Debt

Watching it doesn't work. Worrying about it doesn't work. Only paying it off without adding to it works. So, starting a couple days ago I've cut my ties with my credit cards!

It's just too hard to tell that you're debt is growing when you see yourself plunking down $1500 a month towards it -I figured I must be making progress. But since I used it every day to pay for meals out, groceries, gas, etc and after a few trips and big purchases as well, it's really not all that surprising to hear I was in a loosing battle -I should have known better. I blame denial -I don't think I really wanted to know. I worried about it enough as it was.

So, I'm on a fairly easy debt-diet. No more credit cards. Everything will be paid for in cash or with my debit card. I'm now on an allowance. When I run out of money, I get to wait until I get paid again. Remember that from college -yeah, I survived it then and surely I can do it again. I should be paid off in about 11 months without doing anything else, but I'm looking for good balance transfer incentives to use with my one $0-balance credit card to see if I can save a bit of money on interest and maybe even get it paid off a bit sooner.

Details on how I figured out what to do:

I took my monthly salary and subtracted the total amount of my bills per month. This tells me how much I really have to spend each month.

Then I took my last year's worth of credit card statements (from Discover's website since I've used that one card to pay for almost everything I've bought in the last year) and I added up the "New Purchases" total from each and divided by 12 to get my average monthly expenses for food, entertainment, gifts -basically everything I buy.

I subtracted my average monthly purchases from the amount of money I have after bills each month and found out that I have a surplus of only $483.42 a month. So, without changing my spending habits at all, I'm still ahead of the game. But...

I then used an online credit card calculator (Google "credit card calculator" -without the quotes) to figure out that at my current interest rates it'd take about 2 years to pay my bills off at that rate and I'd spend about $1772 in interest in the process. Not good.

So, I went back to those credit card statements and took out the "big months" -turns out that most months I got away with spending about half of what my average ended up being. I used that number instead (which should be completely doable) and found that if I curb the big purchases and trips I could have more like $983.42 in surplus, which means I could be paid off in 11 months instead. Much better!

So, that's the goal. We'll see how I do. I've set up an automatic payment to both cards for just after the first of the month since I don't have any bills in that half of the month. This way, my payments are just like another set bill and happen by default. Less effort = less chance of me fudging the numbers to get a new turbo or something. In other words, this makes it harder to cheat than to keep going with my new plan. ;-)