99k by 2011

Thank you for the comments on the last couple posts.

We were all set to go forward with our plan, when I noticed something (thank goodness). The offer on the citibank mc had NO CAP on the balance transfer fee. So if we had gone ahead and transfered $15k, the fee would have been $450. NO THANK YOU. We called, and the best they could offer was to credit our account half the fee, after the transfer had gone through. I don’t want to do it at $225, either, so this is a no go. We have already transfered a chunk of our debt to a 0% discover card, and we’re calling that good for now. We may look into this further in the future. So for now, we will continue paying straight onto our last card not at 0%, which is our usaa mc at about ~10%, for 13k (put the bonus money onto it already).

The numbers are looking VERY good for march, I’m happy to say. I am still waiting for our usaa mc statement so I can see the interest charges for it and finalize my spreadsheet for March. I’m so excited that we paid $3,830 toward credit card debt in March - yeah to the hoo to the yeah-hoo-hoo!

You see before you… (well, you’re reading on your screen, at least..) a lady most informed on the calculations of interest. You’d think that this would be easy to find, but Google wanted to point me to lots of calculators that would do it for me (but only based on a year) but nothing that would tell me HOW to figure it out myself.. But I finally found this very easy to read and understand tutorial of sorts. I highly recommend it.

So using my newfound knowledge, I set to work. I decided to run numbers just based on the 16k balance that will be on our citi amex card, which the 0% rate expires in October. The goal is to get it paid off by October. However, the balance won’t be 16k in April, it will be $13,250k, due to a big payment courtesy of my husband’s bonus.

Behold, the “just pay it down already!” scenario A:

So you know where those bigger numbers are coming from, $1300 is going to come from the regular debt snowball.

We will be receiving $1k back from our state taxes, and my husband gets an extra paycheck in april, so April’s numbers are 1300 + 1000+ 1800 = $4100.

In May, we’re expecting the tax stimulus check: 1300 + 1600 = $2900.

The rest of the months are “normal”.

Next, scenario B, let’s call it the, “Stuff it into savings instead” scenario:

Obviously, we will need to pay the minimum on the card, which I am going to say is $250. Now that I think about it, that’s probably high, but oh well. You can see the running balance for the card on the right, in yellow.

On the left in green, you can see the savings account. Each month, the month that would have gone to debt (minus $250), is instead put into savings. The bright green column is the interest earned for that month, with a tally of all the interest earned at the very bottom of that column ($189). The middle column is the running balance, adding the deposit as well as the interest from the previous month.

So when October comes, instead of making a deposit into the savings account, there will instead be a withdrawal of $10,700, and then that money, paired with the same $1050 debt payment we see in scenario A, is enough to pay off the amex balance in it’s entirety.

And the result? Instead of the 2k we started out with, we have $2189 - $189 in interest. Which we could then use to pay off our other debt.

THE RESULTS:
I’m nervous about my numbers. I calculated the interest using this formula:

.035 (our interest rate) x balance x 31/365 (a month’s worth of a year’s interest)

So if you take the initial $2000, it works out like this:

.035 x 2000 x .0849 = 5.94, or as my google doc spreadsheet rounded it off, $6.

If anyone wants to check and/or correct me, feel free (all THREE of my readers, haha!)

If the numbers are somewhat accurate… I am a little surprised. A benefit of almost $200 bucks in only 7 months is nothing to sniff at, in my opinion. This is looking like a decent scenario! Which makes me think I must have screwed something up somewhere! If I am … in the ballpark of accurate, then perhaps we shouldn’t even put the $2.5K from the bonus towards the debt this month - I could stuff it back into savings and transfer over a 16k balance to the 0% card instead of 13ishk and reap even better interest benefits.

This is definitely something to mull over. I’d welcome any thoughts and comments.

Look at me, I’m a blog-posting poster person. Two in one day!

So, when I was persuing the whole “I don’t wanna pay interest!” thing, another idea kind of poked it’s way into my mind that I shoved onto the back burner, at least until all the balance shuffling has stopped. I brought it up my husband, who agreed to do it, and then I immediately changed my mind and said we shouldn’t do it. I am nothing if not fickle. So here I am, writing it all out to you people, because you know, the internet always gives good advice!

RL (who comments here now and then, hi RL!) sent in her debt situation to Free Money Finance, who posted it on the blog and asked his readers for suggestions. There were a lot of suggestions- A LOT! It’s kind of interesting to see how many different possible scenarios there are for a situation! It was one of the many suggestions for her that has been tinkering around in my noggin. (I posted my thoughts over there too, just FYI.)

Here is the specific comment that has been “festering“, but so you don’t have to clicking around, the jist of it is, put the debt snowball into a high interest savings account while only paying the minimums on the (0%) cards. So the cards are staying current, but the balances are not going down drastically. Instead, the money that WOULD be going to the cards is sitting and earning interest month after month, and then whisked out before the 0% rate expires on the card and is used to pay it off.

In theory, it seems like a good plan. If debt A, B & C is at 0% interest, why not take the money you would be paying on them and earn 4% (although our etrade is now down to 3.5%, grr) and then lump sum it at the end of the 0% period?

Now, first off… I have only a very general idea of how savings interest is calculated. I understand the basics of daily compound interest and the whole average daily balance business, but I am not sure if my simple understanding really allows me to work through the numbers in an accurate fashion.

Secondly, the payoff dates we’re talking here is not far away. $16k will be due in Oct, and it’s not like we have 16k just sitting around now, that could earn interest the entire time.

And third, there is the feeling you get when you see that balance go down down down each month. This is outside of the numbers and not really quantifiable, it just feels AWESOME. The equation I would have to work in my head is whether X amount in interest earned is really worth giving up that feeling of watching the debt go down. I am pretty geeky with my spreadsheets and looking to cut out paying interest finance charges and getting the numbers to work in the best possible manner… but I’m not sure I’m geeky enough to give up that “YES!” feeling when I make a payment. Especially if we’re talking piddly numbers here.

But you never know until you work the numbers, so, I’m going to have a go at it, and lordie lordie help me because I know this will probably be screwed up big-time!

Tomorrow: the number crunching results.

JUST THE CREDIT CARDS, PLEASE

At the beginning of February, we had $31,511 in credit card debt.

In February:

we paid $1,267 on our cards,
$139 was charged in finance charges
for a total of $1,084 debt paydown.

Our new credit card debt total is $30,428.

THE ENTIRE PICTURE

We are now at a total of $96.4K.

I posted my January update, but only dealt with the credit cards. We are, of course, making our usual payments to car loan, and home equity loan as well.. so this blog is about the 99k of debt - let’s get a full update on the $99k of debt, shall we?