Changing Mentality

I started this blog with the intention of getting debt free and getting a stronger financial foothold. I had $32,661 worth of debt (and $13,882 worth of assets).

Now, almost three years later, I have doubled my assets (I’m around $27,000-ish right now, including my retirement which makes up the bulk of this increase). However, my debt is $28,589.

That’s right. In the course of 3 years I’ve only actually been able to reduce my debt by about $4,000. Now, this isn’t the minimum that my debt has been. But seeing that the change is so small has lit a fire under me.

I realize that I’ve been approaching this debt thing the wrong way. I made a budget that included paying extra on my debt and putting any extra money I get onto my debt. However, it doesn’t take a Ph.D. to recognize that since I’ve been playing this strategy for three years and am just about where I started (minus $4,000), I have to make a change.

I’ve decided that the only way I can get out of this debt in a reasonable time frame (I’m going to set the date as December 31st, 2012), I have to stop treating my debt as an account that I throw extra  money at and instead think of my debt as a bill.

What does this mean? Instead of thinking that my minimum payment on my credit card is $400 and anything I pay over it is a “bonus” – my new “minimum payment” is now the payment that it will take me to pay off my debt by December 2012.

That means 16 months from now I’ll need to pay off $15,960 worth of credit card debt.

Using CNN debt calculator I figured out that it will take a payment of slightly over $1,000/month to achieve this goal. Also, after 3 months my bed will be paid off (it is at 0% interest), which means I’ll have another $115 to dedicate to my new “minimum payment”.

With my new mentality of this amount being my new minimum payment, I have to adjust my budget to be able to afford this. So I spent the majority of this afternoon figuring this out.

Above you can see summary of how this works out based on my new salary that I negotiated (which starts August 15th). I’ve decreased quite a few parts of my budget including emergency fund, food, doggy daycare, miscellaneous, gas, and clothes. The best part of this budget is that I will feel pinched (this is good as it reminds me of my ultimate goal), but I don’t think I’ll feel completely cash strapped. Also, in a few months (presuming no emergency happens) I’ll be able to decrease the emergency fund savings even more and put that onto my debt.

I’m excited and scared for this new mentality towards debt. I hope I can stick with it. I’ll start on my next paycheck, which is August 15th. I can’t wait to see some fast movement because of my large payments I’ll be making.


14 Responses to Changing Mentality

  1. LBC Teacher says:

    Good for you! I’ve missed reading your posts lately. And I think a new mentality will be a good thing, to change it up! You can do it!

  2. Nice that you took fresh eyes to it! I bet you’re itching for your next paycheck!

  3. I love it! A switch in mentality can make all the difference. I’m rooting for you!

  4. Lane says:

    Welcome back! Your blog was one of the four blogs I read religiously back when I was a PF lurker. Your presence was dearly missed : )

    Love the new mentality. My consumer debts totaling $37k have a deadline of December 2012, so I’ll be running with the same mentality well into 2012 with you.

  5. Amanda says:

    Like the other commenters I miss your writing. A great reasource you might want to look into is Gail Vaz Oxlade’s Blog ( She is the host of “Til Debt Do Us Part” (which I believe plays in the states as well as Canada), and she has a fantastic library of posts about everything PF. Her debt budget worksheets might help. Best of luck.

  6. Glad to hear you have a plan. It’s very easy, when debt is manageable, to pay minimums and ignore it, which the card issuers are happy to let you do forever.

    I don’t know what the interest rate on your CC is, but if you have decent credit, you might be able to lower it by getting a fixed income loan. Even if you get exactly the same rate, it might be a good idea to move from a variable to a fixed rate, as, with the recent downgrade, it is almost a certainty that interest rates will go up for dollar-denominated loans in the next 18 months. If you can’t get such a loan from your bank, I know other PF bloggers have had good success with the Lending Club, although I have not tried it myself (they offer 3 year terms, bit you can pay off early).

  7. Katie says:

    This is how I’ve been handling my student loan debt this year, after getting my emergency fund in place and deciding I’m ready to be done with those loans. It feels like a slog sometimes, but the progress feels substantial compared to only making minimum payments. I also think it’s pretty empowering to decide when YOU want to be done with a debt and figure out what you need to pay each month to get there, instead of letting your lenders decide what those numbers should be. I pay at least $600 each month, and try to get it closer to $700. My minimum payment is only $62, but I just want that sucker GONE. If I stay on track, I’ll be all paid off by this January! I’ll be following your progress!

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  11. good luck. I hope this new plan of attack works for you!

  12. cw531 says:

    Good luck. Good job finding so much money to throw at your debt to hit you goal. Another option is to stop paying into your retirement plan until your debt it paid off. That frees up another $200 which would help. Dave Ramsey says to hit your debt with all you have and going a year without money going toward your retirement is ok to get the debt gone. Just another thought to help up the amount you are paying on it.

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