Wednesday, June 9, 2010

Another Idea

Here is another idea for prioritizing which debt to pay off first: pay the most hated debt first.

Step # 2

Picking up with step # 2 of our debt plan.

After we gathered up all of our bills and figured out the total amount we owed, the next step for us was to document our debt. We created an Excel chart, but any kind of chart or document will do, that included the following information:
  • Name of creditor (i.e. Citibank)

  • Amount of debt

  • Interest rate (including any details regarding short term interest rate deals, i.e. 0% expiring on X date)

  • Minimum payment

  • Monthly payment due date
Then we determined the method of debt repayment. You've got a few choices here, you can go with paying highest interest rate debt first (which will likely save you money in the long run) or go with the debt snowball method (pay off the smallest debts first). After some debate, we went with the snowball method. Pick which ever method you think is going to work for you.

Read about Step 1 here.

Tuesday, June 8, 2010

June Numbers

(1) Max out 401ks - $33,000
(2) Max out IRAs - $10,000
(3) Prepay mortgage - $1200
(4) Add to baby fund - $3500
(5) Add to emergency fund - $7000
(6) House/Furniture fund - $3000
Total - $57,700

(1) - $11,832 (36%) (goal is $33,000)
(2) - $8500 (85%) (goal is $10,000)
(3) - $500 (42%) (goal is $1200)
(4) - $1500 (43%) ($7861 in our baby fund, goal is $10,000)
(5) - $-800 (-11%) ($25,839 in our emergency fund, goal is $32,000)
(6) - $3000 (100%) (Completed)
Total - $24,532 (43%)

Added more to Mr. Sam's IRA with the market down again this week.

Thursday, June 3, 2010

Debt-Free Vacation

I just returned from my annual girls Memorial Day trip/vacation and want to share a bit about how to plan a debt-free vacation.

(1) I have an automated transfer into a vacation/travel fund in the amount of $50.00 per pay-period or $100 a month. Obviously, this is not enough money to fund a full vacation, but it is generally enough to pay for a flight. While we don't normally use credit cards, I do use them when I book a flight, a hotel and a rental car. So I book a flight and pay for it using my credit card, but I normally have more than enough to pay for the flight in our ING travel/vacation account.
(2) I book the hotel, again I use my credit card, but I also find out if there is a charge to the card or whether or not I can pay for the hotel upon check out. I add the cost of the hotel to my travel spending plan.
(3) I think about what I'll be doing on my travels: spa, tour and entry fees, shows, etc. And I sketch out a spending plan for expenses I'm pretty sure I'm going to incur (these are planned expenses).
(4) I also think about daily expenses: dining, shopping and misc. expenses like tips, cab and bus fares. I normally plan for a $100 a day in food, dining, cocktails, shopping and misc. for just me ($200 a day when I travel with Mr. Sam). These are what I call unplanned expenses.
(5) I add up the flight, hotel, planned and unplanned expenses for my total. I deduct the amount already in the travel fund and come up with my unfunded travel/vacation amount. Then I take my unfunded amount and fund it by setting up an auto transfer to my travel fund for the weeks between when I plan my travel and when I leave. Since I normally plan travel at least a few months in advance this works pretty well for me.
(6) Finally, at the end of my travel I either leave the expenses like hotel and rental car on my credit card and immediately pay from my travel fund or I pay for the hotel and rental car upon check out/return using my Visa debit card. During my travel, depending on where I am, access to bank ATMs, safety issues, I use a combination of cash and Visa debit.

While I use a spending plan for my vacation/travel (what some would call a budget), I don't normally skimp when I travel, I like to stay at very nice hotels (and did so on this last trip), and I normally partake of fine wine and great dining, etc. But, I plan out those expenses and allocate funds before I depart. End result, a stress free and basically pre-paid vacation.