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That's a psychological trick, but mathematically you should always target the high interest rates, not necessarily the small balances.
I've never really been in debt aside from a mortgage and some credit card balances related to cash flow. But to me the addictive aspect would be based on the real math like the OP's updates.
I paid off the final balance transfer I did on my sister's credit card. Now the only money I owe her is the cash loan.
I did the balance transfer on the debt I added that I spoke about in my last update post and have added it to this update. In order to try to curb my spending I have been keeping track of what I purchase and I think this is helping me to spend less. I'm still using my credit card for my purchases but I have been paying it off fully at the end of the month as to not add anymore debt.
Finally, I am in the process of doing another balance transfer on the 9.99% loan I have to reduce the interest rate.
Here are the numbers:
1) My Loan 1 = $14,319 @ 9.99%
2) Her Credit Card 1 = $0 --- paid off in February 2024 ($22,660 paid off in 11 months)
3) Her Credit Card 2 = $0 --- paid off in July 2023 ($12,200 paid off in 4 months)
4) My Credit Card 1 = $0 --- transferred the balance to my credit card 2
5) My Credit Card 2 = $17,869 @ 2.9% until December 2024
6) Her Cash Loan = $21,500 @ 0%
7) My Credit Card 3 (NEW DEBT) = $7,890 @ 0% until September 2025
8) My 401k Loan 1 = $9,913 @ 1.5%
9) My 401k Loan 2 = $6,082 @ 3.1250%
Total Debt = $77,573
Am I reading it correctly that you have almost $8k in new debt since the December update?
you want to pay the highest rates off first no matter what the balance on the card is
When it comes to rates, doesn't seem to matter when it comes to credit scores.?
In 2022 I charged $3K on a Goldman Sachs to purchase precious metals, during a zero interest teaser/statement credit for spending so much in 6 months promo.
A few months ago, before said rate expired; I paid it down to $300.
My credit score at the time was 749, and I wanted to see what I would be charged in interest; 27.99%.!
Deductive reasoning says they must be charging everyone close to max allowable.
Either that, or this banks is mad that I actually made $$$ off of them.
I paid off the final balance transfer I did on my sister's credit card. Now the only money I owe her is the cash loan.
I did the balance transfer on the debt I added that I spoke about in my last update post and have added it to this update. In order to try to curb my spending I have been keeping track of what I purchase and I think this is helping me to spend less. I'm still using my credit card for my purchases but I have been paying it off fully at the end of the month as to not add anymore debt.
Finally, I am in the process of doing another balance transfer on the 9.99% loan I have to reduce the interest rate.
Here are the numbers:
1) My Loan 1 = $14,319 @ 9.99%
2) Her Credit Card 1 = $0 --- paid off in February 2024 ($22,660 paid off in 11 months)
3) Her Credit Card 2 = $0 --- paid off in July 2023 ($12,200 paid off in 4 months)
4) My Credit Card 1 = $0 --- transferred the balance to my credit card 2
5) My Credit Card 2 = $17,869 @ 2.9% until December 2024
6) Her Cash Loan = $21,500 @ 0%
7) My Credit Card 3 (NEW DEBT) = $7,890 @ 0% until September 2025
8) My 401k Loan 1 = $9,913 @ 1.5%
9) My 401k Loan 2 = $6,082 @ 3.1250%
Total Debt = $77,573
I started this debt payoff journey in January 2023 and so far in 14 months I have paid off $53,269 (not including interest and fees). What an accomplishment!
I'll post a cleaner update of the numbers in April once the balance transfers have gone through.
Thanks for all the support and advice everyone!
Hopefully the 77K includes ALL your debts. Keep up the good work. And remember, it's ok to have $1,000 or $2,000 in a savings account while you're paying down debt. That way, if you need a car repair or something like that, you won't have to resort to putting it on a credit card or taking out a 401k loan.
That's a psychological trick, but mathematically you should always target the high interest rates, not necessarily the small balances.
I've never really been in debt aside from a mortgage and some credit card balances related to cash flow. But to me the addictive aspect would be based on the real math like the OP's updates.
I had two formulas in a spreadsheet to tell me where to put any surplus dollars, during the years I struggled to fight down troublesome debt.
So I had a standard monthly thing where I plugged in my statement balance, my minimum payment, and any interest charges/fees for all accounts. And then the first formula calculated interest/balance. Then the other formula is the minimum payment/balance. Formatted as percentages.
If I wasn't having any trouble making the payments in general and just working on getting stuff paid off, then paying the one with the highest interest+fees/balance was definitely the way to go. But if my budget was in distress, then paying the one with the highest min. monthly pmt./balance was the right choice. Why? Because paying that one off frees up the most dollar power each month and then permits more breathing room in the budget. It is the way to get out of the juggling/treading water stage and into the real forward progress stage.
An example of the latter where the monthly payment to balance ratio is high will be most installment loans. As the payment of them goes on over time, that ratio gets higher and higher, because the payment stays the same but the balance goes down. If you have a distressed budget you could free up a significant amount by knocking out something like a car payment or other installment loan, if you have any such things. But if your budget isn't in distress and you are just trying to make progress on your debt in general, then those loans may have lower interest rates and won't be where you want to put any surplus dollars.
As to whether one has a distressed budget or not...one question to ask is whether you have the extra money to be making real progress every month, or are you considering what to do with a rare windfall like a tax return? Just for instance. But a healthy budget is an important part of escaping debt. This of course is in addition to generally reducing spending and/or increasing income.
5) Line of Credit = $12,000 ($738 @ 17.24% and $11,262 @ 15.49%)
6) Credit Card 5 = $15,501 @ 0% until 4/24 and then 29.99%
7) Credit Card 6 = $5,359 @ 21.99%
8) Credit Card 7 = $5,239 @ 19.24%
9) Loan 1 = $19,998 @ 9.9%
10) Loan 2 = $17,606 @ 15.99%
11) 401k loan =14,528 @ 1.5%
12) 401k loan 2 =8,068 @ 3.1250%
Total Debt = $134,593
Monthly payments = $2,525 (not including 401k payment)
Monthly interest = $1,324 (not including 401k interest)
And here's a cleaner update. All my balance transfers finally went through and the monthly interest I will now be paying is SIGNIFICANTLY less than when I had first started my debt journey!!! Here's the updated total as of 4/28/24:
1) My Credit Card 1 = $15,712 @ 2.9% until 12/31/24
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