Sunday, February 13, 2011

My Debt/Savings Strategy

I got my progress bars posted so I thought this would be a good time to introduce my strategy, or lack thereof.

I'm not patient enough to do things by the book. I want to see improvements in my situation fairly quickly, so I've taken a lot of advice and molded it to fit what I feel I need to do.

First, I have started saving even though I'm not out of debt. I have literally lived paycheck to paycheck for my entire adult life, and I'm tired of it. I don't like running to my parents or a credit card when I get a flat tire. So I've started auto transfers to my savings account, and while it will take forever to get to my goal of $5000, at least I know I'm getting there.

I also opened a Roth IRA because it occurred to me that I'm approaching 30 and have nothing saved toward retirement. The tiny $25 you see now was my initial deposit to open my Roth, and I'll be contributing $100 a paycheck in hopes of reaching $2000 by the end of the year. I changed my W4 at work to eliminate a tax return and gain the extra money to put into my Roth. I don't even notice it's gone! Of course I want to max it out eventually, but I know that won't happen as long as I'm carrying so much debt.

The debts I've listed are in order of attack. All of my credit card debt is high interest, so it didn't make a huge difference which one I worked on first. I chose to pay off Merrick Bank because (1) they closed my account when I stopped using it and (2) it had the highest minimum payment, which freed up more money for my snowball. I paid off Orchard because they are owned by HSBC. I hate HSBC with all my heart. Both of those credit cards were paid off with my tax refund.

I've now switched gears and I'm paying off my Target card. I need the psychological boost of paying something off quickly. I'm paying $105 a month toward Target so it will be gone soon. I'll then pay $130 a month to Dell and get rid of it by the end of the year. The car payment is next - I recently refinanced my horrible 12.7% loan to a slightly better 8.93% (not bad for 4 years out of Chapter 7!). I was able to shorten the length of the loan, and I'll continue paying my old payment amount even though the new one is $60 cheaper.

My system is a little complicated, but I'm happy with it for now. Every week, I'm making a payment or transferring to savings or contributing to my Roth. My finances are constantly active, and as a result, I'm active in keeping track of them.


Hank said...


Congrats on taking the first steps. It sounds like you have a pretty good plan and are well on your way. Have you thought about selling things or taking a second job (not sure if that is fesible)?

Andrea said...

I've been in the process of selling some things, but I didn't leave with much out of my divorce (that's a topic for a whole post of its own!) so there isn't much to sell. A second job is a tough one - I am the director of a residential facility for kids and put in some long hours at times. I've thought about working weekends, though. Thanks for your feedback!

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