John Cummuta has a formula for which to pay off first and uses an accellorator payment that is above the minimum payment per month. The way he tells you make the decision on which to pay off first is this: Divide the total payments by the min payment and figure out how many months to payoff when you have all the numbers the lower the number the higher on paying off first. that allows you to pay off quickly and then take the accellorator money which is above the min payment and apply it to the next debt with including the amount of the first debts min to the new payment on second debt. All other debts get the min payments until they get to the point where they get the accellorator payments.
I was drawn to your posting, as I saw myself there. I was in Debtors Anon. for many years and I remember what they told newbies that really helped me. So here are a few ideas:
- People in debt generally focus on what they owe, but the focus is best used to look at what you make and how you’re spending it now. There are general guidelines on how to spend the money you earn which may help you get out and stay out of debt.
- For example, one rule of thumb is that debt repayment for credit cards and unsecured debt would be no more than 10% of your monthly gross income. Anything more is a red flag that you’re spending in a way that will continue your debt indefinately.
Note: If I added right you are paying $369 in payments now without student loan. Earning $3,690 per month gross income would manage these debts according to this rule… To add in your student loan, you’re talking a gross income of $6,690.
Another “rule of thumb” would be to take only about 10 per cent or $150 of your bonus would go initially towards debt repayment, if you want to break the debt cycle. 10 per cent of it would go into savings/retirement and the rest would be up to you, including if you want to pay a little more of it on debt. But to pay it all on debt may actually contribute to your debting cycle.
– Here are the general rules for managing unsecured debt, in a perfect world. Even a good financial consultant would probaby tell you this.
- Unsecured debt repayment should not exceed 10% of your monthly gross income;
- Take another 10% of your gross for retirement/savings. Even 5% will help in most cases. Having savings has a positive overall effect on health.
- Take another 10% for charitable giving if you believe in that. 5. Live on the rest. Adjust your lifestyle to do that. If you do, you’ll eventually eliminate debt completely. This is an age-old formula for financial health.
Obviously, it’s not this simple in anyone’s reality, but this may be good food for thought. Please note that I still struggle with these principals and have recently lost a job and am struggling to remain in my home, so take what I say with a grain of salt. In my experience, living a cash-only day to day life when I’m working and distributing my income even close to this way, seems to make financial dramas disappear from my life.
As for what to pay off first, there’s no easy answer… except to say whichever you pay off, make sure you never charge anything on that card again until you’ve got a year or two’s worth of assets in the bank.