a pretty in the city gal on her way to debt freedom & healthy living a day at a time, who fills her time with yoga, music, books, baking and much much more. won't you join her?

Thursday, June 25, 2009

All aboard the m$ney train

So there were a few breathless moments when I thought I'd be made redundant the other week. Thinking ahead of times of stress and having no cushioning under you is a horrible feeling.. anyone in debt knows that feeling of tightness in the chest! So it's with great happiness I found out that no, I wasn't getting made redundant - and in fact I had such a good performance review that I got a nice litle pay rise : )

First thing I did when some extra $$ landed in my bank account was to pay off the American Excess credit card. DONE! No more debt on that card!

Next thing I did was to build up my $1000 emergency fund. DONE! It's a good feeling to have some money in there for a rainy day. Cushioning, it's nice to know you.

Next thing I did was pay a weeks extra rent. And then I put some extra payments onto my loan - which is now under $10 000. DONE!

I thought about paying extra on my rent, to know that I have payments taken care of.. but then I realised it would be silly of me to pay money into my landlords bank account and let him earn interest on it, when I could keep it in my ING account, earn interest on it myself, and put that towards my 3-6 months living expenses.

The Dave Ramsey baby steps to getting out of debt that are relevant to me right now are:
1. Save an emergency fund of $1000
2. List your debts from smallest to largest and make the minimum payments on all but the smallest - throw everything you can at this smallest one, get rid of it, then move onto the next smallest one, putting all the payments from debt 1 that you have now paid off onto debt 2... thus creating a Snowball Effect, getting bigger and bigger with each payment.
3. Up the emergency fund to contain 3-6 months of living expenses.

(The remaining 4 of the steps talk about retirement, education, home, investing)

So right now I'm onto Step 2, and only have the one loan repayment now. Minimum loan repayment is $275 each month. What is my goal when I'm out of debt? HOME baby!! My own home. There is no inheritance coming my way, it's all going to be done on my own, so I'm looking at saving 6 months worth of living expenses and then looking at options. Interest rates at the moment are FAB so if a market looked like it does today, I'd go in 100% borrow rate. How the hell are you meant to get into the market otherwise? But seriously, that day is years away and in the meantime it's about getting things on track.

It's good to have paid off that pesky credit card tho and see the end in sight.. it might still be a while off but it's visible : )

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