This post is part of a 13 money resolutions for 2013 series. You can check the first post for an updated list of the following ones.
the burden of carrying debt.
One of my money goals for 2013 is to pay over $25K of debt on top of my regular mortgage and loans payments. Look at the awesome goals tracker in the sidebar! I have already paid $9500 thanks to finalizing the sale of my Paris flat on December 28th :).
In total, I need to come up with about $3000 every month to complete that goal ($2000 to make my $25K goal plus $800+ in usual repayments and paying my balance in full each month on CCs). I am convinced that it doesn’t make a lot of financial sense since there is a 0% balance out there and my weighted average interest rate is under 5%, less than what my money brings in investments and passive income, but I decided I don’t like that debt anymore, and I want to crush it in 2013.
I know many of you aren’t as lucky as to decide whether they want to take it slow on repayments or crush it, because
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there doesn’t seem to be enough money to pay more
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interest rates are crushing them and the balance isn’t melting as fast as expected.
It is time to take action. By doing the same things over and over again, you can’t expect your world to change. If you have followed the first steps of the 13 money resolutions for 2013, you have already made a lot of room in your budget. You have eliminated waste, monthly expenses you don’t need or use, and started doing a lot of things yourself, while making sure you get the best deal on anything you still are paying for. That should give you quite a bit of extra cash. And that cash isn’t giving you any interest by standing on your current account, so throw it at your debt!
Every time you lower a monthly bill, keep pretending the amount is still the same, and throw the difference at your highest balance credit card. Found an extra gig? Pretend you are still making the same amount and put everything towards debt before you start getting used to the money. Did the oil change on your car? Put the amount the workshop would have charged you towards debt.
Before you know it, you will be crushing your money goals for the new year. The key is to not keep the money, or it will burn a whole through your pocket before you know it. You were used to paying $50 for your data plan and have managed to bring it down to $40? Set up and automatic debt payment of $10 on the same day your $40 goes out. Refinanced your mortgage? Keep the old payments and shake some years off. Fortunately, I don’t have any early repayment penalties on any of my loans, so I can make those kinds of small payments. If not, you can set up a dedicated savings account and make monthly or quarterly payments with the balance.
There are many ways to attack your debt
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Repay the smallest balance first, then gain momentum and allocate what you used to pay on the second smallest balance.
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Repay the highest interest first then work your way down.
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Add a small amount, like $5 or $10 every month to the usual payment.
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Make bi-monthly payments on your mortgage.
All of the above are powerful strategies to accelerate your debt repayments and meet your 2013 money goals faster.
And what better way to start than getting a free $1,000? Click here for the details of this awesome giveaway!
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What strategies do you use to fasten debt repayment?
Photo courtesy of freedigitalphotos.net
I don’t really plan on attacking my debt, but that’s because it’s a mortgage with a rock-bottom rate as well as student loans that are relatively low. I plan on putting more in my emergency and car fund before attacking debt.
good strategy too, nice to have options!
These are all great strategies for tackling debt. I’m planning on eradicating my student loan debt for good in 2013, (a little over $11,000 to go). I’ve been throwing every little bit of extra cash I have towards my debt, and it’s really made all the difference, I managed to pay of $16k last year because of it.
That is amazing progress, no doubt you’ll reach your goal this year!
“By doing the same things over and over again, you can’t expect your world to change.” I could not agree more Pauline! It’s about making those changes so you can turn your life around and be on a better path financially. Thankfully the only debt we have is our mortgage. We do try and make extra payments on it, but we’re not focusing on it too much.
I am hoping to get there this year! One mortgage, period.
Pauline, you are SO on track here! Most all of us can find little changes to make in our spending that will add up to big contributions to debt payoff.
We’ll be taking all of our “leftover” money in each of our budget areas, from coming in under budget, and putting it toward paying our debt down. We’re also selling all of that stuff we never use anymore!
Thanks Laurie, good luck with your repayment acceleration!
I can finally say that I happy to have all of my debt left far behind. That was definitely an experience (it is still difficult to understand whether it was a good or a bad one). It’s funny, but it took me only a year to get into debt and almost 4 years to get out of it. That’s the price I had to pay for being careless about my student loan, loans and of course credit cards. I wish you good luck and your plan is going to work for you!
The only debt we have is my student loan. Since the rate is only 2.3% and I can write off the interest on my federal taxes, I don’t see the point in repaying it any faster. Much like you, I can (and do) make more money using the extra freed up capital. Of course I am getting to the point where I just want to be done with it, so I may try to kill it off faster. Good Luck with your plan to crush your debt!
Thanks Brian! I am torn too. My rates are low, but the debt is hanging over my head and I want out. Paying off almost $10K this month was great although having to come up with the money to pay monthly also pushes me to earn more. Oh well, it’s done now, and I still need to push the extra income to repay $15K more!
I had to crush my debt earlier in 2012 in order to finish paying off my credit cards, but now that I only have a mortgage, I won’t be doing so. Now I plan on crushing my emergency savings by adding a lot into it along with my retirement funds.
Are you starting a college fund?
I actually just set up a 529 for my son last night. That is now also on my list!
All set then!
We are throwing extra money at the CC debt every month. Some months, we can afford more, some months, not so much. But every little bit helps get me to my goal of paying it off.
Absolutely, no amount is too small to make a long term difference!
Nice Pauline, go balls to the wall!
My goal is to take on some freelancing gigs (1 may be soon:D) and use that as debt repayment as well. If you can’t cut your spending, earn more money!
You are one step ahead Joe, that is resolution #7! 🙂
You’re planning on paying down $25k in debt? That is awesome! We are all about crushing debt as well. It is our goal to knock out $17k in 2013.
$25 in extra payments, yes, plus about $10K normal payments. I just sold my flat so I was able to make $9500 payment this month, and am hoping to earn extra income to make the goal! Good luck to you!
One thing that I do is round all of my payments up. My medical loan requires a $48 payment. I pay $50. The student loan is $189 and I am paying $200. Meanwhile, I’m snowballing my payments. But that $13, I would probably never have thought to have used otherwise.
That is a great idea. I saw debit cards that round up your payments and put the extra on a savings account too.
You are doing a great job with this series to help people pay off their debt one step at a time. Good luck on accomplishing the same goals for yourself! 🙂
Thank you Sicorra!
I try to look at the bigger picture and plan ahead and set goals to get there… Right now I am excited about buying a new property in about 6 years… it is motivation for me to ‘CRUSH’ our mortgage this year!! 🙂
Good luck!
One easy way is to round your bills up to the nearest $10, $50 or $100. That cuts into the interest each month and you barely feel it in your budget.
I just paid off my high interest credit card so I have about 1200 left on a zero interest credit card. Hoping to have it paid for by the time there is an interest rate. Gong to be tough though!
Good luck, tough is not impossible!
Why does it make me happier to kill, crush, and, crucify debt instead of just paying it off? I am stockpiling money right now to crush the student loans. I don’t know why I’m doing that instead of just paying monthly, but putting a lump some toward the balance seems to make me feel better right now.
It feels so much better to throw a big chunk at once!
When I was in the throes of debt payoff I slashed the budget and redirected the savings to debt like you wrote in your post, I created additional sources of income and also re-routed my pay raises, I sold many things that I didn’t need. In short I did whatever I thought was needed in order to achieve that goal of no debt. I know you’ll get a lot of debt paid off this year as you’re a very determined woman!
I’m gonna crush this debt hard!! Looks like you were very motivated too. I still hesitate because the extra money would be a nice cushion with all the expenses I have here for house improvements but I think putting it all towards debt will only motivate me to make more money.
I just received a promotion with a nice pay increase. I intend to keep my budget the same and use the increase take home to crush my debt. Also, I want to consolidate my CC debt at a much lower rate. These two things should really help me get rid of my current debt.
Congrats on the promotion Justin! You should crush your debt in no time thanks to that.
Love this post! I had to link it from my site. Do it! We are all rooting for you, Pauline!
Thanks Tony!
2012 was a big year for us debt-wise – we paid off our last car loan and the rest of my student loans. We only have our mortgage left, and will be selling this house in the next 12 months (with any luck!) to move back to my hometown. We’ll be debt free – at least for a while, until we buy our “forever” house with a large down payment!
That is awesome Elizabeth, I hope your sale goes smoothly!
Your words remind me of a quote that I read that changed my life quite a few years ago, “If you always do what you’ve always done, you’ll always get what you’ve always gotten.”
Best of luck with killing that debt! You’re off to a great start!
Thank you! That quote is true but unfortunately we try to go to what we know and fear the unknown, the testing, the potential failure..
Since I already have an allowance and no frivolous spending, including having anyone do something I could do, I had to really dig deep to find way to save money. I am hell-bent on finishing my debt off by the end of April, so I have a no-spending rule (except for basic every day needs such as eggs, yogurt, etc.), eat my way through my pantry and freezer in order to spend less on groceries, then only refill with nutritious and less expensive choices. I am seriously debating cutting a class or two off of my schedule in order to pull this off since it will only be for a semester, but not sure if I could live with myself if I did that. Other than no spending and cutting down on school, I will have to find additional income in order to do anything else. Wish me luck because I already applied to a few. 🙂
Oh yes, good luck!! I wouldn’t cut on the classes, your time is more precious and you would make more once you finish anyway.
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