Just snowballed the car payment

[rszdtrvl]

I decided in the end to snowball the car (Dave Ramsey).

The credit card has a $4,000 balance, and the car has a $3,000 balance.

I figure that the sooner we pay off the car (the lower balance is the one we should pay off first anyway), the more money we can put on the credit card in the end.

Our budgeted amount for credit cards is $150 - actual minimum was $86. Budgeted amount for savings acct. was $138. So I made an extra payment of $202 today towards the car!

Yay!! It felt weird paying only the minimum on the credit card, but it felt GREAT paying the extra on the car.

As soon as the car is paid off, we will be able to make payments of ($182 + 150 + 138) $470 on the credit card!


And (sob!) I did the responsible thing and cancelled ALL of my pre-orders at Amazon.com. I did make a list of it all, and I will attempt to buy them when we have some extra money. That was hard to do, as I love to read, and I know my local library won't have any of these books in stock anytime soon.

Just had to share my joy (and pre-order sadness, LOL) with all of you budget people.

 

[bumbershoot]

How fun is that????

When we started, I got some graph paper, divided my balance by $5, and then worked it all out so each square was $5 and I've filled it all in with each payment. I also print out the bills, I write it down, I have it on whatsthecost.com....I have it everywhere, depending on how I want to look at it each day.


Sorry about the pre-orders...are you part of Timberland? (the rest assumes you are) Since they are such a big regional system, won't they have ordered more than just one library's worth of the books?

Or do you have a trip to Pierce County planned? I just looked it up, and people who belong to Timberland are eligible for a free Pierce County library card, but you do have to get it at a PC library. Just looked up King Co library too, and they also have a reciprocal agreement.

We have Pierce and King county and Tacoma city library cards. Very convenient!


Anyway, congrats on the snowball. I know it's weird to not do what you have been doing...but if you can get that car paid off quicker and that allows you to pay off the CCs quicker, it's good!

 

[Luv Bunnies]

And (sob!) I did the responsible thing and cancelled ALL of my pre-orders at Amazon.com. I did make a list of it all, and I will attempt to buy them when we have some extra money. That was hard to do, as I love to read, and I know my local library won't have any of these books in stock anytime soon.

Just had to share my joy (and pre-order sadness, LOL) with all of you budget people.

I used to buy all of my books until last year when my DH was laid off. What I do now is find books on Amazon that I want to read and then put them on hold at the library. The library doesn't have everything I want but I can usually find enough to keep me happy. I guess I'm lucky that we live in a huge city and have access to the city's entire collection since they can get books transferred from other libraries. I also check out the "new arrivals" section of the library frequently to see if they have anything that looks good. It's tempting to buy books and I did get some after Christmas with gift cards, but I'm trying to survive off the library for now.

 

[Virgderon]

I buy all my books at the flea market for $1.50 to $2.50, but maybe you don't have them in WA? The flea market folks will also take 2 books in trade for one.

If you don't have flea markets, how about garage sales? People often sell books cheaply at their garage sales.

As a book lover, I sympathise. I long ago decided that $8.00 for a paperbook didn't fit into my budget. :-(

 

[LovableGluttons]

I'm a book lover too! I bought a Kindle and just download the free books. I think I bought it in January or February?

I accidentally download one for $6, but I've been much more careful since.

I read three or four books a week. There are more free books than I can keep up with and I read fast!

I think my Kindle was around $250, so I've definitely read my money's worth already!

Congrats on the snowball! DH and I keep eyeballing the new Camaros. We have a sinking fund for our vehicle replacements, but we weren't looking at spending that much!

 

[dimimi]

great plan!

 

[PaulaSue]

OP I hope your CC interest is WAY LESS than your car payment or I would do it the other way. I always heard to pay off the biggest interest first.

 

[bumbershoot]

OP I hope your CC interest is WAY LESS than your car payment or I would do it the other way. I always heard to pay off the biggest interest first.

With Ramsey, you go in order of lowest balance. The idea is to get "quick wins", so that you pay something off fast.

For us, the lowest WAS the highest interest so I didn't have to choose.

Many say that the math doesn't make sense...but math isn't the reason for it. I've heard it said...if those of us who need to snowball our debts were doing the math in the first place, we wouldn't have the debts to snowball! (though if I recall from the OP's previous posts, she's actually in a really good place to begin with, much better than many who start Ramsey)

Of course, it's *personal* finance, so if someone wishes to go in the other order it's fine...and I believe that's what the OP was going to do, but looks like she changed her mind.

 

[aggielawyer]

Another budget option for books: try paperbackswap.com. You list all your books that you want to get rid of, then make a wish list of books that you want to get. When someone requests one of your books, you mail it to them, then you get a credit to spend. They also give you one credit for the first 10 books you list. So, you are getting a book for the cost of postage, which is usually $2.38. I've swapped so many books that I have a shelf-full that I need to read before I get any new ones in.

 

[prncess674]

OP I hope your CC interest is WAY LESS than your car payment or I would do it the other way. I always heard to pay off the biggest interest first.

Paula Sue, I am with you and cringe at this philospophy. When you are talking about two debts that are sooooo close in amounts I would start with the biggest interest first. It is one thing when you owe on a bunch of small department store codes that may have $200 and $300 balances, but the OP will see a way bigger bang if she worked on the higher interest debt first in this scenario!

 

[rszdtrvl]

It was a hard decision to make (deciding which to pay off first) but in the end the car won because :

a) it is the one we owe the least amount on
b) it has the higher payment

At first we were going to do the ccard first, but changed our mind. As soon as the car is paid off, a massive amount will go on the credit card, and we will be that much closer to being debt free.

I am selling some stuff on ebay to make a bit of extra cash too, trying to help with the debt.

But with just the payment and the extra (from what should go in savings and the extra that I budgeted out for the credit card) the car should be paid off in 8 months. Super cool!!

 

[kittycat9]

Paula Sue, I am with you and cringe at this philospophy. When you are talking about two debts that are sooooo close in amounts I would start with the biggest interest first. It is one thing when you owe on a bunch of small department store codes that may have $200 and $300 balances, but the OP will see a way bigger bang if she worked on the higher interest debt first in this scenario!

Exactly - you always pay down the higher interest debt, but more so revolving high interest debt.

For example: If you have a car payment with set terms of 5 years and 10% interest (which is pretty high) clearly you want to pay that off. However, it's term set. You know at the end of 5 years it will be paid off.

However, say 3 years in to that car loan you have a credit card with the same balance as your remaining debt and you're trying to decide with to pay off first. Let's say the credit has a rate of 7.99% - pretty great rate these days. However, it's not term set - meaning that rate continues to revolve year over year and only adds to your balance.

It makes more sense to tackle that credit card and knock it out as quickly as possible, and just continue to make your schedule car payments on time. In two years your car payment will be free and clear, and you will have made sizeable progress toward (if not eliminated) your credit card debt.

The key is - credit card debt is never good debt to have. Mortgages and auto loans are more secondary debt that are easier to manage. The first debt to eliminate should always be the credit cards. Always.

 

[bettymae1121]

I agree, it's better to pay off CC's first in most cases. But, at least the OP is paying off their debts ahead of schedule, that's always the better way to go.

 

[lovesmurfs]

I decided in the end to snowball the car (Dave Ramsey).

The credit card has a $4,000 balance, and the car has a $3,000 balance.

I figure that the sooner we pay off the car (the lower balance is the one we should pay off first anyway), the more money we can put on the credit card in the end.

Our budgeted amount for credit cards is $150 - actual minimum was $86. Budgeted amount for savings acct. was $138. So I made an extra payment of $202 today towards the car!

Yay!! It felt weird paying only the minimum on the credit card, but it felt GREAT paying the extra on the car.

As soon as the car is paid off, we will be able to make payments of ($182 + 150 + 138) $470 on the credit card!


And (sob!) I did the responsible thing and cancelled ALL of my pre-orders at Amazon.com. I did make a list of it all, and I will attempt to buy them when we have some extra money. That was hard to do, as I love to read, and I know my local library won't have any of these books in stock anytime soon.

Just had to share my joy (and pre-order sadness, LOL) with all of you budget people.

Yay! Great job! Great idea about the pre-orders. Our public library has an online catalog. For books that haven't been published yet, if they're a popular author, they post the book in the catalog before they've been published. You can place holds on the book before they arrive -- you might want to check into your library's catalog. You might also want to see if your library subscribes to an electronic book service (ours is mymediamall.net). If you don't have an eReader (Sony or Nook), you can read the books on your computer -- it's clunky but works all right.

Congrats, and best wishes. Paying off the car is a sound idea.

 

[PrincessBelle09]

The main point of Dave Ramsey's plan is the "heart change" and actually sticking with it, which is why he wants people to ignore the interest rates unless two debts are very close. Yes, the math does not make sense, but this method helps ensure that folks stay on track. As he says, it's like going on a diet. If you don't see some quick results, the average person is not likely to continue it. People following DR's plan and are now debt free have paid off over 22 million this year alone. Sometimes, ignoring the math works! =)

 

[rszdtrvl]

The way I see it is that if it will pay off the debt, and if I am happy about doing it this way, that is all that matters.

And I am happy.

And I will be happier in 8 months, when we no longer have a car payment.

 

[disneylove69]

Exactly - you always pay down the higher interest debt, but more so revolving high interest debt.

For example: If you have a car payment with set terms of 5 years and 10% interest (which is pretty high) clearly you want to pay that off. However, it's term set. You know at the end of 5 years it will be paid off.

However, say 3 years in to that car loan you have a credit card with the same balance as your remaining debt and you're trying to decide with to pay off first. Let's say the credit has a rate of 7.99% - pretty great rate these days. However, it's not term set - meaning that rate continues to revolve year over year and only adds to your balance.

It makes more sense to tackle that credit card and knock it out as quickly as possible, and just continue to make your schedule car payments on time. In two years your car payment will be free and clear, and you will have made sizeable progress toward (if not eliminated) your credit card debt.

The key is - credit card debt is never good debt to have. Mortgages and auto loans are more secondary debt that are easier to manage. The first debt to eliminate should always be the credit cards. Always.

Dave's rule is car debt is debt. You should pay cash for your car. The last thing on his baby steps in paying off debt is mortgage. 2nd mortgage is also like cc debt.

 

[ICF]

OP I hope your CC interest is WAY LESS than your car payment or I would do it the other way. I always heard to pay off the biggest interest first.

That's what you SHOULD do, in order to save the most money, but for some crazy reason it's not what he advocates.

 

[disneyofcourse]

Yayy! I'm so excited for you! I can't wait till you finish paying it off completely and start your next goal of CC's.