Debt Reduction

The method to my madness

OK – I was going to start my “Latte Factor” countdown next week, but there’s never been a better time than right now – mostly because I got paid yesterday and I feel like I have a clean slate to work with. Also, since it’s a new paycheck and the end of the month, it’s time to do some bills.

As it sits right now, I have $890 in checking and $30 in savings. This is a $100 more than I had projected for checking, mostly because I had a $150 refund that was automatically deposited in my checking account overnight from cancelling my previous health insurance policy.

I keep an estimate of my expenditures on an Excel spreadsheet that I keep at work. I get paid every week by virtue of the fact that I work two jobs and I can usually estimate that my full-time paycheck pays about $800 every two weeks and that the cab job pays about $200 every two weeks.

Here’s what this week’s looks like:

$890 – starting balance
-$450 – my half of the mortgage
-$35 – my monthly gym fee
-$15 – gift for my nephew J
-$30 – gasoline

So I have $360 leftover this week to do some damage on my existing debt. The question is, though – how much should I spend?

There are a couple things I have yet to factor into my budget: I plan to hit the grocery store today to see if there’s any day-after Thanksgiving deals – specifically I’m looking forward to how much turkey might be discounted (for my family of two, one turkey would last about a month) and to buy some staples like chicken broth, pumpkin puree, etc. I also promised a couple of my coworkers at the cab company that I would bring them cookies since I’m not working this weekend. Also, the $30 budgeted for gas might not be enough since I’m driving to my parents’ house this weekend for more turkey-centric festivities.

In terms of “existing” debt, I keep track of my credit card balances on another spreadsheet that I keep on Google Docs and right now I have about $5,500. I also need to make a payment toward my growing dental bill.

There are two scenarios I’m mulling in my head right now: Pay $150 toward my dental bill and another $150 toward one of my Visa cards (I’m doing the Ramsey “snowball effect,” paying down my lowest card balances first and knocking them off one at a time). Or, pay $150 toward my dental bill and just $100 toward my Visa card. That way I have $110 leftover “just in case.” Next week, I’ll get paid by the cab company (although that check won’t be for $200 – it will probably be about $50 less or so since I’m not working on Saturday) and I should be getting a $50 expense check from my office for stuff that I bought last week and paid for with my check card.

I’m leaning toward the $150/$100 scenario … because I can put that $50 expense check towards another payment on my Visa card.

I’ll keep you posted on my “Latte factor.” That could be eye-opening.

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1 thought on “The method to my madness

  1. My feedback would be that, if managing each paycheck and making payments works for you, keep doing it. However, I have found that it works better for me if I do an overall budget for the month with a set payment to my debts. In your case, if I had a 5500 cc debt I would determine a monthly payment towards it based upon my average monthly income and just plan on sending that it. If I had extra cash beyond that, I would put it aside in my checking account as an emergency reserve until I had at least $1000 built up. After that I would apply any extra money (beyond bills, such as your dental bills) to the credit card debt.

    I have also found that it is very nice to build up enough money in my checking account that I can budget *last* months’ income for this month’s expenses–so I am spending money now that I banked last month.

    I learned this from Jesse Meacham on his YNAB budgeting site.

    This is a fantastic approach that would majorly reduce the stress (and bill juggling) of your financial life. I know that as long as I have a base level of $1400 in my checking account at the end of a month, I don’t have to even visit the bank to deposit my paychecks for 4 weeks because the $1400 is enough to cover all budgeted expenses for the month.

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