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How do you pay down debt?

September 13th, 2011 at 04:25 pm

So I'm taking to this new way of debt payoff. In the past I always left a very small cushion in my checking ($100-200) and then I would throw every last dime at my debt assuming that a large cashflow would absorb most of the damage if an emergency came up. That was stupid. It left me stressed all the time!

Now I save up all the money and then some in my account and throw it at the debt when I can pay in full. I do end up paying a bit more interest in the end, but peace of mind sure is worth something! I've currently got over 1k sitting earmarked for my student loan. Friday's paycheck will be very nice to us, and I'm currently estimating we can have the student loan paid off at the end of January. Woohoo!!

Posted in Uncategorized | 4 Comments »

4 Responses to “How do you pay down debt?”

  1. ceejay74 Says:
    September 13th, 2011 at 04:49 pm 1315932590
    1315932590

    I'm very much a chipper-away-er, throwing every unallocated penny toward debt. That said, when I got pregnant and had a baby, I took time off from extra debt repayment to build an emergency fund, a medical fund and a lawyer fund. Now I still tend to throw everything I can at debt, but it's much less stressful because I have these three funds; if I need to borrow from them and pay myself back at my leisure, it's no big deal.

    The loan I want to get rid of most is at $27,000 and has interest-only payments while NT's still in school, so it would drive me nuts if I tried to save that up without putting any of it toward the debt! If it were a smaller chunk I could see how your method would be very satisfying and not very wasteful.

  2. PauletteGoddard Says:
    September 13th, 2011 at 05:13 pm 1315934023
    1315934023

    Still working on a way to accelerate debt repayment. Right now I divide 8% of the income between debt repayment and precious metals, and what surplus I have the day before payday in the chequing account is divided between the debt repayment and the savings account. I don't divide by an even 10% because I am trying to build up my savings accounts to the maximum I can have to enjoy a high interest rate: the 2% goes to savings.

  3. MonkeyMama Says:
    September 13th, 2011 at 05:14 pm 1315934041
    1315934041

    I personally throw large chunks at debt, when I can, but that is with ample cash savings. Of course, the few debts I have had, I have paid off lightning fast. Mortgage is a bit of an oddball since it is a bit too big to pay off lightnings fast, and I don't want to tie up all my extra money in that for 30 years. So, is the only debt I have been happy to chip away slowly. (I have never waited and saved up the final payoff, first, to pay off any debt. BUT, generally always keep $5,000 - $10,000 cash MINIMUM for a rainy day).

  4. Jerry Says:
    September 25th, 2011 at 10:45 pm 1316990725
    1316990725

    I think that having a good EF in place leads to a feeling of security that allows you to be able to throw everything at other debts without worrying about other situations that may arise. It offers you some insurance that you aren't cutting your own legs out from under you, financially. Good luck as you tackle these debts, you are doing a great job!
    Jerry

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