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.