I've read over a bit of your blog, and I enjoyed it. I'm on a mission to pay off HUGE debt. I need some help (support – not asking for money). I need to be accountable to someone for my daily spending to keep me on track so to speak. This is my situation:Debt Fee, I’m glad you’ve enjoyed the blog. I’m happy to give you some thoughts. Maybe other readers can offer suggestions, too.
Credit card #1 Balance $6500, Int. Rate 19.99%
Credit card #2 Balance $11,800, Int. Rate 19.99%
Credit card #3 Balance $3600, Int. Rate 28.99%
Credit Line Balance $14,000, Int. Rate prime plus 5% (currently 8%)
Car Loan balance $17,000, $177 biweekly
Mortgage balance $114,000, $163.08 weekly
Child support $500 per month (this is likely to change end of this year)
Full time job $2926 (net) per month
Part time job $1700 (net) per month
Do you have any suggestions? I would like to have this paid off in 2.5 years from now.
Any advice you can pass on would be greatly appreciated.
To start with, the only way I know of to become debt-free is to spend less than you make. The gap needs to cover all the interest plus some principal to make any headway. We need to crunch some numbers to where you are.
I need to make a few assumptions. Let’s assume your line of credit and credit card minimum payments are 2%, except for the higher interest rate card which is 3%. That makes the total minimum payments $754 per month. Your mortgage, car loan, and child support average about $1593 per month. This totals $2347 per month.
However, if you just make minimum payments, it will take decades to pay off these loans. If we add in $500 per month in additional principal repayments, you’re up to $2847 per month. This leaves only $1179 per month for food, gas for your car, insurance, and everything else.
This is very tight. You need to look at some changes. Can you expand your mortgage to pay off the high-interest debts? If not, can you expand the line of credit to pay off the credit cards? If you do this, do you have the self-control to not just run up the credit cards again?
Do you really need your car? Cars are not only expensive to buy, but they are also expensive to operate. If you have some equity in your home, you might consider selling it, paying off debts, and renting until you get some savings again. Another possibility is to take on a renter in your home.
I think it would be very difficult for you to maintain your current minimum payments and come up with additional cash to repay some principal each month. You may be forced to make some tough choices.