By Debt Avalanche
As part of the debt avalanche, we ended up getting rid of $125,000 worth of debt in 9 months. Here is how the debt was broken down:
credit card 1: $8,250 @ 6.9%
credit card 2: $5,300 @ 8%
credit card 3: $13,500 @ 9.9%
credit card 4: $6,600 @ 17%
credit card 5: $19,800 @ 23.5%
car loan 1: $24,000 @ 2.9%
car loan 2: $6,000 @ 4.2%
student loan 1: $30,000
student loan 2: $12,000
Total: $125,450 of debt
In addition we had $94,000 left on a house mortgage, so if we wanted to include that, it was over $200,000 of debt (yes, we wiped out the mortgage debt as well, although probably not the way that you expect). As you can well see, it was a huge mess, especially for a couple that wasn’t making all that much. Once credit card was mine while the other four were my girlfriend’s. We each had a car loan and we each had student loans.
There were really no excuses for the debts. We both made poor to questionable choices and we both realized it. The question was how were we going to tackle this debt? The conventional wisdom was that we should do a debt snowball and slowly chip away at the lowest balance or highest interest rate while paying the minimum amounts on the other debts, the snowball that payment to the next once it was paid off. My calculation was that if everything went right with no unexpected issues (and when aren’t there unexpected issues?) it would take us 8 and a half year to pay off the debt.
I wasn’t willing to start off married life in that kind of debt and I was eventually able to convince my fiance (now wife) to also agree (although there was a lot of shouting, resistance and down right fighting along the way).
The first thing we agreed was that nothing was sacred and that it would be better to suffer immensely for a shorter period of time than for an extended period of time. I promised her that she would not have to suffer more than I did and that if she ever felt that I wasn’t sacrificing more, then she could back out. And with those general guidelines, we came up with a plan of how we could pay off the debt. It wasn’t pretty…
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