, we have about $2000 less in credit card debt.
That is simply not enough
One crucial missing step in my financial planning (my apologies to Stephen Covey for dropping the ball on this!):
Begin with the end in mind
I didn’t even realize I was missing this step! We were trying to determine which debt repayment method to use. the snowball method has advantages. (Pay off the bills with the smallest balances first) has advantages. When it is paid off, throw that bill’s payment onto the next smallest balance. It is a psychological boost to have bills disappear quicker. However, the avalanche method has positives too. You pay off the card with the highest interest first. When it is paid off, throw that card’s payment onto the account with the next highest interest. If the process is long, this can save hundreds or thousands in interest.
We had been feeling okay with our progress. We were going to start throwing an extra $250 a month at our debt. So we should be able to start snowballing and get this debt paid off in no time, right? According to the calculator I did, at the rate we were paying, it would take us 3 years to pay off this debt and would cost over $6000 in interest!
I want to have credit card debt and the Dude’s student loan paid off, with a sizable down payment for a house in place in 5 years. If it is going to take us 3 years just to knock out credit cards, that isn’t going to cut it.
That afternoon, I thought about the goal so that we could know what the end is. It sounds silly, but we hadn’t actually sat down and said, “We want to pay this debt off in this amount of time, therefore we need to pay this month per month to make it happen.”
6-9 months to pay it off
My ideal goal is to pay off the credit cards in 6 months. However, with our current salaries and obligations, it is not likely to happen. It would mean over $3000 per month just in credit card payments, and we pay another $400 in student loans each month. That was simply too high to contemplate!
I played around with the debt calculator a bit. If we pay about $2300 in credit card payments per month, we can have it paid off in 9 months. That is still a really belt-tightening proposition, but it feels more doable. And we will throw anything we can on it to accelerate that plan. It will not be fun, but it is short term.
The child becomes an adult
Cy has enlisted in the navy. He will go to A-school in Pensacola. The Dude and I will have our 25th anniversary next year. I was looking at cash flowing our trip out to Chicago for his boot camp grad, and then a combo anniversary trip/grad event in Florida later next year. Cy struck me down though, noting that we can’t pay off debt in 9 months AND afford two trips. It is important to him that we attend his boot camp graduation, but he is not attached to the A school one and that trip is further and more expensive. He is right, of course and gave me the wake up call I needed. We will be postponing our tropical anniversary getaway a wee bit longer.
After we get this paid off, we will take a breath (and maybe a short vacation), and start tackling the student loan debt.
I have posted this to hopefully garner some encouragement, but also to demonstrate how easy it is to let goals fall through the cracks. Even though it has been my stated intention throughout this past year to get debt paid off as soon as possible, it took a full year to sit down and actually map out what that looks like! Don’t be like me. Always begin with the end in mind. But if you forget and you are like me, you can always go back to the end.