My Credit Card Debt Repayment Plan
I am in debt. There’s no other way to put it except to say that my spending on credit cards on the run up to and after my recent marriage has left me with a sizable balance on my credit card. Like many people, I have buried my head in the sand and hoped for the best. I kept thinking, who cares when you can get away with paying out the minimum every month? Well, eventually it hits home. I have a problem. I have too much credit card debt and I need to clear it ASAP.
Background Details
Credit Card Debt
My starting balance is $9,900. Up until last week this has been the split across 2 credit cards.
- Credit card 1:Â $4,900
- Credit card 2: $5,000
Income & Costs
I am not a big earner, but fortunately my overheads are low. I do not spend money on clothes. I do not eat out a lot, and if I do I get a deal. I drive at 60 MPH so that I get more miles to the gallon and I have to spend less on refills. I earn $1,000 per month, I have no bonuses. Ever. Here are my monthly expenses.
- Mobile phone: $30
- Car insurance: $45
- Personal insurance: $30
- Mortgage: $350
- Loan repayments: $70
- Petrol: $50
- Living: $50
Subtracting my cost of living from my wage leaves me with: $515 $375
Repaying In Earnest
The first part in my debt repayment plan was to consolidate my debt, so I have consolidated my debt from both cards and put it on a new credit card that has is interest free on balance transfers and new purchases until January 2008. The thing that I like / dislike about this card is that it has a minimum monthly repayment of 3%. Let me just outline my thoughts on this. I like that I will have to pay out 3% of my balance because it is so easy to pay out nothing, but at the same time it might prove a bit much when times get tight. Nevertheless, I plan to stick with this credit card until January 2008 when hopefully I will not have any more credit card debt.
Paying back this rather large debt has already started in earnest. I have managed to get together $1,500 that has already been paid into the credit card. So I am already down to a balance of $8,400 with my first monthly repayment due mid-December.
Between now and the time of my first scheduled repayment due in the middle of December I will be paying in another lump payment of $750, which will bring down my balance to $7,650. (I just wish every month will be like this, but it won’t.) I anticipate my first repayment to be somewhere in the order of $300, bringing the balance down to $7,350 by the end of December.
So from January on I will be paying at least $220 to service this debt, but if I paid back at this rate it would take 35 months to clear my account. No way! I am not on for that. I would rather live on the breadline for a few months and make a significant dent into this debt that be stuck with it for the next 3 years.
My Monthly Repayment Plan
I plan on paying back at least $450 of my credit card debt per month. It’s going to be tight, and I’m sure I’m going to slip behind schedule somewhere along the line. If I can pull this off I should be credit card debt free within 16 months at most. But I am looking to take on new work, any income from which will be put directly towards my debt repayment plan.
December 5th, 2006 at 2:48 am
Thanks for sharing your plan to debt free. I just want to give a piece of my mind. You said you going to pay $450 every month from your balance of $515. However, from what I read, I think you don’t have any emergency fund right? Your debt free journey will need 16 months of time and within this time there are a lot of things can be happened. So what I suggest is maybe you should build an emergency fund.
One more thing, I can’t understand how you can get $515 after subtracting your living expenses from $1000.
December 5th, 2006 at 3:19 am
Because I am not very good at maths?
Thanks for pointing that out Harrison!
December 14th, 2006 at 6:09 pm
This is a nice blog, thanks for the info, keep on posting relevant issues/topics.
You’ve done a great job in getting your credit cards but like a lot of people, you may find yourself in a bit over your head because life has a way of throwing obstacles in your path and those obstacles generally cost money.
Here is another resource I’d like to share about The Best Ways to Pay off Your Credit Card Debt. Hope you’ll find it and your many readers very useful.
Have a super day!
December 27th, 2006 at 8:45 am
[…] Credit Cave outlines his debt repayment plan. (Keep it up Andy!) […]
February 21st, 2007 at 4:45 pm
[…] Many people are sometimes able to avoid bankruptcy by negotiating a settlement with their credit card companies. On occasion when your finances are in tough shape you may find yourself negotiating a lump sump debt settlement on your credit card. To achieve such a settlement, a lawyer or credit counseling agency may also assist. However, I would highly advise you try a debt repayment plan first, as this will affect your credit score. […]