Debt Reduction Plan-Sticking to it!

[FreeTime]

I need some advice. Has anyone been able to successfully stick on a debt reduction plan? I calculated that we can have everything including mortgage paid off in 9 years. This seems like a long time, but I know it will go by fast. I left additional money for a car payment, that I know we will have to get, out of the budget. How do I stick to it? Any tips? Has anyone actually done this from start to finish?

BTW-We had our first frugal night out. We went to the zoo to view the Christmas lights (free to get in as we have passes) and they allow carry in food. We had pop corn (in our Osbourne Spectacle of Lights buckets!), hot cocoa, and rice crispie treats. And the best thing-we had a good time on no money!

I am already thinking if we cancel our planned cruise that we will be out of det so much sooner (we will not be charging it!), but I am afraid if we don't reward ourselves and still do things it will never work.

Thanks for any advice that you can give!

 

[staci]

Well, we have only been married 3 years, but we do the following that work well for us:

1) We always pay more on our mortgage. For us it is 10% more, but I would do more if I could. Instead of thinking that our mortgage is $10 (not real figure), I convince myself that the amount DUE is $11 (which allows me to not pay less any month).

2) We pay ALL bills as soon as they come in. If there is extra money in checking, it goes STRAIGHT to savings. I think of our savings account as our 'emergency' money, and will only pull out money if there would be a medical emergency or major home disaster. Then, since checking always has a minimal amount, I tell myself that we are 'broke' until next payday.

Once you get yourself to believe that you really dont have money, it is easy to do!

Also, I LOVE recieving paper statements from the mortgage company each month. I find that it is really helpful to watch that amount go down ever so slowly. That keeps me very motivated.

 

[kfeuer]

At one time DH and I had about $8,000 in credit card debt. We paid this over the course of about 3 years. This may not be what you want to hear, but during that time period we didn't take any vacations. We love to travel, so that was a tough sacrifice to make, but it was worth it in the end. What kind of debt are you trying to eliminate? 9 years is a long time to go without a vacation, but on the other hand a Disney cruise is a pretty darn expensive vacation. We're dying to take our kids on one, but we know there's no way we can afford it right now (and we're not trying to pay off debt). It just costs too much in relation to what we make and what we're willing to spend on one week of our lives. Do you honestly, deep down in your gut, feel good about spending the money right now?

Anyway, to stick to a plan it has to 1) become a way of life 2) not be so restrictive that it's not livable. Cut the things that aren't important to you, but try to hold onto the ones that are. For my family, that's meant that we've always had cable or satellite (tv is cheap entertainment). Other families hold onto other things. Keep tweaking your plans until you find a level of frugality that you can live with. As long as you don't give up, you'll get there sooner or later. I applaud your efforts!

 

[strasfamily]

We are sticking to our dept reduction plan too!

I think one of the things that is really helping us now is doing on-line bill pay. Whenever I have any extra money, I automatically put it towards my bill so I may be sending them money 3 or 4 times a month rather sending it in the mail once a month.

We do take vacations, but we budget for them and set aside some money each month towards our next one.

 

[crisi]

I am already thinking if we cancel our planned cruise that we will be out of det so much sooner (we will not be charging it!), but I am afraid if we don't reward ourselves and still do things it will never work.

Thanks for any advice that you can give!

First of all, why do you want to get yourself out of your mortgage in nine years? Unless you are closing in on retirement age, or want to use it for college, that may not be reasonable. Mortgage debt - provided it is your house and not a continual refinancing of consumer debt - is not really bad debt. Nine years is a long time, and a mortgage is usually a major debt. My original plan was to pay ours off in time for the kids college bills to start arriving - fortunate circumstances meant I'll do it much faster (right now its not paid off because I'm waiting to do it for my 40th birthday, its my birthday present to myself).

Second, I would keep some treats in your budget, just not the five Disney trips you managed in '05! Cancel the cruise for next year, but plan it for when you think you'll have the credit card debt paid off as a reward. As someone said, a Disney cruise is an expensive vacation. If you need a vacation, get in your car and drive. Depending on where you are in Ohio, Washington DC, Mammoth Cave, the Smokey Mountains are all places you can get to reasonably, stay in a cheap hotel, and enjoy for much less. You won't be charging the cruise next year, but you won't use the money to pay down debt either, so the net result is the same (have $15,000 in credit card debt, use $3,000 cash to cruise, have $15,000 in credit card debt. Have $15,000 in credit card debt, use $3,000 to pay down credit card debt, charge cruise for $3,000, have $15,000 in credit card debt - don't let yourself play semantic games about "well, I'm not charging this" cause its all the same money.)

Best wishes.

 

[nbodyhome]

Paying off the mortgage is a good idea - why have any debt if you need to? But if you have a great interest rate, it'd not be at the top of my list. Everything else should come first.

We are paying down debt, and hope to have it payed off next year. At the same time, most of my income is going into saving for a house. The most important thing is to go over your budget with a fine tooth comb. There are things that I could live without if needed - like cable, though there are two of us (my husband and I) in the house, and I think he wants to keep that. We don't get any extra channels, though. We occasionally eat out - but mostly we eat in. The food is better, healthier, and much cheaper. I don't skimp on things that are healthy, like vegetables and fruit - but I buy things like handsoap in the 1 gallon containers. I drink water from the sink, often with a little lemon juice, I refuse to spend money on bottled water. I go to Target after Christmas for 75% and 90% off of Christmas wrap, gifts, etc. I pay extra on bills - my husband has, what I consider, a huge truck payment ($528.70 a month). I even pay more on that every month. Once it is paid off, I plan to save as much as I can before my car goes kaput, so I don't have much car payment. I don't plan to buy as expensive a vehicle as my husband has, I don't think I'd break 15K. My huband wanted to rent a storage unit here for stuff (at our apt.), but also wanted a large screen TV. I said that we could do the large screen TV if he didn't get the storage unit. I can't believe how many people pay for storage! Just get rid of the stuff!

There are so many things you can do. I certainly don't think that you shouldn't do a vacation now and then, including Disney. But there are so many other places to see also, and there are often great deals to Europe (I love France), and great deals on lodging there. We stayed on Mont St. Michel for the price of a moderate Disney resort, with breakfast - it was wonderful! But there must be places close to where you live also.

Think also about every dollar, every penny you spend. Do you need that item? I paid $1.00 recently for a deck of Nightmare Before Christmas cards. But now it's like, well, maybe I could have done something else with that dollar!

 

[FreeTime]

Thank you for your feedback everyone!

The reason why I would like to pay our mortgage off early is so that we have no debt to take on when our kis go to college (in about 13 years). DH works at a university and the kids will get 50% off, so hopefully we can pay cash for the rest. I certainly agree with the comment about using the money for the cruise to pay toward the debt, however, I personally know that if I don't take some type of trip, I will go crazy and then splurge on too many trips. BTW-the 5 WDW trips in 2005 was using DVC (which is paid for) and AP's for all. They still got expensive with transportation, but we have memories. However, I now realize that we can have fabulous memories at the local amusement park as well.

So what do you do to stick to the plan?

Thanks!

 

[Lisa loves Pooh]

I wish I had advice...so far my hubby and I are the poster children for not doing to well on any plan.

 

[lisajl]

We are currently working on Dave Ramseys plan. So far, so good.
We had a major car problem to deal with and we had the cash to take care of it...that felt so good not to use the CC.

We have the emergency fund back up to par and are working on the bills, smallest one first. I can understand why he does that. It is so discouraging to start with the biggest one, it takes forever to pay off!

Find something that for you is reasonable and keep plugging away at it.
That is what we are doing and I want to be DEBT-FREE!

Lisa

P.S. Yes, we are going to Disney soon, but we are staying offsite because it is cheaper, not spending a lot on anything other than food and tickets.

 

[nowellsl]

I've been on my own debt reduction plan for about a year. Once you see your debt start going down it is a real motivator. I can't wait until payday so I can pay more on my debt No matter what I pay at least twice the minimum payment. Hopefully in about 16 months I'll be looking at a 0 balance! I started at around $8,000. I haven't encured any additional debt since I started and I think that's an important goal to shoot for! Every Friday I transfer money into my ING account and am working on building my emergency fund! I have had to use some of it in the last year but before I would have had to resort to using credit. I have money put into a Christmas club account every paycheck so I won't be charging any Christmas expenses. There's also enough there for a quick trip to WDW in Dec. I found that once I started seeing results it was easy to stick with the plan!!

 

[bellarella]

If the reason to pay off your mortgage is to have it done by the time your kids get to college, I would really run the numbers, since this could set you further back, depending on what your interest rate is. Personally I think that paying off your mortgage should be one of the last things you should do. Money sunk into the principle of your house is money you cannot access without either selling your house (which could be disasterous financially if your housing market has risen to where you wouldn't be able to see any profit because you would have to "rebuy" a house equal to what you sold yours for) or taking out a home equity loan, which means you are paying interest on that money -- and interest rates may very well be higher than what your original mortgage payment was and may not have the tax advantages the mortgages do.

If you think you might need to tap into the equity of your home to help pay for college costs (if you chose to pay for them -- I know DH and I paid our own way through school with loans and working), then you may be much better off not paying extra into your mortgage and instead be disciplined about investing that money. Then when your kids enter college, yes you will still be paying a mortgage, but you will have funds that have been saved (and also hopefully interest on those funds if you invest them carefully) rather than no mortgage, but perhaps not enough cash and be looking at borrowing back that money that you worked so hard to put into your house at a potentially higher interst rate than you had been paying (which is a very likely scenario since current interst rates are still near historical lows).

The question to ask yourself is whether you will have enough liquid assets when your children start college to not need to tap your house for it's equity. If you can save enough to pay off your mortgage *and* have other liquid assets, then it's a great idea to pay off your home and eliminate the debt (so long as you aren't planning on moving anytime soon). But if you can't save enough on top of paying off your mortgage, you are likely to be trading a relatively low interest debt that has tax advantages for future debt at a higher interest rate that may not have tax benefits *and* lose the earning power of that money if it were invested in the interim.

Not all debt is bad debt.

 

[graygables]

I wish I had advice...so far my hubby and I are the poster children for not doing to well on any plan.

Make room for us on that poster! No real advice here, either, but slow and steady wins the race. We started with a huge amount of CC debt 9 years ago (had a child with complications and no medical insurance) and I'm thinking that debt may finally be paid off next year. Anytime we have a set back, I try to remember Anne of Green Gables, "Tomorrow is a new day with no mistakes in it".