Our Get Out of Debt Plan
Now that you know how we got into this mess in the first place, you might be wondering how we are planning to get out of debt. A very logical next thought. The short story is I created a get out of debt plan that worked best for us that would get us out of debt as quick as possible.
Free Budget Spreadsheet
I found a free monthly budget spreadsheet that I was able to easily add all of our income, bills, and debt into. I included how much we owed next to each debt to be able to easily track it and know where we were with our balances at all times. I put everything into the spreadsheet that either created funds going into or out of our budget. Besides all of our regular bills, I added all of our basic necessities like food and gas. I was also able to customize the spreadsheet based on our needs.
Find an Order to Pay Off Your Debt that Works
Once I had all of this information entered, I started playing around with the numbers. First, I put in all of our bills and the minimum payments we could make on our debts. Then I started adding more funds to the debt we would work towards paying off first. Once we have one debt paid in full, all of those funds will then go towards the next debt on the list to pay off.
Most of our debt is from credit cards. We also have debt from personal loans, as well as revolving accounts, like Bill Me Later. Some have no interest rates at all and others have ridiculously high ones. Some have little balances under $200 while others have balances at $5000. Unfortunately, there are a lot more $5000 balances then there are $200 balances. Isn’t that the way it always is?
After looking at the balances, what kind of debt they were and who the debt was to, I ran my credit score through my Credit Karma account and printed up my yearly free credit reports through Annual Credit Report. I wanted to make sure I wasn’t missing anything and to know where my current credit score stood since it had dropped (all from new debt) just shy of 50 points (ouch!), 4 months prior and still hadn’t budged on going back up. I did the same for Drew so we were both starting off on the same foot.
Gather All Information Before Making Decisions on Your Debt
With all of this information I felt fully equipped to figure out which debts to pay off first. I thought about paying off the smallest debts first and working my way up to the bigger ones. I looked at which debts had the highest interest and thought about paying those debts off first. I considered which ones would increase my credit score the most. I even ran our debt through the DOLP calculator. For some reason, none of that seemed correct to me. None of these results and the order they were telling me to pay off my debt felt right to me. I was missing something.
Emotions Can Be Attached to Debt
While going through our debt I realized it was more than just how much we owed or interest rates. It was a lot more. There were actually emotions connected with each of those debts. Emotions that were affecting me in the order I wanted to pay our debts off.
I knew all of the debts we had, wrote them down on a list and then worked on that list for all of January. I switched the list around in different orders with different factors and paid attention to how it made me feel paying the debts off in different orders. By the end of January, I finally came up with a plan that felt the best for paying off all seventeen of our debts.
We now know how much debt we owe and what order we want to pay it off. All we need to do from here on out is to follow our get out of debt plan. Easier said than done.
What did you do to develop your get out of debt plan?