Don't Ask Me Out For Lunch. I'm Paying Off My Credit Cards

I have finally sat down and created an interactive budget for myself. It's something I have dabbled with for years, but never actually completed. Now that I'm more Excel savvy, I created a three tab spreadsheet with my monthly budget, which paycheck pays which bills and my debt snowball schedule. It's already helping me tremendously, just by thinking "What category is this going to go in?" before I spend money. The fact that my happy little spreadsheet will hold me accountable for my debit card and ATM relationships has kept me in line this month. I've also been able to pay over $1000 towards my debt snowball!

If "Debt Snowball" is a term you are unfamiliar with, it works like this:
  • Write down each and every debt you owe, outside of home expenses and utilities. Mine include 2 credit cards, a time-share and my car.
  • Break down highest to lowest balance, interest rates, monthly payments.
  • For me, my highest interest rate was also my lowest balance so I chose to pay that off first (we'll call it Debt 1).
  • I pay the minimum payment on my remaining three debts and all discretionary cash on Debt 1 (this is over and above the minimum payment).
  • Once Debt 1 is paid off, I roll my entire Debt 1 payment plus the minimum payment for Debt 2 to pay off Debt 2. And so on and so on until all debts are paid off.
  • Once I am debt free, I will begin building my emergency fund. 3-6 months of expenses. Without my debt payments, my monthly expenses are pretty low.
  • I will also max out my 401K and fully fund my Roth IRA.

My goal for 2010 is to pay off my two credit cards, time-share and most of my car. The car won't be fully paid off until halfway thru 2011, but I'll be in a much better financial situation before then.

So don't ask me out to lunch. I'm paying off my credit cards.