January 8th, 2010 - 2010! The year we get out of debt Challenge!
I’m making 2010 my year of no debt. My goal for the year is to pay off my car, my credit cards, my school bill and my Newegg bill.
To many, this is mere pocket change to the debt that they are in and I would agree. Most people probably won’t be able to pay off their debts in a year. Many people have multi-year mortgages or car loans or business loans, and paying those off suddenly might make the IRS take notice of where you’ve been hiding your riches if you still have years left to pay it off.
To help me with my goal, I’m going to challenge you, my readers, to the same goal. Get out from under your debt. Again, I realize that some of you have homes and cars to pay off and were expecting to pay those off for at least 2 more years (car loans really shouldn’t be longer than 3 years, 4 at the most) and that’s fine. Continue to pay those off as you would normally.
Since I know my debt is relatively small compared to most, I’ll set some ground rules and make some suggestions.
The ultimate goal, by 1/1/11, is to be debt free. I understand things can come up that make that impossible, but you can make a goal and still achieve it.
I’ll start with the #1 money sink to anyone’s bank account, the credit card. I know debit cards probably do this more, but I’m sticking with credit cards because you have to pay those back rather than the money coming straight out of your bank account.
Pay off at least 2 credit cards if you have more than one. That’s not to say you pay it off now and you’re done, that means your credit cards are paid off on January 1st, 2011. If you had to put a big item on a card that was necessary to maintain you’re home/job/loved ones, that’s ok and understandable. But for all the little luxuries you buy, and a giant $3000 TV is considered a small luxury, those need to be 100% paid off by the end of the year. This also includes stores/websites that have extended you credit that you might not be able to use elsewhere, but still requires being paid off (like my Newegg account for instance).
Now for the home/car/business loans. If you’ve managed your other credit (cards/stores/websites) fairly well and have little to no balance on those, look where you still have debt. Home loan, car loan, school loan, etc. I think of these as generally static since the only thing that ever gets added to it is interest. If you can, get the ones that can be paid off in a year, paid off. You may still have a year and a half on a school loan, but is that with minimum payments? If so, pay off more and get it out of the way. Same goes for the car loan. I know when I set my loan up I had them round up so I paid my car off a little faster. I’m finally in the last 5 months of my car payments and I’m looking for ways to accelerate that already. I don’t know much about business loans, but if business is good, pay it down a little more than you would normally.
I know home loans tend to be for decades, so here’s what I’ll say about that. Look at your home loan and figure how much you pay off in a year at the rate you agreed on with the bank. Then, pick a realistic amount over that, and try to meet that by the end of the year. Try adding an extra $100-$200, that’s 1200-2400 extra you’ll have paid off, and that could take months off your loan!
If you would like to keep track, you can post on the forums. I recommend not posting actual amounts, but a percentage. For example “I paid off 50% of Credit card 2”
I admit I have no prize to award for completing this challenge. The only prize you get is going into 2011 with drastically reduced debt worries on your mind. Perhaps in future years, with future challenge ideas, I can offer prizes. :)
Alright. I’m heading out. See you all later!
January 13th, 2010 at 17:17
I wish I could forgot about my savings account and have auto-withdraw. :P So far I just have auto-withdraw on the car payment, which is nice.
I would tell everyone to tailor the goal to their own situation. I know it’s almost impossible to pay off a 30 year mortgage in a year, but if you actually set a goal (like you’re no new debt one) that will help keep you on the right track!