Elvis and I have no credit cards. None. We do have a bank debit card with a Visa logo on it that can be used for purchases, but we have to have the money in the bank.
Q: Domestic Goddess, how do you go on vacation? Pay car repairs? How can you be credit card free??
A: Wait until we have saved up enough money and pay cash.
There are a lot of books available at your local library that will tell you how to dig yourself out of debt. Choose carefully, some are geared towards those with champagne tastes and caviar breath. I've never been fond of either - luckily.
Have an 'all hell broke loose' fund set aside for things that seem to happen in life - flat tires, busted pipes. The small things that catch us off guard, but not so small that you think ahead and have cash available to cover it. The popular line of thinking is that the emergency fund should be $1000. No, that won't cover every OOPS moment that can happen, but it sure can make a difference between sinking and swimming that month.
After you have the money set aside, hack away at your debt. People argue about balance vs. interest. I say balance first. Once you have a small debt paid off, a feeling of accomplishment comes over you, and it's one less creditor knocking down your door. Send in the minimum payments to the others and throw everything you have at the first in line.
For Elvis and I, it is our cars. In August of 2006 I bought a brand spanking new car. I made the minimum payments of 271.17 for about the first 36 months, give or take a few. We bumped that up to $400 a month to get it paid off a few months early.
I just sent in $2420 which leaves a balance of $352. I'll have that paid off this Friday -18 months early. I will do a small dance when I send the money over, but not as big of one had I actually thought about paying extra principals 3 years earlier.
How I wish that would be the end of our story. Alas it is not. In June of 2010 we bought a certified pre-owned car for Elvis. Minimum payments of $217.57 and the current balance is $8768.04 *sigh*
The plan -- take the money I was sending in for my car and a wee bit more and put it towards his car. I am HOPING to have his car paid off by New Years Eve 2011 - 42 months early!!!
In the meantime, we still have $150 going to the other account every other week to work towards saving for 3 months of expenses... but, that's another story.
