My Credit Card Debt is Almost Gone

Maybe this post is a bit premature. After all, I still owe $870 before my credit cards are paid off. But if I keep going at this rate, they’ll be paid off in November - hopefully sooner once I start my second job. I can’t believe I’m even thinking about a day when I won’t have credit card debt! Not because of a consolidation loan (I’ve done that a few times), not because of bankruptcy (did that too), but because I have concentrated on paying off this debt all on my own.

Until last year, I made minimum payments on my credit cards every month. Oh, and I kept using them too. I would check my available credit online, and instead of being excited that the balances were dropping, I got excited because I could spend 60 bucks on junk. It was pathetic.

The change of heart came when I met with my divorce attorney in September 2009. We were dividing up the list of debts for the divorce petition, and she casually stated, “You know, your life would be so much easier if you weren’t the one with all the credit cards.” It was like being slapped. I thought, do I really want to be known as “the one with all the credit cards?” I wasn’t fully aware of the financial changes I needed to make at that time, but I did make a decision to get rid of the credit card debt.

I started paying extra toward all my cards. After awhile, I decided to focus on one at a time, and I threw every extra dollar I could find at my debt. I even used my entire 2010 tax return to pay off cards, despite really really wanting to buy stuff for my house. When I filed for divorce, I owed $6200 to Merrick, Orchard Bank, Dell Financial Services, and Target. Today, just 19 months later, I’m down to $870. It’s awesome!!!

So now my mind travels to the future and what I’m going to do with the $130 I’m now paying toward credit card debt. There are a lot of choices. I already pay $60 extra toward my car payment each month, but I could round that up to $200 extra and pay my car off 1.5 years early. Alternately, I could increase my Roth IRA contribution to $330 and come closer to maxing it out for the year. I could put that money in my emergency fund and reach my $5000 goal faster. I could also start saving for a vacation in 2012, which is waaaayy overdue. (Last vacation was Orlando in 2003, with my parents footing the bill for themselves, me, the ex, my son, and my sister and her husband.)

What I won’t do is leave the money sitting around to be wasted. I’ve already learned the dangers of leaving even $20 unaccounted for. I feel a compulsive need to plan ahead and make the best possible decision with my money.

So I leave it up to you - what should I do once my credit cards are paid off? Answer my exciting turquoise poll below!

What should I do with the $130/month I’ve been paying toward CC debt once the cards are paid off?
Keep the snowball rolling - put it toward the car payment!
Max out your Roth IRA
Contribute it to the emergency fund
Save for a 2012 vacation
None of these! I’ll tell you in the comments.

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  • Frugal Forties

    Oh weird. My comment seemed to be on the poll and not the post. Just to recap … I say IRA. I'm in my 40s and neglected my retirement when I was younger which is now pretty darned scary. The little bit you'll save in interest by accelerating your car payments is nothing compared to what you'll gain by maxing out your IRA first … both in tax deductions and in long term gains.

  • Debt Eye

    "I would check my available credit online, and instead of being excited that the balances were dropping, I got excited because I could spend 60 bucks on junk. It was pathetic."

    I know exactly what you mean!

  • Alltid Blakk

    How about spilt it in three. The distant future, the rainy day and a sunny one (Retirement, EF and vacation) You need them all. If you want to throw it all in one I would def go EF. when you're below your limit, it's because you borrowed from yourself.

  • wheresmomsmoney

    Congratulations! What a wonderful feeling to know that you did this all on your own. I can't wait until I'm in the same place. And I have to say, I totally relate to the same quote that Debt Eye pulled out - that was so me not so long ago!

  • Ashley @ Money Talks

    Congrats!!! You know… at least you have options of what you want to do with your money. None of the choices you listed were bad. All good ideas. I chose e-fund by the way.

  • Evan @ My Journey to Millions

    Congrats thats so cool! Question do you have any idea how your ex is doing with his half of the debt?

  • Andrea

    Yes, we have a son together, so we still have contact. He lost his house to foreclosure after failing to make a single payment after I moved out. His credit cards have been charged off. From what I can tell, he is still spending like crazy and complains of being broke when it's time to put money on my son's lunch account (we'rw talking $25 a month here). I don't want to waste the energy to be angry, so I just try to be thankful that it's not my problem now!

  • Julie @ The Family CEO

    First of all, congratulations on your accomplishment and your positive attitude! My vote would be to split your old cc payments between the Roth and the emergency fund.

    The emergency fund will keep you from having to turn to debt in the future, so it's important. But I agree with Frugal Forties, that it's important to start saving for retirement earlier rather than later.

    Good job!