Sunday, 20 December 2015

Chasing Zero - You've got to start somewhere

I'm Malady and I have a confession.

I have debt.

In the grand scheme of debts, its probably not that big, but to me it feels like a mountain and I need to overcome it.

I earn good money, but I've never been good with it. I spend it when I have it, and my budgeting skills to date have been pretty well zero.

Two months ago, I decided that enough was enough.

I wrote a budget, and got really motivated.

At that stage, my debt stood at:

$28,000 (round figures) - Personal Loan with variable 14% interest rate.

$5,000 (exact) - Maxxed out credit card with 13.99% interest rate.

$1,600 (exact) - Medical fees to be paid off no interest.

I have since paid my credit card to $0, and dropped the limit on it to $1,000 which is the minimum that it can be lowered to. I also negotiated with my bank to drop the interest rate to 3.99% which made a huge difference to the amount of interest that it was accruing.

Unfortunately, I went a bit crazy with the repayments in order to hit that $0 as soon as possible, and left myself nothing in savings.

Adding insult to injury, a payroll issue meant that a payment for a leased vehicle wasn't being taken out of my pay on a fortnightly basis. This meant that the Christmas bonus that I was counting on to help pay for my daughters Christmas present, which was $700 (after tax), went straight back into repay the debt that had accumulated, which was entirely out of my control.

With Christmas gifts needed, no bonus and no savings left, I've had to put my credit card back into use, and the balance is now back up to over $900.

I decided that I needed to keep track of my progress in paying back the debt, and hopefully in doing so keep myself accountable.

I've been reading some terrific personal finance and debt reduction blogs and have found them inspiring. One of the things that I keep reading is that the writers found that having the blog kept them on track and motivated. I want that - even if no one else reads this, I will, and that should help.

So, full disclosure.

Today, my debts stand at:

Personal Loan    $ 26, 664.69
Credit Card        $ 969.45
Medical Fees     $ 1, 280

TOTAL            $ 28, 914.14

My aim is to use the snowball method to pay off the debt - my payments initially will be as follows:

Personal Loan $ 300 / fortnight
Credit Card     $ 300 / fortnight
Medical Fees  $ 160 / fortnight

TOTAL           $ 760 / fortnight

I also have a second job, and any money raised through that will be put to the first debt (credit card) to be paid off ASAP, and then to the personal loan. The medical fees have no interest attached and have only 8 payments to go before its cleared, so I'm not going to put extra payments towards that to clear it.

My aim, once the debt is cleared, is to put the money currently going to debt repayment into a high yielding savings account, with bonus interest, to save for a house deposit.

So here I go... stage one of my journey towards my goal of home ownership: chasing zero!

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