Welcome to the forums Margerie! Living debt free is fantastic and you're on the right path! I'm pumped for you! This is the most exciting time in your journey to financial freedom as you can really tackle this debt (especially the Credit Cards) quickly.
I am super excited about our momentum and want to post updates on a semi-regular basis...
$1k in emergency fund
$25k in retirement funds
We have a small windfall of $1800 coming our way. We will apply it all to the credit cards.
So here’s what your debt looks like.
CC 1 $1200 @ 22%
CC 2 $1900 @ 15%
CC 3 $4600 @ 15%
HM $199,000 @ 4.75%.
SL $600 @ 2.5%
A) I would not apply the $1800 to all the credit cards. I would recommend paying off the CC1 $1200 first since it has the highest interest with the $1800.
B) Then while I know this may not be popular with everyone on GRS (as it has the lowest interest rate) I’d knock out the SL $600 with the remainder from the $1800 as well. That way you reduce your debts from 5 to 3 accounts. If I reduced my debt accounts by 2/5's in such a short time I'd be even more pumped.
C) Personally I’d feel uncomfortable with $1k in my E-Fund. I’d build my E-fund to say $3-5k. Emergencies can and always will happen - house appliances, new roof, new central AC unit, car repairs, medical expenses, ect. Better to be prepared than risk putting the cost on a card at 15% interest.
D) Then I’d tackle CC2 followed by CC3. After that I’d tackle the HM loan.
Our income is variable at the moment. My husband is a contractor and makes $25 an hour after taxes and health insurance but we have vacation coming up (spending time with my parents) and while he'll work part time during the vacation, we'll have a hit of about $1000. He's also had his overtime cut so his paychecks have been reduced by $500. Also, we're paid every other week so we have a paycheck each Friday, so some months we have 5 paychecks and some months we have 4.
So, in general, in a four paycheck month, we bring home a combined $6200. We'll have to cut back on spending and saving in October but I've run the numbers and I think we'll be okay.
With $6200 a month on average you should be able to hack away at this debt rather intentionally and quickly. That’s good. What are your total monthly expenses? Where can you reduce some of your expenses while getting out of debt – especially the CC? Consider this thread
when cutting your expenses.
Might also want to start a separate savings account and deposit $50-100 a month into it for next year’s vacation?
I'm really excited because this is the first time a book like this has really clicked with me, and I can visualize this working for us. Thanks for reading!
This is awesome! Keep up the good work! Keep moving forward!