July 2008:

Credit card debt $31,000. Before I could start repaying the student loan debt, with its rather modest 7.25% interest, I needed to tackle the $31,000 in personal debt I had. One of the toughest steps was actually determining how much debt I had, what my expenses were each month, and what my income was likely to be. For the longest time I was like many others, people I still run into now, who not only have no idea what the make or how much they spend, they don’t want to know. Let that sink in. There are people in a great amount of debt who actively avoid learning how much they owe to others and how much they spend each month. That’s like taking a road trip and not knowing where your starting point is.

So I created a budget with excel and a budgeting program (it was a free version of Quicken that has now become Mint). I also used a debt pay-down calculator from the web and the debt snowball technique that Dave Ramsey and others advocate for. Below is a screen shot of the budget. I figured I could pay 2504.14 each month towards personal debt and still have a little left over each month.

One method of using the debt snowball is to pay the smallest credit card off first. This gives you a sense of accomplishment and success. To me, it seemed more important to pay off the credit card with the highest interest rate first, so I used this approach to the debt snowball. Each month I would pay $2504.14 to credit cards, and as each one was paid off I would then roll the amount from the paid off card to the next highest credit card. So after one month and Macy’s was done, I added that to Amex. I would then hide the card so I wouldn’t use it.

2008 budget