Recent Divine Discussions

Tuesday, October 28, 2008

On my way to credit card debt freedom!

Finally. CC Debt Zero Day is sooo close I can smell, feel, and taste it!! I'll get straight to the point. I have saved a total of $6734 to date since I started my new job in late July. I plan on using $6K of that to pay off some debt.

I sat down today and did some analysis on my current credit card debt situation and looked for the best way to go about paying them off. I looked at each card's balance, limit, APR, minimum monthly payment, and last month's finance charge. I ran different pay off scenarios focusing on different key points. For example, in one scenario I focused on paying off my credit cards by balances starting with the highest balance first while in another I looked at paying off the cards by APR. Here is what my credit card debt situation looks like:


CARD

BALANCE

LIMIT

APR

MINIMUMS

1

$7165

$8500

19.99%

$200

2

$3976

$6500

16.99%

$93

3

$865

$1100

9.99%

$25

4

$735

$1500

14.99%

$20

5

$172

$1200

9.99%

$10

6

$95

$1150

24.99%

$20




Based on the my analysis, the best way to pay off my cards that will save me the most money is the following:



  1. 1. Pay off credit cards 2, 3, 4, 5, and 6. Total = $5843.


  2. 2. Transfer $6K of credit card 1 to credit card 2 @ BTR of 5.99% until 01/10 and no BT fee.


  3. 3. Transfer remaining $1165 of credit card 1 to credit card 5 @ BTR of 0% until 03/09 and 2% BT fee.

As of 10/28/08

* 4 cards have been paid off
* $250 is freed up from my budget & will be used on debt payoff in Nov.



  1. 4. Apply $1500 payment to CC 2 and minimum payment ($25 est.) to CC 5 in November.

  1. 5. Apply $1500 payment to CC 2 and minimum payment to CC 5 in December.

  1. 6. Apply $980 payment to CC 5 which should pay it off and use portion of tax refund to payoff the remainder of CC 1 ($3000 est.).



CC DEBT FREEDOM BY FEBRUARY 1st 2009!!!!!!!



The only thing that could get in the way of the joyous day is me. I need to keep a firm hand on the purse strings and make sure I do not over spend and keep to my budget. The fact that the next two months are binge shopping months won't help.

*sigh*

Black Fridays!

Cyber Mondays!!

mmmmmmm

Needless to say, a couple of things are in the works to help me keep on the path to ZERO CREDIT CARD DEBT bliss.

I received my 401K distribution from my past employer yesterday. It is $403.20. Because it is under $1000 I will have to cash it out. Minus the 20% tax, I'll receive $322.56 back sometime next week. That money will go into a Holiday fund that I created. My goal for that fund is $350. Once I receive my $10 check from MySurvey.com and $20 from TextLink Ads, I'll add them to the account to reach my goal. Of the $350 budget for the Holidays, $250 will be allotted for Xmas gifts and the remainder will be put towards decorations, food, and other misc Holiday stuff.

I should be receiving a $125 refund sometime this week from an AmEx card I closed (annual fee refund). That will be put aside in my Travel fund and be used for the traveling I will be doing for Thanksgiving and Xmas (primarily for gas).


My birthday is almost around the corner (Jan 3rd). My plans are to relax, relate, and release at a spa in a far away city with some wonderful girlfriends and have a fun filled weekend. I am saving my $50 SpaFinder gift card that I got using my AmEx rewarsd to use then. I don't need anything specific for Xmas so I'll request to get cash instead and put that away to use during my birthday. Aside from that, I'll be working on earning some money from my side hustles and saving up for a fab birthday weekend that will soothe the soul without hurting my pockets.

I updated some goals (top right hand corner of blog).

I currently have $734 in my emergency fund. I will add $266 to it in November to make it an even $1000. After that I will be directing all my excess money to pay off my credit cards. That should be done by the beginning of February 2009. Once that is accomplished I will work on my $5K Home Fund goal which will consist of the remainder or my tax refund, and excess money in February, March, and April . I'll most likely start house hunting in mid March. Once I buy my first house (fingers crossed!!!) and IF plans go my way, I'll use $2000 of the Home Fund to furnish my home and transfer the remaining $3000 to my emergency fund. With $4000 in the emergency fund I will then work on increasing that to $10K by the end of 2009.




I'll give an update on my 2008 Goals and Career Goals next post.


CIAO!!!!



10 comments:

Fabulously Broke said...

I am so happy for you!!! That is such a high to know that it`ll be done so soon!

SavingDiva said...

Good luck!

Are you going to purchase a home without a down payment?

Dimples said...

@ fabulously broke

Thanks chica. I am on a high. Paying off those 4 credit cards gave me a boost and then finally seeing land from being adrift in the sea off debt is definitely a wonderful feeling. I can't wait till I completely wipe out the remaining $7K.

@ saving diva

Thanks. I am going for the First Time Home Buyer program which requires a down payment of 3%. But there is a possibility that I can get the seller to pay that for me. So that is what I am aiming for. If not then the $5K should adequately cover 3% of the max purchase price that I would consider ($150K).

I'll layout a more detailed plan once I get a better understand of the process and get more into it.

frugalchick said...

Wow! I'm impressed with your analysis of your credit card debt pay-off and your goals. Good luck in everything especially the house hunting.

MrsMoney said...

Wow!! That is great! Good luck in paying off your credit cards.

Dimples said...

@ frugalchick

Thanks!!! I am a capricorn. Its in my nature. tee hee


@ mrsmoney

Thanx. I can't wait to get it all over with. It has been a long time coming.

Sistah Ant said...

A few things. First CONGRATULATIONS! I know how good this must feel for you and how hard you had to work to get this close. Great use of alternative income too!

Now. About your 401K you said, "Because it is under $1000 I will have to cash it out." Huh? No you don't, if you don't want to. You can roll it over into an IRA and save that tax hit. I did last year, and all I had in my 401K was $300. Like mine, the money would probably go into a money market fund until it became large enough to buy into mutual funds. There is a tax advantage for contributions. I'm not saying you have to do anything different, but you have a choice if you want one.

Also, now that you're paying these cards off, just remember to be strategic when it comes to closing them. You don't want to close your oldest cards if you want your credit score to be good - it affects the length of your credit history, and the ratio of credit used to credit available, both of which factor in your FICO score. You don't have to use them, but you should keep the accounts open for now. Especially since you plan to buy a home.

One thing I've been learning about mortgages is that the more cash you have for downpayment and closing costs, the better. Get a realistic estimate for how much it would take you to close on a home. I didn't, and when I found out it would cost me about $4 or 5,000 on top of the downpayment, I was surprised and had to revise my savings goal.

Congrats again - I LOVE your hustle!

Dimples said...

@ sistah ant

Thanks girl!

I was told by the HR Director of the last company I worked for that we could not roll over or keep the account where it was if the balance was under $1000. I did research on this and did find something about 401K accounts under $1K being automatically cashed out. The company made a deposit into my 401K account on Monday and Prudential cashed the account out that same day. By the time I called them a check had already been issued and was set to be mailed out to me. They deducted the 20% tax out of it and when I asked about the 10% penalty they said that they didn't know if I would be hit with that at tax time. I am looking into now.

I don't plan on closing any credit cards any time soon. I closed the ones I wanted to this past summer. The had low limits and had been paid off for a while. Next time I close any cards will definitely be AFTER I purchase a home.

I am aiming for a 1st time homebuyer program that is offered here in Florida where only 3% of the purchase price is required as a downpayment. I have more research to do so when I have finished that I will layout a more detailed and ironed out plan.

Thanks for all the advice. Much appreciated. :-D

velvet jones said...

woo hoo! congratulations! getting out from under the credit card debt rock is one of the best feelings in the world! congrats to you, you've worked really hard at this...keep it going. :-D

Dimples said...

@ velvet

:-D I can't wait until February. I may have to through a lil partayyy for myself. LOL!!!!!