by Hope
I felt so good about my significant debt payment after our No Spend Month but this total debt number is not going down fast enough! But I am fairly confident Collection #1 will be paid off before the end of 2018 – yeah!
(as of 10/14/17) | |||
|---|---|---|---|
| Student Loans | $34,725 | 2.88% | $0 (income based deferment) |
| Car | $5,877 | 7.00% | $400 |
| Credit Card | $3,557 | 17.00% | $60 |
| Collections 3 (Ex-husband) | $1,003 | 6.25% | $246 |
| Collections 2 (Apartment) | $499 | $0 | |
| Total | $45,661 | $706 |
I am working on my new monthly budget now and will publish it later this week.
Next Plan?
I’m also torn as I begin thinking of my next targeted debt; it’s between the credit card and Collection #2 in my mind. But I’m leaning towards Collection #2 since it is such a small amount comparatively and will be a nice ego boost to have all collection accounts cleared up. But the credit card interest is significantly higher. What would you do?
Student Loan Debt
In the same thought, I’m already steering away from Dave Ramsey’s path again, and thinking I need to start paying something every month towards my student loan debt. I know it’s in income based deferment for a few more months, but the interest jump was a couple of hundred dollars. I want to really start seeing that total number drop.
As you can probably hear, I am conflicted. But I’m also not rushing into a decision and weighing all sorts of scenarios. I figure I have until next month to really make a firm plan as I am definitely targeting Collection #1 and getting that gone.
That will free up $246 per month AND be a HUGE weight off my mind as it is the last, very last financial tie to my ex-husband. Now that has been a LONG TIME coming. And I couldn’t be more excited from that point view.
I’m all ears for your recommendations. But know I am committed like never before (and actually making enough money these days to follow through with my commitment!) Debt free here I come!!!
Hope is a creative, solutions-focused business manager helping clients grow their business and work more efficiently by leveraging expertise in project management, digital marketing, & tech solutions. She’s recently become an empty nester as her 5 foster/adoptive kids have spread their wings. She lives with her 3 dogs in a small town in NE Georgia and prefers the mountains to the beaches any day. She struggles with the travel bug and is doing her best to help each of her kids as their finish schooling and become independent (but it’s hard!) She has run her own consulting company for almost twenty years! Hope began sharing her journey with the BAD community in the Spring of 2015 and feels like she has finally in a place to really focus on making wise financial decisions.
Collection #1 isn’t listed. Is that the same as the tax debt? Also, the Self Lender dropped off the chart. I know it’s paid, but you should keep listed even at $0 for consistency.
I vote for start paying enough on your student loans to cover the interest, at a minimum.
It would be a nice small win for you to get collections 2 gone, then you can snowball to collections 3 and your credit card. Since you’re asking for advice, I think if you try and spread extra payments over too many accounts you won’t make the immediate headway you would by focusing on just 1 at a time and then snowballing. Take the deferment from the student loans as time to clean the rest of this up and then you can focus on those next! Also, with your income rising your expenses will rise as well if you’re no longer eligible for certain programs so make sure you’re factoring that in your budgets.
I agree with the commenter above! I would focus on collection 2, then 3 since they’re so low. Then I would prioritize the credit card debt – the interest is so high that you want get anywhere paying minimums. I wouldn’t consider paying towards the student loan until these three were knocked out.
I don’t see “Collections 1” listed on the table but you reference several times in your post.
Also, the minimum payment on the car loan is $320. Showing the $400 you prefer to pay there is deceptive and foolish IMO. That $80 would be so much better served on debts that have higher interest rates and/or the Collections debt that still ties you to your ex husband. Those need to be paid first.
I have a different opinion than others. Yes, 2.88 is a low rate. However, with almost $35,000 in debt you are accruing almost $85 in interest per month or $1000 per year. If you defer in December, January and February you should be prepared to see that number come real close to $35,000. Instead I would start making a minimum payment of $100. To put it in perspective, 17% is a horrible interest rate. However, with a balance of around $3500 you are looking at around $600 a year in interest or $50 a month. I also suggest that in January you challenge yourself to get the credit card balance under $3000. Hopefully you have figured out Christmas. The most wonderful time of the year has been known to d erail people particularly if they have no plan. As far as collections go it isn’t accruing interest so it would not be as high a priority as paying down the card for me. However, I do get the psychological satisfaction of knocking it off the payoff chart, something the card may not ever have happen since you use it as a revolving line of credit. Additionally if I were able to early next year I would bump my car payments to $550, that way I could see my car decrease by $1000 every 2 months and finish it off by 2019 end of year leaving me with just the credit card and student loan in 2020. Anyway that is what I would plan on doing if I knew that I had around $1000 each month in extra to go towards debt.
I agree with getting rid of the collections debt! What a weight off your shoulders :).
Get rid of the collections debt – then laser focus on credit card – then student loans – you are on a great path!!!!
Whatever you do, stop dithering! You don’t need a new plan every month. These are smallish (except for the student loan) debts and you should just pay them off smallest to largest. A while ago I was suggesting paying the interest on the student loan but at this point it’s negligible — it’ll be out of deferment in a few months anyway.
Dec/January: both collections debts
February/March: as much credit card debt as humanly possible
April forward: minimums on student loan and car, anything additional to credit card
Once credit card is gone: extra to car
Once car is paid off: everything to student loan
The non-student loan debts are small and really doable if you can consistently make $1000/month payments. It makes the most sense to get rid of them so you can direct your focus at the student loan.
But even if you make a different decision about allocation, just MAKE THE DECISION and stop worrying at it.
I am in the same boat with the debt thing. Right now I am trying to just get current. That is my goal for right now and then I will start paying down/off my debt starting in the New Year. This is going to be a long month.