Have $500 to pay off some debts, which ones first?

[Good Morning Dewdrop]

I understand knocking the 4 bills off in one swipe is tempting and would no doubt feel good. However logicically I have to recommend doing the 2 19% bills (knock one out and significantly dent the other one) first. Then take the extra $$ that you normally pay to the one that's gone and put it towards the other one - snowballing until it's gone. Then with everything at 0% interest start paying each one off starting with the smallest bill.

Good luck!

 

[richmond282]

Pay the small ones first as you have suggested, OP. You will feel a sense of accomplishment. You will free up more OOP $ to put towards other things. Less checks to write each month. Dave Ramsey calls that debt snowball and it works. It's a mental game not a mathematical game.

 

[ilovediznee]

Thanks everyone! I am actually LOOKING FORWARD to paying bills when I get paid tomorrow - now that is not something you hear very often!

Diane

 

[mrsklamc]

Don't forget to check your state's unclaimed property (and any other states you have lived in, and any other names you've had.) I do this pretty regularly and never expect anything to show up, but sure enough - yesterday $50 for my DH!

 

[apnep]

Original Poster - you

LOL! That made me laugh.

OP. Too bad your hospital won't give you a discount! My DH was in the hospital for an entire week last year (blood clot after minor knee surgery) and when I called to pay the bill and started probing, they ended up giving me a 20% discount for paying the entire thing off right away!

You keep doing what you're doing, it sounds like you have things under control. Good job!

Ang

 

[punkin]

personally, I think it would be smarter to pay off the two with the horrifically high interest rate as you would be saving a ton of money in the long run.

That would be my suggestion too.

 

[ICF]

Pay the small ones first as you have suggested, OP. You will feel a sense of accomplishment. You will free up more OOP $ to put towards other things. Less checks to write each month. Dave Ramsey calls that debt snowball and it works. It's a mental game not a mathematical game.

so Dave Ramsey suggest paying interest just so you can feel good?

That makes no sense....No wonder I ignore what he says....

 

[mrsklamc]

No, Dave Ramsey says if you were motivated by math you wouldn't be in debt to begin with, and he understands that for some people, they need that rush of paying something off to stay motivated.

 

[jessicaerv]

I love spreadsheets, I'm a junkie!!

So, I plugged in your info and came up with the following:

You've already decided to pay off the first four debts on your list, so I assumed you will keep the same total monthly payments following this action ($125/mo) and apply the overage to the Bill Me Later and then to the highest debts after that.

So, the second month after you make the large payments, the $45 that WOULD have gone to those 4 debts now goes to Bill Me Later, making a total of $55 per month. At these payments and 19% interest you will have this debt paid off by month 9.

Then, the $55 you were paying to Bill Me Later will carry over to Hospital 2 for a total of $80/month. You will have this bill paid off by month 14.

Without changing your payment to Hospital 1 at all, it will ALSO be paid off by month 14.

Carry those payments over to OB-GYN and THAT will be paid off in month 15.

GOOD LUCK!!

 

[smkiya]

Good choice OP! The debt snowball does work (personal experience)!!! As a pp stated, it's a mental game not a mathematical one. And freeing up $45 instead of just $20, gets everything paid off faster. Keep adding to the snowball as you pay things off. Eliminating 4 debts instead of just 2 is a great motivator, and will make you work harder to find ways to knock out the rest of the debt even quicker so that you can progress.

Smallest to largest wins the race. We can all add, but when you're not motivated to do it, it doesn't get done. People need small victories to keep them excited and motivated. Do you think someone struggling with debt would rather say, "Phew, I have 4 fewer bills to worry about." or, "I saved $8 in interest this month." Most people just don't "care" about interest when they have an overwhelming mountain of bills staring at them, interest is not really tangible and isn't really noticiably impacting their day to day. Why else would someone use a card with a 10%, 20%, 30% interest rate? Why do most stores offer 0% for 6-12 months? Because banks know people just don't "care", and they make BIG BUCKS with the knowledge. (

When people start seeing some progress though (i.e. fewer bills), they like that feeling, and are motivated to do anything possible to keep that feeling alive, in other words, pay off the rest faster!

BTW - notice "care" in parentheses, for emphasis, not literally.

 

[ilovediznee]

Jessicaerv,
Just sent you a PM (personal message). IF you can't get pm's yet, please email me at: dianedisney@hotmail.com

 

[ICF]

No, Dave Ramsey says if you were motivated by math you wouldn't be in debt to begin with, and he understands that for some people, they need that rush of paying something off to stay motivated.

guess it's good I'm a "math" person then.

 

[wdwfan16]

Good choice OP! The debt snowball does work (personal experience)!!! As a pp stated, it's a mental game not a mathematical one. And freeing up $45 instead of just $20, gets everything paid off faster. Keep adding to the snowball as you pay things off. Eliminating 4 debts instead of just 2 is a great motivator, and will make you work harder to find ways to knock out the rest of the debt even quicker so that you can progress.

Smallest to largest wins the race. We can all add, but when you're not motivated to do it, it doesn't get done. People need small victories to keep them excited and motivated. Do you think someone struggling with debt would rather say, "Phew, I have 4 fewer bills to worry about." or, "I saved $8 in interest this month." Most people just don't "care" about interest when they have an overwhelming mountain of bills staring at them, interest is not really tangible and isn't really noticiably impacting their day to day. Why else would someone use a card with a 10%, 20%, 30% interest rate? Why do most stores offer 0% for 6-12 months? Because banks know people just don't "care", and they make BIG BUCKS with the knowledge. (

When people start seeing some progress though (i.e. fewer bills), they like that feeling, and are motivated to do anything possible to keep that feeling alive, in other words, pay off the rest faster!

BTW - notice "care" in parentheses, for emphasis, not literally.

No it doesn't. It will take longer since she will be paying 19% interest.

 

[Mad4Mickey]

I think you have a good plan it makes sense to me. You can do it

 

[punkin]

Sometimes I think Dave Ramsey works for the credit card companies. He seems to encourage people to pay more interest. In this case, it is so insane to pay off 0% debts and keep the 19% ones.

 

[Planogirl]

I tend to agree that it seems wisest to pay off the high interest accounts in this case but only because the first bills are so small and it would be easy to snowball them once the two bigger bills are gone. I would say at least pay off the ICP since the interest is supposed to increase.

 

[2Eskiedogs]

I just wanted to send OP good vibes in paying off your surgery. I'm in the same boat with paying off my hysterectomy in July 09'. I've been selling a little on craigslist to put towards my payment. Every little bit helps.

 

[ilovediznee]

Thank you all - Today is the day and I have decided to keep it just the way I said by paying off the ICR at the bank, radiologist and radiologist II and the pediatrician.

I plan to snowball the rest but I know it will be hard!

Thanks everyone!

Diane

 

[MrsPete]

I know what you mean, but with OP's plan she will be freeing up $45/mo to go towards other bills, instead of just freeing up $20/mo if she paid off just the two bills with higher interest rates. That will allow her to pay off other ones more quickly. I think that makes sense if you are looking at the big picture...

I agree. It's a no-brainer; pay off the ones that're costing you first, then pay the 0% interest bills later.

Once the ones that're actually INCREASING IN PRINCIPLE are gone, then pay off the smaller bills first to reduce the number of bills.

 

[punkin]

I agree. It's a no-brainer; pay off the ones that're costing you first, then pay the 0% interest bills later.

Once the ones that're actually INCREASING IN PRINCIPLE are gone, then pay off the smaller bills first to reduce the number of bills.

Apparently not.