Wednesday, January 7, 2009

How to Pay it Down?

Last year has been great for me, most importantly because I realized the value of money. I never had my money organized; it’s ironic that I have my masters in Finance. I came across couple of PF bloggers that have really motivated me to gain control of finances. I started blogging in June-2008 with a debt of around $ 20,000, today I have $ 8000 remaining. I am proud of myself that I have come a long way. For anybody out there who is starting your “Pay it down” journey right now here are a few tips to get going.

Start with a plan: I know this is what many PF bloggers say and they say it for a reason- because it works. I did not plan anything fancy. I just used Excel on my computer. I listed all the debt I had, the target pay off date and how much I paid down as I progressed. I had it color coded to keep it interesting. I had red in the debt column and green in the ones I paid off. I was always curious to see how my excel page would like if everything was green, and I have only one column in “RED” left now. Having a plan gives you a purpose and acting with a purpose in mind will always yield results.

Start paying your debt by paying yourself first: I am a big fan of Ramit This was the tip from him. I opened ING Savings account and automated 50 dollars bi-weekly to it,when I decided to get control of my finances,even before paying my CC’s ,I slowly increased that amount 200 now. This way you will be saving money for unforeseen expenses instead of digging into your CC again.

Don’t Nickel n Dime: When I started paying off my debt, I was trying to save every cent which really did not make me feel good. I wrote a post about how I saved 10 dollars a month by making breakfast at home but I realized its just waste of time and resources. If having breakfast is something that you look forward to, go and get it from your cafeteria at work. It’s the big items that save you money not the small ones and that’s my next tip.

Save on big ticketed items: The reason I was able to pay off 12,000 in 6 months was because I kept myself away from making big purchases. I loved to shop so I kept myself away from the mall. I enrolled in 24hr fitness with a friend for 30 dollars month and started going to GYM after work. This way I got my workout and I had to go home to freshen up instead of going out elsewhere. I haven’t been to the mall for more than 4 months until last Dec-2008.

Keep yourself busy: You end up spending more money if you have too much free time. Pick up a book and start reading or learn something that will enhance your career. This way by the time your have paid off your debt you would have learnt something new that might lead to an increase in your income.


Follow the snowball method of paying down debt: Seeing results sooner will keep us motivated than having to wait for longer periods. I followed the snowball method to pay down mine. You simply have to arrange your debt from the lowest amount owed to the highest and keep paying if off in that order that way mentally it keeps you motivated to clear off the remaining debt. I followed this method, however, I called up my CC Company and transferred the high balances on to a zero interest card that way I won’t be accumulating too much interest when I am knocking off smaller balances.


I hope these tips will help you pay off your debt as they helped me. Let me know if you have any more tips. All the best and remember that;

" You cannot go back and have a new beginning but you can always start NOW and have a new ending."

1 comment:

Anonymous said...

Wow 12k in 6 months! That's really amazing. I love your bars on the right to keep track of where you are.

It's not the normal looking bar so it looks pretty interesting. Great job!