Debt Countdown Update

[BigMoneyJim]

As I type this, my credit card countdown image to the left says 11 days. As it turns out, I have managed to overspend my budget lately and will have some debt left over on another card that I may or may not have to carry over until next month. But I'm still going to celebrate the June 15/16/17 (whenever the transfer hits) milestone.

I don't owe as much on my car as I thought, so that will be paid off in July. (My car loan is an interest-free loan from a relative.)

Depending on how well I discipline myself over the next month I should be debt free by all financial measures beginning in August.

It was about 5 years ago when I realized I really wanted to be debt free. I didn't have a solid plan in the early days, and the plan went to hell anyway 3 to 4 years ago when I was off work, failed to cut spending and then took out cash advances on the credit cards. I wanted to get back on a 5-year debt payoff plan, but I didn't think it was possible. I got determined, though, and managed to do it in 3 years!!

I've always been more of a spur-of-the-moment guy and not a long term planner. This is my first medium- or long-term plan to bear fruit. I just want to say to others who are in debt that it is possible to get out...just keep paying it down as fast as you can. I downgraded my vehicle and altered my spending habits to make the biggest differences in my budget. Consolidating my credit on a relative's low interest credit card helped, and having the interest-free car loan from a relative helped, but without those I still could've done it in a few months' more time.

Back in February I posted some ideas I had for my post-debt budget. My plans have changed a bit since then; some due to feedback from this board and some due to my reconsideration.

First, I'm going to max out my 401(k), and I'll be able to hit the $13000+ limit in 2005. My original plans for the after-tax money involved a lot of emergency funds. But now I'm going to allow myself to go spend crazy (without building debt) for the rest of 2004 to really enjoy myself after restraining myself for years. After 2004 I will try to find my personal balance between saving the extra after-tax money and spending it on travel; I know I will save some of it, but I'm not sure I will save as much as I originally planned; for brevity I'll explain by echoing John Galt's saying that tomorrow is promised to no one. My emergency plan will be a couple or few thousand in savings followed by credit cards backed by early IRA withdrawals if necessary. But at my current expense levels I don't forsee a situation where I will be short of income long enough to need to tap the IRA. (And I intend to keep my nondiscretionary spending levels low enough to support with a low-paying job.)

I'm not sure yet how I'll invest my non-emergency after-tax savings. It will depend largely on when I think I may need it for a car or home down payment. Those questions are unanswerable right now.

 

[JWR1945]

Congratulations on making an amazing amount of progress.

Shortly, you will have to call Dave Ramsey to scream I'm debt free! over the air.

Have fun.

John R.

 

[Cut-Throat]

Shortly, you will have to call Dave Ramsey to scream I'm debt free! over the air.

And then I'd pretty much stop listening to him! He has people calculate a 12% SWR based on his 12% prediction of stock market returns for the future.

That's of course if you invest 100% in the Market and Inflation stays about 1 or 2%.

He's better than Rush Limbaugh, but not by much!

 

[Skylark]

I'm getting pretty close to debt free too, less than $1000 to go (I think) to credit card balance payoff. August is my estimated payoff month too.

It seems like when you pay off a credit card they stop sending you statements, so you don't really know if it is paid off or not.

I'm almost at 401k max (actually 457) and put a couple hundred a month away in another unrestricted Vanguard account. My next raise in June will go to max the 457, and side income of about $500 will go 50% to mortgage principal and 50% to my Vanguard account. I haven't chosen which Vanguard fund to put it in though, was thinking about VISGX.

However I have had some car problems and it is looking like I may need to dump the old car. My options are to sell it and not buy a new one for a while (we do have another car in the family), let it sit in the driveway all summer and not use it except for local trips, or to get it fixed (wobbly steering at 55mph, sounds like big bucks to me). It has a few good road trips in it but it won't be long till it falls apart like the Bluesmobile at the City of Chicago building. Also I am looking at switching jobs and relocating somewhere, maybe northern plains/mountain states. Or northern Michigan. Places where you need a reliable car for the long run.

Procrastination may be the best strategy for both car and job. Meanwhile putting the wood stake in the heart of credit card debt.

Question:

Is it better to cancel credit cards that you have paid off and maybe keep one for emergencies, or to keep the old ones? I have a bad habit of using credit cards, I would like to shred em all.

 

[Nuclear Redneck]

One the wobble of your car, it may as simple as your front tires being out of balance. You may have thrown a wheel weight. Rebalnceing your tires should not be that expensive, probably less than $50.00

 

[cute fuzzy bunny]

Yeah, i'm with nuclear redneck. Wobby steering might cost you a few hundred bucks. Cheaper than your life. If its a bad steering box, bad ball joints, bad wheel bearings, and out of true wheels...different story. But find out.

I used to know a "high tech redneck" a while back...any chance thats the same guy?

Good deal on the nearly debt-freeness BMJ and skylark...I havent owed anyone anything past 30 days for many years now. On one hand its a great feeling. On the other hand, its hard to relate when you hear about most of america having a fat mortgage, a home equity loan thats filled in their risen house equity value, two car loans, 30k in credit card debt, and 10k left over from their last debt consolidation loan....

 

[Nords]

Re:  Cancel those paid-off cards

You can call the credit-card companies, cancel all but two of your cards, and ask for written confirmation of the cancellation. Keep one for whenever you'd use a credit card and lock the second one away (in case the first one is lost/stolen).

Some alarmed credit-card abusers control their urges by putting the card in a frozen bottle of water so that they have time to reconsider their actions while the ice is melting.

The fewer cards on your credit report, the better your FICO score. The presumption is that if you have a bunch of cards you could run them all up to their limits on a spending spree, which is a much bigger debt than you're probably planning to carry, but that's how the score can work against you when you have a bunch of cards.

 

[BigMoneyJim]

Thanks all.

I haven't heard of Dave Ramsey. It could be fun to shout it on air, though.

It seems like when you pay off a credit card they stop sending you statements, so you don't really know if it is paid off or not.

I cut myself short this month and am living off plastic until the next paycheck, so I pulled out a card I haven't used in over 2 years. My last statement (according to the online banking) was in October 2002, but they did send me something in January with a friendly warning that they would cancel the acount if I didn't use the card within 30 days. They obviously lied because I didn't use it until June and it works.

As far as the wobbly car, that could be cheap or expensive...it's hard to tell. Just be sure you trust your mechanic.

My credit card plan is similar to what Nords suggests. My card that I've used and paid off monthly has been capped at $500 to keep me on budget, but I just had the limit raised. I'm going to close out Discover (which I haven't used in over 2 years) and any other store or gas cards that are still lingering after years of nonuse. For my second card I'm not sure yet if I'll use an existing Wells Fargo MasterCard or try to find something more similar to my credit union Visa.

I'm a bit afraid of having so much credit available, but I think I've shown myself I have the discipline to avoid overspending my budget so much as to carry a balance. (That may sound odd since I already have other cards open, but mentally I've only had the $500 limit card available until this month.) My other quandry is my Best Buy card...I used to like the several-months-without-interest plans, but since I'm a procrastinator I'm probably better off cancelling that card, too. Besides, Best Buy is full of tempting stuff for which the money could better be spent on travel.

P.S. It's really exciting to see my countdown make it into the signle digits. And I just did some calculations and may be able to pay off my budget-overrun credit this month after all....that is unless I take this trip I'm considering this month....