August 2006 Financial Plan
Now that I have a good idea of where I stand in terms of my net worth and how my debts are spread, I need to get cracking on paying it down!
Here is my plan for this month considering my starting point of $4850 in cash on hand.
- Pay regular monthly expenses: $2350 (also includes my food budget which is still under review).
- Pay my parents this month’s loan payment: $350.
- Pay CC1 off in full in 2 installments over the month $448 on 8/10 and $400 on 8/31. I am using two payments this month because I do not have an emergency fund set up yet and so I need to keep some cash on hand until my next paycheck (9/1).
- Pay minimum payments on CC2, CC3, CC4, and RCC2 on 8/31. Total: $90.
- Use half of the remaining $1200 on RCC1 on 8/31: $600.
- Use half of the new remaining to start an Emergency Fund (in a high yield savings account) on 8/31: $300.
- Use the rest as the beginning of my Roth IRA on 8/31: $300.
I pretty much just decided this off the top of my head, so if anyone has any suggestions on how to better manage my situation, please comment!
My thought process behind this plan is to:
- Pay off regular monthly expenses (rent, utilities, auto, food).
- Attack the highest interest rate credit account.
- Not miss any payments on the lowest interest rate credit accounts. Here is where I get a bit unsure of my decisions…
- Attack next highest interest rate credit accounts and start my savings process. (HELP! Is this right??)
Here goes nothing…
Hey Red. Check out my Debt-Proof Living series, particularly Part 3 - Contingency Fund and Part 4 - Debt Repayment. This might help you with your situation.
just curious - who are you doing your e-fund and IRA through?
I like your approach on the credit cards and i’ve adapted it in my new budget plan. I really reccomend PearBudget (http://www.pearbudget.com) for budgeting if you aren’t using anything already, it works great.
Great site, but i’m curious, how did you find out that I linked you?
SleepyOreo
Yes, pay down the highest rate first. Every penny goes toward it. When it’s gone, move to the next highest rate.
Of course, if you see an invitation in the mail for 0% introductory offer, followed by a rate that is competitive with what you have now, then transfer that high rate to the zero rate.
If you can get your debts down to the 5% area, that’s when their meaning subtly shifts. Until then, pay them off, every penny toward them.
Here’s a great way to think about it: If you have a debt at 10%, paying it off is the same as making an investment at 10%! You can’t invest in CD’s at 10%, so the debt payoff is more valuable than any savings move you can make.