Done with Debt?
Posted by Gail | Filed under Goals, Take Control
Take this test:
If you buy a $2,300 couch using your credit card and you pay only the minimum on the card at 18.99% interest, how long will it take you to pay it off?
3 years 6 years
7 years 10 years
What will the couch cost you by the time it’s paid off?
$2,800 $3,200
$3,600 $4,300
Short test. Let’s see how you did.
If you buy a $2,300 couch using your credit card and you pay only the minimum on the card at 18.99% interest, it will take you 9.9 years to pay it off and you’ll pay $1,998 in interest, taking the cost of the couch to just under $4,300 once it’s paid in full.
No doubt the couch looks a little ratty, and you may be wondering why you paid almost twice as much as the store said you would as you look at it disintegrating even before it’s paid off. Hey, that’s the power of interest working against you.
Sick and tired of being in debt? Ready to cut off the credit card company and put your money to work for you, instead of for them?
1. Make a plan. Without a plan, you’re simply throwing money at the problem debt without a clear sense of what you’re trying to accomplish. Start by making a list of all the people to whom you owe money – your creditors. Put the list in order from highest interest rate to lowest. Make sure you’re putting your greatest effort at repayment against the debt with the highest rate.
2. Call and negotiate. If you have extremely high rates on your cards, it’s time to put your negotiating skills to work. Call and describe the pickle you’re in. Ask if they’d be willing to eliminate the late fee and interest for a month or two. Try and get them to lower the rate on your card. If they won’t ask if there’s another card that they can give you that has a lower interest rate, and transfer the balance.
3. Pay on time. Pay at least the minimum on all your debts, and make those payments on time. That will not only help you avoid fees, it’ll stop the interest rate from bouncing up because you’ve broken the rules. And it’ll improve your credit history laying the groundwork for future rate negotiations.
4. Pay more. If you commit to paying at least 10% of your balance every month, you’ll be out of the hole in about three years, before debt fatigue has a chance to take hold. Can’t come up with 10%? Get a second job, or a third job, or a better job. Do whatever it takes. You spent the money. Now it’s time to pay it back. And the longer it takes you, the more painful and costly it will be, so bust your butt to make that debt go away.
5. Set specific goals. If you want to stay motivated, set milestones that are achievable and for which you can pat yourself on the back. Maybe you’ll have that department store card paid off in six months. Perhaps you want to be debt-free before your wedding. Whatever goal you set, write it down and hang it where you can see it every day. As you get closer to your goal, the motivation to hit your target will carry you forward.
None of this will work if you keep using your credit cards so freeze them, chop ‘em up, or hide them behind the washing machine. Find something positive to do with the time you used to spend shopping. Avoid magazines and catalogue that may leave you salivating. Focus on your goal. And if you need a debt-mate to talk you through your spending withdrawal, find a friend who can help steer you clear of the mall and the temptation to spend. That’s what true friends are for.
February 4, 2010 at 7:47 am
I’m very done with debt. never carrying a balance ont he credit cards and as soon as my line of credit is done this year, then I’m completely done with debt, till I buy a home and need a mortgage.
regards,
Jason
February 4, 2010 at 7:57 am
It seems I am one of the very lucky ones who was taught from a young age that you have to save for the things you want and you must also ALWAYS also save for a rainy day. My Dad said you always need to have what he called a “kicker” which is $50 or 100 tucked away for when something comes up or you want to splurge on something. So, I have been blessed to never get myself into the situation where I must make a plan to get out of debt. Thanks Dad!
February 4, 2010 at 8:42 am
Gail,
I completely agree that INTEREST is truly the bane of debt and debt-repayment. The faster the elimination of it, the more money you can use towards fulfilling your own goals, dreams and desires. It takes ALOT of motivation and dedication (like any other plan in life) to stick by your path to being “interest/debt free” but I know deep inside that it is TRULY worth it, and EACH and EVERYONE of US CAN DO IT!
On a second note, I just wanted to thank you,Gail, for keeping this daily blog going for as long as you have. It is that lovely daily reminder I need to keep going, that proverbial “debt-mate” to provide the encouragement I need when my ambitions begin to wane. Although the finale of “‘Til Debt Do U$ Part” has passed, I truly hope you continue to write these altruistic and inspirational articles, for they have more of a positive effect on the general public than you could ever fathom.
Take Care Everyone!
February 4, 2010 at 8:45 am
Great advice Gail. It takes a lot of determination to get out of debt. I like Aimee’s idea even more. Just like drugs or alcohol, it’s even better if you just don’t start. Avoiding debt in the first place is a lot easier than dealing with it afterwards.
February 4, 2010 at 9:15 am
I agree with Adrian. I love the daily blog and find the information truly invaluable. I read it every morning while I have my coffee, a great way to start the day! Thank you Gail.
Have a great day
February 4, 2010 at 9:20 am
a GREAT BIG THANKS to you Gail!
You brighten so many people’s days!
: )
Mel
February 4, 2010 at 9:39 am
I have pointed several people towards this website who say they want to get a grasp on their financial affairs. As I found out a year ago, all the tools and support are here to get going towards a debt free life. I found once I got going on it, as well as my home office purged and organized, it became very addicting. Gail’s daily blog keeps me motivated to keep going. I just wish I could make the people I pointed towards the website actually take action, but it’s their lives I suppose. You can lead a horse to water….
February 4, 2010 at 9:55 am
Great advice as always Gail on gaining control of debt. If people would just stand back and understand the true cost of things versus how much it will cost them per month, a lot of people would shy away from financing loans, credit cards, long mortgage amortizations, monthly mortgage costs, etc.
It’s all about understanding how money works. The difference between being rich and being poor has nothing to do with how much money one makes, but more so on how knowledgable one is about money.
February 4, 2010 at 10:11 am
Large Debt is a horrible thing. It can cause many sleepless nights, frustration during the day, and depression when you get your pay cheque.
Starting in January, I have now taken charge to get my debt under control. This week, the company I work for has just been bought out by another company, so job security is not good. However, before this happened, I was putting in applications for a part-time weekend position. I have encouraged my husband, too, that we have to supplement our income. In his position, his hours have been cut recently.
Each month still comes along, and there are bills to pay, and if we didn’t have the credit card debt, we would be fine. So, our priority right now is getting that debt paid off, and establishing an emergency fund. January was difficult, but we made it. I gave myself a virtual star! lol So, I am very determined to continue with my strategy for February. This weekend will be the test when I have to go grocery shopping with cash and coupons in hand. SuperBowl weekend and I will have to say “no” to a lot of things and stick to the list.
Gail’s daily blog inspires me and I look forward to reading it everyday. And I enjoy reading the comments from everyone. Thank you Gail!
February 4, 2010 at 10:25 am
Great Blog, I agree with Linda, I read this every morning with my coffee- great motivating way to start off the day! I always learn something new or a better way to do something!
Is Till Debt do us part the show over? for good?
February 4, 2010 at 10:34 am
Awesome advice! Love reading your advice everyday, it gives me the motivation to pay off debt and life a debt free life.
February 4, 2010 at 10:59 am
I love all those ideas. We don’t carry any debt other than our mortgage and car payments and like Aimee and 2 Cents said, it’s better not to start. It’s much easier to buy only what you can afford than trying to find out how to make some extra cash to make payments towards credit card bills, loans etc.
Thank you for this test Gail. Love doing some number crunching first thing in the morning! HAHA
And like all others said.. thanks for writing every day. Your blog is the first one I read in the morning and it definitely keeps me motivated to use only what’s in the jars. Don’t know why I didn’t get my butt in gear sooner and tried living on a budget. My husband and I are much happier now that we know where every cent is going.
February 4, 2010 at 11:02 am
The couch scenario is frightening. This is why I am striving to get rid of our credit card debt. My mortgage comes up for renewal in September and I am determined to get the credit cards paid off by then. It will be hard but I am sure we can do it.
Without this site and the show I would probably have never bothered.
I always thought I was a smart person but when you really have no interest in finances, it can be hard to wade through the lingo. Gail makes it easy to understand and makes it interesting.
Thank you Gail.
February 4, 2010 at 11:28 am
Gail, all your posts about keeping on target and being determined could not be coming at a better time. It is coming up on our 1-year anniversary of taking control of our debt, and yes, it is tiring and frustrating at times.
The debt still looms large, and sometimes I feel sickened when I look at things we bought on credit and think “this is worn out/broken/used up, I still haven’t paid for it, and it is costing me double its worth”!!
However, we’ve been sticking to our plan, and things are starting to slowly turn around. Thanks for your daily “pull-up-your-socks” post!
February 4, 2010 at 12:12 pm
I wonder how many things we (people with credit card & LOC debt) purchased that we no longer have, or have forgotten, and are still paying for.
Thanks for your no nonsense approach Gail. I used the shock tactics that you used at the beginning of TDDUP to get my DH to realize we NEEDED to follow a budget. Before that, he said it wouldn’t work. Now, he always checks the jars before a purchase. We are on the way to paying back a ridiculously large amount of debt from a new vehicle, home renovations, and STUPID, STUPID spending.
You get a gold star!
February 4, 2010 at 12:21 pm
oh, yes… i am so done with it! well, two things really helped:
1. not bringing my credit cards with me (i still use them for paying bills for rewards points but not for indulgent shopping)
2. being conscious of my spending habits (that includes getting educated by Gail re money matters)
keep it up peeps!
February 4, 2010 at 12:29 pm
Done. done. sooooo done with debt. That’s why I’m on a plan that will see me out of debt by the summer of 2011. This means a tight belt, and not much wiggle room at all in the budget. But it feels great to be marching towards the DONW WITH DEBT DAY!
then it’ll be all about savings and future planning, house hunting and the like. YAY!
February 4, 2010 at 1:34 pm
On our way too, and almost there. Our credit card debt was from using the credit card at the gas station for a full year… so last August I added $3800 of credit card debt to our LOC, racking up the LOC balance to $8000. We have just over $3000 left on the LOC – basically the gas expense from 2007! I hate to think of how much that gas ended up costing us, considering it was expensive enough when it was pumped into the car! Yikes! The good news is that in a few short months, the LOC will be fully paid and the credit cards are at zero and we will be “done with debt” too. Looking forward to that day!!!
February 4, 2010 at 1:40 pm
We just got our annual mortgage update paper today. It basically says “congratulations, you have paid twice as much in interest as on the principal last year”. Rather disgusting and discouraging. But we have a plan and we must stick to it and one day (sooner than the bank is expecting), we will pay off our debt and mortgage.
February 4, 2010 at 1:42 pm
I agree with Adrian as well. Every morning I read this blog and learn something valuable.
Gail, you are making such a big positive difference in so many people’s lives! You are a wonder! Thank you!
February 4, 2010 at 1:56 pm
Pam, I’m on the same journey as you it seems…debt free in Summer of 2010. After that, I’m taking about 3 months’ worth of debt repayments and taking my family on a vacation in the Winter I’ve decided…my gift to myself (just before I turn 40) and my gift to my family for the rein-tightening I’ve had to do for 18 months (the time it’ll take to be debt free).
I am soooo done with debt, that I wrote in my journal last night that I was open to the financial windfalls that the universe sees fit to send to me…yeah, it was a desperate plea for cash to fall from the sky, but hey, if The Secret is right, then I’ve been doing this ALLLLL wrong! I’ve been focusing on the debt instead of on the income that helps me pay down the debt.
I know, I KNOW…it’s the hard work that gets the debt paid off, not the hoping and wishing for mannah from the skies (or in this case, money), but it doesn’t hurt to dream while I’m slogging it out in the trenches between now and August 18th, 2011 right??
February 4, 2010 at 1:56 pm
Debt at the sovereign (government) level is much in the news today and giving the markets a good whacking. I guess global government leaders don’t read Gail’s blog.
February 4, 2010 at 1:57 pm
Argh, that 2010 should read 2011…talk about wishful thinking! Or maybe a universal Freudian slip…maybe the Universe heard my little wish last night after all! *ha ha ha*
February 4, 2010 at 2:22 pm
I just have my student loan debt left and I’m tackling that with Gusto!! 2010 is my debt free year!
February 4, 2010 at 3:52 pm
Buying anything on credit and not paying it off in total when due makes no sense. The only winners are the banks and credit card companies. Something should be done about “buy now, pay later” plans, store-front cash places found at every plaza, credit card offers arriving in the mail, and banks offering mortages and lines of credit to anyone who walks through the door. It’s temptation that many people can’t resist. It’s just like the candy at the the checkout counter when I’m on diet.
I’m debt free but I sure need to lose a few pounds.
February 4, 2010 at 4:00 pm
We are completely done with “volunteering” for debt. The process took about 35 years – 28 getting into debt and 7 getting out of debt and playing catchup to build some emergency and retirement resources. I try not to think about how much our debtors life style actually cost us, but I know. Living on cash, budgeting and planning spending works wonders. During these past 7 years we have learned that to live without a safety net is crazy and irresponsible. We have regained some sanity and become responsible however – you can’t really ever play a complete game of catch-up when a lot of time has been wasted and you can plan for emergencies but you can actually never have enough if the Universe decides to rain and snow on you at the same time. All you can do is do your best, be determined and consistent and know that you have new skills that will help you to recover. If we end up back in debt it will be because all our resources were used up first not because I went on a BOGO shoe shopping spree with no money in the bank and a credit card collapsing under last month’s balance.
February 4, 2010 at 4:32 pm
I have been following this blog for the past 2 years. When you talk about baby steps, my first goals were to not go over the limit on the credit card which caused a $25 fee, to start an emergency fund and tackle $33000 in consumer and student debt. Now we have 6 months worth of expenses, able to pay the credit card completely off every month, and get our consumer debt down to 1500 which should be paid off in the next couple months. Now we don’t argue about money, we discuss our goals and expectations. We enjoy more time in our home, participate in everything we can find that is free and our’s and our children’s sports is our entertainment. It can be done it just takes time, perseverance and figuring out your priorities.
Sending debt free hugs to all of you!
ps: Gail are you interested in having a picnic in the park again this year? We are heading to Toronto at the beginning of July and would love to meet up again and introduce you to my husband
February 4, 2010 at 5:16 pm
I just discovered your show here in US and now I am addicted. I adopted the jars and have been totally amazed by how more conscious it makes me of spending but what I spend on. I think setting a goal and seeing a end game helps to curb the shopping. Thanks Gail, you were the kick in the pants I needed.
February 4, 2010 at 6:34 pm
As always I love your post today!! The furniture example struck me because last year I saved up for a large dining room set, paid in full with cash, I just saved up for a new couch (paid cash in full) and am mow saving for the matching loveseat! Next up will be new lamps… The best part about my new furniture is that when it comes into our home, we actually OWN it! It’s a good feeling!!
February 4, 2010 at 6:35 pm
This is why I never carry a balance on any of my credit cards, the interest is highway robbery! I wish that more people were aware of how exorbitant it truly is.
February 4, 2010 at 8:33 pm
First of all, I love to read your blog everyday. I discovered it a few months ago and I’m now addicted. It really helps me stay focus. So hands up for you Gail!!!
I was dragging a cc debt (not super high, about 1000$) but still I didn’t like that fealing. Just cleared it up a month ago.
I’m really not good to manage my cc, I take it for cash and go overboard on stupid stuff I buy with it. I have tried to stop this bad habit many times but failed. I decided to take a bit step and told my boyfriend to take my cc and hide it from me so now I don’t have access to it. It may sound extreme as a solution but for me this is the only way it works. Its been a month and a half and bu current balance on my cc is at 0$. It feels great and I will continue this way.
February 4, 2010 at 9:06 pm
I learned my credit card debt lesson many years ago, so don’t do consumer debt anymore. I’d rather use my credit card to get an ‘interest-free’ loan and pay it off in full when it comes due – no minimum payments here. These cc companies should be forced to include with your statement a chart showing the amount of interest and the length of time it would actually take if you only make the minimum payment. It’s kinda hard to miss the obvious when it is staring you in the face – but then again, they wouldn’t make any money if people only knew . . . except for those folks who consider any credit available to them as part of their income! I’d rather keep my hard earned money than blindly give it away to banks/credit card companies.
For those of you who aren’t aware, Gail was on Steven and Chris yesterday (http://www.cbc.ca/video/#/Shows/Steven_and_Chris/ID=1403960390). It is episode 147/Feb 3 – I believe her segment is @ the 22 minute mark). Enjoy.
February 4, 2010 at 10:27 pm
Jo G – we are on the one month in thing too!
It’s very eye opening and scary too that we did this to ourselves. We will be out of debt by the end of 2013 unless the money faires come and grant us a boon!
I never realized how much we spent on things like groceries and gas let alone crap and crap.
February 4, 2010 at 10:40 pm
Now I’m feeling guilty. Just as I got out of debt, the washing machine went kaput. Part of my emergency fund had also just gone on an additional tax payment from a re-evaluation.
So I purchased it on my credit card. But wait – there’s more. The store and my card would let me buy a new machine at 24 months interest-free instalments. I re-jigged my monthly budget and worked out that I could buy the machine I wanted in 12 monthly instalments instead of 24. The salesperson looked surprised, I guess not many people ask to pay more each month. I also received supermarket vouchers and every month I get points on my card.
The machine is now half mine. I paid no interest on the cc payment as I have the amount in my budget and I pay it off in full every month. Yet I still feel guilty.
February 4, 2010 at 10:46 pm
Ajana:
No interest paid, no guilt needed! (Unless you feel bad about keeeping your money and keeping it from the merchant.) I think your approach is great. Just stick to the plan! Once the machine is all yours, keep putting that amount aside for those rainy days. You made the best of your situation.
February 5, 2010 at 12:46 am
hi moneymagnet,
thanks for the link!
February 5, 2010 at 12:47 am
hei Carla…
what you said is so TRUE-lala!
February 5, 2010 at 12:50 am
i will be taking a vacation back home (hoping that the ontario teachers won’t do the strike) after this term… and i am looking forward to it without having to worry about getting into debt (or at least so much debt). i have been saving for it and my ticket is now paid and all the gifts for my family and friends… and i have also saved for fun! yipeeeeeeee!!!!
February 5, 2010 at 4:12 pm
I was just starting on my way, with a modest emergency fund, and the credit cards put away, when two things happened: January was an unusually low-income month, and my car decided to have multiple things fail at once. So, $1500 in repair bills later, with my emergaency fund gone and my credit maxed out, I am very glad that we actually had paid down enough of our card debt that we could get our car repaired, otherwise, we would lose out on income.
Thank-you Gail. I really want to be out of debt, and I plan to be before 2015, but it just isn’t happening right now.
February 5, 2010 at 5:04 pm
I am kicking my credit card debt to the kerb! I have the plan in place I will have paid one card off by April and the second one by December! So long credit card debt!
February 8, 2010 at 3:47 pm
HI Gail,
I just have a lil question. I have $3000 on a visa card. It should be paid off in 3 months as i have an extra $1500 a month to go towards savings and debt repayment. I also have a line of credit that i’m working on paying off.. My question is that i have $1000 available to me on the line of credit… Should i use the available credit to put towards my visa card as that interest rate is significantly less??
Either way, the debt should be paid off by the end of the year. Was just wondering if this is a smart way to go?
March 5, 2010 at 3:54 am
Found your blog on Yahoo and was so glad i did. That was a warming read. I have a small question.Is it OK if i send you an email???…