The cheque arrives

The cheque from the overpayment I made on my electricity account arrived and the money is sitting in our transaction account. I'm going to pay the final $103 of the card we thought we paid off and then put the rest off my store card. Thanks to some aggressive payments on the store card the balance should be around $1500 once I have transferred the remainder of the money from the cheque. Now that they first card as actually paid off we will be paying off the store card at a minimum rate of $450 per month. So in the worst case we will be cancelling that card in 3 months time. I am hoping to pay it off sooner, however, by putting as much spare money onto it as I can. After that we will go for my personal loan, which should by then have a sub $4000 balance. We will have an extra $450, on top of the $333 regular payment, in which to pay it off. At that rate we will have the loan paid off after another 5 months and then out snowball amount will be close to $800!

Wine

My wife and I have been discussing a weekend away to buy some wine for about six months and now the chance has finally come. This coming weekend we are both free of other events and we have decided to go. We will stay with my wife's brother which will help keep down the costs. The only real expense we should have will be a tank of fuel to get there and back. We have been putting all our spare change into a piggy bank for the last few years and it is finally time to crack it open and spend! We opened it last night and 50 minutes later we had separated out the different denominations of coins and estimated a total in excess of $300. That should amount to a pretty fun weekend.

We don't pay off the first card

When I asked my wife how much I had to pay of the card to close it she told me the available limit instead of the balance. To make a long story short, we still owe $103 on that card. Oh well, we will pay it off next pay day.

We pay off the first card

We have paid off the first credit card! It only had a $1000 limit (and a $1000 balance) and it is a very small step in the big scheme of things but it feels so good. As soon as the money that we just paid clears my wife will call them to cancel the card. I can't wait! Not only have we decreased the amount we owe and our credit limit but we have also increased the amount we can now pay on the remaining cards and loans. Our next goal is to pay off a store card which currently has a balance of $1700. We have already been paying this one off quickly because we need to get the balance to zero before the interest free period runs out. With the extra $100 a month we had been paying of the other card we will get there almost twice as quickly. We will also put any other spare money off it as well.

Once that card is paid off and cancelled I think we will go for the personal loan. Because it is relatively low interest with regular repayment, conventional wisdom tells us to leave it till last. If, however,we pay it off and add the regular repayments to our snowball we will have around $800 per month to pay off the next card. Then we will really be moving!

Take care in the supermarket

I have been taking extra care when I've gone to the supermarket to buy a few things that those few things don't turn into a few more. Every time I've gone in the last 2 weeks I have had a list of stuff to buy and I've stuck to the list 100%. Every time I see extra things that I could buy but I ignore them and stick to the list. I want to learn to take the impulse out of shopping and I'm sure that it will just take a bit of self-discipline and prior planning. I just wish I had some proper historical data so I could compare my new grocery bills with my old ones.

Money Owed

While I was entering all my data in quicken I remember that I had accidentally overpaid a final electricity bill a few years ago. I sent the company an email and they agreed to send me a cheque. From memory it was about $350! That will go straight off the $1000 card. We will have it paid off in no time! I also noticed that one of my old internet providers has been charging my card $10 for the last 3 years. I sent an email to them to let them know I expect a cheque in the mail. Fingers crossed that will be even more money off the card!

Some extra cash

Cutting up the cards has given me a big motivational boost and I'm very determined to to pay off that first card as quickly as possible. I had a look through the house and found a few items we could easily live without. There is a 2 year old flat screen computer monitor that we don't have a computer for, a spare color printer and a spare oil heater. I'm going to advertise them at work and put any proceeds off the card.

Debt Snowball

My wife wants us to pay off the credit cards in order of their interest rates. A very sensible idea but the problem is, that is exactly what we have been doing and we are not getting anywhere. In fact we are going backwards. As soon as we get any sort of available funds available on a card they get spent. We need to do something different. Cutting up the cards was a good first step because it stops us from spending any further.

After reading about Debt Snowballs at Get Rich Slowly I knew this was the solution for us. The card with the highest rate is one with an $8000 balance. If we pay that off at a rate of $100 per fortnight it will take us years. Instead we have decided to knock off some of the smaller balances first. We will start with the card with a $1000 limit. It has been cut up so we can't spend any more on it. We are going to pay the minimum balance on everything else and put the remainder off this balance. Once it is finished we will close down the account. Then we will attack the next smallest balance. Once again we will pay only the minimum balance on everything else but this time we will have the money that we had been paying off the $1000 card as well so it is getting an extra payment per month. We will finish off the balance, close the account then go to the next smallest balance but now with 3 payments per month.

I like this plan for two reasons. First of all we will see results. With a bit of discipline it won't take us long to knock off that first $1000 card and then we can close it. It is only a small step in the big picture but it will be a big psychological win for us. Secondly the plan involves reducing not just our amount of consumer credit but also our available credit. We had been treating our available credit as a target for spending and until we can truly break that habit there is nothing for it but to reduce our credit limits.

This is very exciting and I can't wait to make the call to close that first card!

Knowledge is power

I downloaded a trial version of Quicken and started putting in some account balances. The good news is that overall we are in the black. That's including the house, my wife's car which is paid off and our combined super. We aren't much in the black but we'll take anything we can get. "That's depressing," my wife said when she saw the credit card column. It is depressing. But at least we are doing something about it now. It will be good to see what we are actually spending our money on. My best estimate is that we spend about $1000 per fortnight on discretionary items. If we could cut that in half it would go a long way to spending less than we earn.

I also expect that by monitoring what we spend we will automatically spend less. In the last week we have only spent around $20 on groceries and our tithe. There has been none of the frivolous discretionary spending on credit cards that normally take place. The figures in Quicken may be depressing but my overall mood is good because I know we are taking the right steps to fix the problem.