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Two years ago, I was $65,000 in debt; $13,200 of it was credit card debt. About a year ago, I started paying it off. I put extra towards every credit card, my auto loan and my mortgage, hoping to get them all paid down and eventually paid off. It did not seem like I was making any progress, so I started doing research and found I was approaching everything wrong. I started following personal finance blogs and trying to figure out what I needed to do. I continued my above minimum payments to every account, but put extra into the highest interest card.
Through the blogs I followed, I was given the opportunity to work with a personal finance coach for a few months to help me set and achieve my goals. The goals I set for myself: pay off all consumer debt including my mortgage, and prepare for retirement by creating an emergency savings account of $30,000 to $40,000. I am a public sector employee, so I have my public retirement fund, and I have been contributing to a deferred compensation fund since the early 1980s. I also pay into Social Security, so that will be an option in the future as well.
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I focused on paying debt using the avalanche method, meaning I paid off the highest interest cards first. In order to expedite the process, I transferred my two highest interest card balances to a low interest credit card at my credit union and then started using aggressive payroll deductions to pay off that card.
My total debt is now $41,400, and only $3,400 of that is credit card debt. My last credit card will be paid off in the spring of 2012; I am on track to be debt free by early 2014. I have learned to focus, to reduce spending and to budget.
In my next post I will discuss overcoming my fear of facing my debt.
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