I’ll throw a quick number at you $32,786.5. Seems like a lot of cash because it it a lot of cash. It’s the amount of cash I owe to institutions. It’s a really big number for someone who has just turned 21. Let me give you a run down of everything that has happened since 2012, when I was 17, to give you a better picture.
I graduated high school a year early and became the first one in my family line to make it to college. This was in my life goals since I was little. There was no way I wouldn’t go to college. I loved school and learning, and since I was homeschooled the last two years of high school (grades 10-11 since I skipped grade 12), I craved the learning structure of a traditional classroom.
So, I chose to go to a vocational school and get an Associate’s degree leaving me with $24,166 in student loans. And, after graduating in 2014 and beginning to pay it off in 2015, I still managed to have $23,145.03 in student loan debt. I paid over $3,000 to it last year and only paid off $1,020.97 of the principal because of stupid interest. But, anyway, next up we have consumer debt.
I started working before I graduated, got my first credit card to build up my credit and was paying it off dutifully every month. I got an A in personal finance and this was my time to shine. I had a $500 credit limit and I kept the balance between 1-10%. My credit score was extremely high. Like, 770, high.
So, it was time to move out of my parents house with my fiance. We both had jobs, kept our spending down and was doing fine. I forget when debt started creeping. I think it started when I started paying student loans and I was making too high of payments that we could handle (I was putting $200 towards student loans every two weeks; I wanted it gone.). Or, maybe it was when I replaced my phone and couldn’t pay it straight off right away.
I think the real culprit was what happen around August. My credit limit was in the $3,000s. I was about to lose my job in August (I didn’t know this), we just had a fun vacation in July that we couldn’t afford, my cat was extremely sick and dying (after many vet visits, medical testing and medication trial and error, he is well and happy. I will never regret spending money to save my baby’s life.), and I somehow ended up with two more credit cards.
So, things happened. I applied for a second card to help my credit further and then two days after being accepted, I applied for a Best Buy credit card, so I could purchase my current laptop. My old one was about 4 years old and I wanted to start my own business soon. So, I needed a new one.
I then lost my job, moved and started paying for a wedding. Needless to say, we are currently maxed out of our credit cards. All together? $5,629.47. Yep! I should’ve failed personal finance. And, next up, we have the wedding!
Besides, the credit card debt, our wedding had one other credit expense: our wedding rings. We didn’t plan on spending more than $500 on these rings, but we fell in love. Mine is even custom designed to match my husband’s. So, $500 went on credit cards and we have $1500 to pay off. Which as of today is $1,240.
And, let’s not forget about Mr. Perfect’s debt. All he has is some student loans. That’s it. Although, technically we helped me get into debt and now that we’re married, everything is both of ours. So, the final numbers as of February, 2016:
All My Debt And My Plan To Demolish It
My Student Loans: $23,145.03
Brandon’s Student Loans: $2,772
Credit Cards: $5,629.47
Wedding Rings: $1,240
Total Debt: $32,786.5
I want to bring down my credit card debt first while continuing to pay more than the minimum on my student loans. I now pay $200 a month on student loans when the minimum payment is $124. I want to start with credit card debt because it’s harming my credit score; something I used to cherish.
It’s income tax season and my and my husband’s whole tax returns will go into paying down the credit cards. According to online calculators, we should get back enough to almost wipe them out. Not bad for the start of this journey. The trick will be keeping the balances low. We would have to use them until we’re completely on our feet.
After nearly wiping the credit cards, I want to tackle the wedding rings. We have interest free payments for now. But, if we don’t pay it off before October 2016, then the rings will start accruing interest. I hate interest! So, the rings is goal number two while also paying $200 a month on student loans and throwing money at the credit cards as we continue to use them.
For the record: Many bloggers who are on their own debt journeys, completely stop using their credit cards when they become debt free or get their limits lowered. This does more harm than good to your credit score. You have to have a balance between 1%-10% of your overall credit limit to keep a good score. Also, the more free credit you have, the better.
I’m planning on spending around $500 a month towards debt. $200 for student loans, $100 for credit cards and $200 for rings. Any extra income that we bring in, will go towards the main goal: rings.
After paying off the rings, which I’m assuming will be in September after throwing $200 a month towards it, we’ll start working towards Brandon’s loans. The $200 a month will be transferred from the ring fund to his student loan fund.
I know I’m getting ahead of myself, and many unexpected things will happen, but I just wanted to write down a basic plan. I want to breathe. I’ll update throughout the journey.
How is your debt? Are you debt free?