Today I had some positive financial news and decided to rededicate myself to beginning the serious commitment to getting out of debt. I tried to figure this out a few months back using the debt snowball calculator, which is by all means handy, but showing all that accrued interest is psychologically cloying. Playing around with the numbers to make the journey a little more palatable (and to allow myself some money to live with while I'm working on this goal), I came up with a "Meghanomics" approach.
This will take four years to do, but with only one real "crunch year." By year two the money I used to throw on my credit card will come directly from my bank account and by year three I can start saving. By year four I'll have half a downpayment saved, which I'll be able to round out in the "debt-free" year five.
The method that I am using it to start with paying off 40% of my existing debt in Year 1. Instead of using the "one credit card at at time" approach, I'm paying off 40% across the board. Yes I realize I'll be more screwed on interest this way, but psychologically it looks like I'm making a bigger dent.
In Year 2 I pay off 50% and Year 3 60%. By year 4 I can pay off the balance in one fell swoop.
Granted there are factors I'm not adding in at this point, like the possibility of going back to school (likely) or co-habitating/getting hitched (highly unlikely).
I will need the help of my friends to make this happen, in particular Year 1, but I'm confident it will. This is the best hare-brained scheme I've come up with yet. As with the other challenges I've self-issued for next year, I will use this blog as a forum to explore my achievements and failures.
Here are a couple of ways I've thought of to get through the arduous Year 1. Please leave your suggestions in the comments.
- Give myself a "per diem." After expenses, divide each paycheck by 14. That's how much I get to spend each day. I can "carry over," but at the end of the cycle the money goes into a "fun" money savings pot.
- Limit travel. For crying out loud, I'm going to India to start off the year, I think that will hold me over. The only other trips I HAVE to take are to Portland for Christmas '09 and to the Bay Area for an undermined wedding (thanks to Homeland Security). I would like to get to Phoenix, New York and D.C. to visit friends, and if airfares do drop to Europe it will be hard to wait, but I can hold out. I am happy to become a tourist in my own city and state. Lots more blog posts about Wisconsin's wonders!
- Eat healthier, work out more. For some folks this gets expensive, but for me, I've already paid for half my CSA for 2009, which will certainly feed me for the summer and beyond. By combining smart dietary habits with a consistent workout routine, I'll be able to fit into my old wardrobe, which will prevent me from shopping!
- Be social, but be conscious. I am not going to give up my active life because I don't want to waste money. I need to learn to have one cocktail and switch to water. Skip out on food, or just order soup or salad.