My Debt Blog

I don’t think a payday couldn’t come closer than it has this time around. Yesterday our checking account got down to $8.16 and there’s absolutely no emergency fund. Our dog had an unexpected expense that ran $110, but that $140 check from overpaying the escrow saved us from charging it. Logging into my bank this morning and seeing that my paycheck posted was a huge sigh of relief. Granted we have around 1k worth of expenses coming out of this check, at least the money is there to do that now. My wife get’s paid this afternoon with a paper check, so I don’t know what that will be yet. Today is her last day at that job too.

I’m debating what the best route would be as far as paying on debt. My wife has some cards that have extremely bad APRs and the principle balance very rarely goes down. As of today there’s a Capital One balance of $2586, and two store cards EXPRESS $187 and Victoria Secret $300. This all totals a little over 3k and the minimum payments total $98. At roughly an average of 21% interest it would take 45 months to pay this off making a fixed payment of $98 a month. This is where it got me thinking about how to get rid of it other than just chunking away payments.

I have a 0% balance transfer option on another card paid off awhile back (funny how they offer these things AFTER you pay them off) and have been tempted to use 3k of the available credit. This doesn’t pay off the other 3 accounts, it just shifts the debt into a 0% for 12 months with no balance transfer fees. Simple math here now, 3k over 12 months is $250 a month exactly. Take the $98 being normally paid, I’m canceling a gym membership $52, then come up with throwing an extra $100 and I can pull off the $250 a month.

The other debt that is a pain in the backside is my Bank of America account. Awhile back I debated the idea of cashing out an IRA in order to pay that off. I can’t bring myself to make this move because I’m going to lose 25% of it to the government. Is it really worth it to zero that out in order to zero out this other card? The Bank of America card is around 16% interest, so the 25% penalty would still result in a 9% loss or roughly a bit over $400. The reason I bring this up is it frees up an $80 payment that could be contributed towards the plan I’m thinking about. By doing the balance transfer I avoid around $650 in interest, so actual difference is $250 in savings as long as everything goes according to plan.

Nothing has been done yet because I’m still thinking it over. At the same time we also need to get our emergency fund back to the 1k safety net we used to have. I’m just trying to figure out the most efficient way to remove debt from our lives and survive. As the payments go away the stress I am under also eases and that is empowering. On the other hand I have no plan on how to handle the student loan payments that will come in a few months. It’s a sleeping bear right now and we’re watching our steps for when it wakes up.

Comments(6)