Fine tuning

I think my initial proposal was a good one, and it lays some pretty good groundwork for getting my debt paid down smoothly and quickly.  I was thinking about the most economical way of paying down my debt would need a bit more fine tweaking.

My largest concern is the high interest rate on my credit card, I will need to verify the % APR, but my card was one of the thousands that the credit card company sent out a letter saying they were about to raise rates, and I could cancel the card altogether if I didn't agree to the terms.  No one to blame here but myself for the account balance, but I felt a bit dirty when that happened, and now I am paying somewhere in the ballpark of 20%.

Now I don't have a bond calculator to make this into an exact calculation of interest paid, but a $7,500 account balance at that rate is about $125 per month in interest alone.  That's actually more than my car insurance and my cell phone bill together.

What I will do to change my strategy is to pay off my small 401k loan first, which could be done in about 2 months at the rate of savings I am shooting for.  Then I would look to take out a bridge 401k loan (I can have a max of 2 out at a time) to pay off my credit card completely.  This way I would no longer carry a credit card balance in about 2 months time, I would then be set to handle my accounting by funneling all expenses through the credit card asap, and lastly save myself some cash in interest.  However the downside is I would significantly reduce my 401k balance for the time being. While I do not see much upside to the market in the next few months and if it does drop, I can average back in at a lower price in my 401k...but a big missed opportunity if the market does continue to climb.

This move should save me a few hundred dollars in credit card interest, and also convert all the debt into very low interest loans, setting me up for an easier payoff time.

Plan of attack

My official start date for tracking my progress will be on May 1st.  For personal financial reasons, I have 1 more paycheck essentially going out the door this week, then I will be able to start taking real bites out of my liabilities.  I'm looking forward to that!   In the meanwhile I am challenged to put a plan of attack into place, and be able to hold myself accountable to that plan.  First things first, lets take a look the numbers we are up against (in order of priority):

Liabilities: $43,100

1. Credit card:  $7500
2. 401k Loan A:  $1960
3. 401k Loan B:  $6330
4. Student Loans:  $27,300

I want to start my focus on the worst of the three, the high interest card...while I can't justify a lot of balance on the credit card, I definitely remember a ski trip to Colorado that accounts for about $1500 of that which I certainly have no regrets for, that trip was unreal!    Other than that, no good excuse really - it just happened, and I need to make sure to be on top of it this time.

The 401k loans took second priority because its interest I am paying back to myself.  I wanted to put the smaller balance ahead of the larger loan to get the sense I am knocking the debt out sooner, another check mark to track.  I figured due to the size of the student loans (lengthening the payoff time), and that there is always the off chance of a default (I don't plan on a possibility of losing my job, but no one does) .  I would also like to get more back into my retirement account anyways.  It would be like a reward to get to this level, getting to contribute more.

Lastly I want to take care of my largest burden, my student loans.  The tax advantages for the interest and its sheer size make me place this third.  This list however also makes up a pretty good debt snowball approach to paying off this debt.  The idea being to start with your smallest balance loan, pay that back with as much as your budget will allow, then apply that payment to the next loan.  After a while you can make payments of much larger chunks of the account rather than the minimums.

I made a quick chart to show what my debt "curve" would look like if, on top of minimums, I committed an additional 500$:

Based on that quick analysis, it would take me 36 months to become debt free...damn that seems like a long time.  The one big difference is that I am in a position to pay this debt down, in a big way.  My living expenses are minimal for now, and I can redirect what those funds would have been into my debt.  I want to be done and done with this much faster than that.  For the time being, I am going to commit myself to try and make it 1k each month over my minimums - that would blow this out of the water in 1.5 years.  I task myself to the 1k, however I still want to contribute more if possible, anything I can really.

As part of my strategy to paying my credit card down, I have now deferred all transactions onto my credit card...everything, from bills to everyday expenses.  I know this will initially make my card balance fluctuate, and add all new velocity to the money, but this will allow me to retain the rewards points that my credit card offers (I'll take a $25 gift card to amazon for 2 months of normal every day costs, its like a reward for paying your bills for a few months).  Ultimately when the credit card balance is down to 0, I would like to continue to manage my expenses in entirely the same way, of course no longer carrying a balance.  However that is still a long ways away!

I will be fighting an uphill battle for quite some time, but the end of the race has been drawn, and now I am at starting gate.  

Here's to the challenge, an additional $1,000.00 per month towards debt.

Since I've been away...

One of my passions besides stock trading has always been the outdoors, whether its camping, canoeing, whitewater kayaking, or hiking, I love it all.  Lately I have been getting the chance to hike a lot more lately, which its great for a ton of reasons - keeps me in shape for one, its absolutely the best way to spend a weekend day and you get some incredible satisfaction from completing a good hike (even a bad one!), and it really only costs as much as the gas you pay to get there.

There are 48 mountains in New Hampshire that exceed 4,000 feet, and I have another personal goal to tag them all.  Currently I have checked 18 off my list, with a whole lot more to go!

Here are some of my favorites from this past winter:

Summit of Mt. Lincoln, N.H.

Summit of Mt. Pierce, N.H., looking towards Mt. Eisenhower and Mt. Washington

Me hiking back up after skiing the Great Gulf, Mt. Washington, N.H.

It's very important for me to always keep life in perspective, as much as we can get caught up on the rat race of life, I find a peacefulness and serenity unlike anywhere else in the Whites.  As much as I dedicate myself to my financial goals, when it comes down to it, its just money.  If you haven't had a chance to give hiking a try, it's never too late to start - and only good things can come from it! Happy hiking!

Progress Bar

I was giving some thought as the best way to keep track of my debt, and I was thinking of a few different scenarios.  Whether I monitor it in straight dollars or if I wanted to do it equity curve style, or percentage.  As for ease of use and updatability I landed on tracking my progress by percentage. In thinking of a style I could track it, I figured the best bet was to measure two goals, first my overall long term goal (the big one, being debt free), then my immediate focus as another.

This will hopefully be a helpful way to track my progress during these first months building towards my first debt target.

As for what do I want out of this blog?  Ideally, this could maybe become a bit of a help for anyone else looking to take big steps towards paying off debt.  It took me a long time to really focus on this, the better part of 6 years (I've basically been in debt since owning a credit card.).  If I run into hang-ups, I want to be able to look at how I worked on it, with the blog holding me accountable!

Heeeeeere's Johnny!

After a long delayed personal hiatus (which was financially prefaced by the Audi catching on fire), I would like to start making contributions back to this blog.  From a new perspective. 

 Instead of starting with the original gimmick that I took out a loan from my 401k since I could not come up with the capital through savings (that didn't work out so well because of these unexpected events, and ended up gone), I am going to take drastic action on my outstanding debt, with a short term goal of knocking that out so I can generate some real savings (of course the big goal is funding the trading account.) 

I want to track my progress to really getting back on my feet financially, and this can where I can hold myself accountable.  I still need to come up with some sort of measurement of progress and how that'll be displayed, but I'll come up with something.  For now, I am just excited to start this back up!