For 2020, I am attempting to pay off my debt in a huge way. I am sick and tired of being sick and tired of having debt just lingering around dragging my energy especially my car payment. I absolutely hate my car payment, and if I wasn’t upside down on the car loan, I would have sold the car by now. As a result of my complete and total hatred of my car payment, I have created a plan to pay off my debt (excluding student loans) by the end of the year. The reason I am excluding my student loans is because that debt is astounding and will take more than a year to pay it back. Additionally, I am using the Public Service Loan Forgiveness to assist in that payment.
1. Plan for Payment
The first thing you need to pay down any form of debt is a plan. A plan to pay off the debt and a plan for the money. Doing something without a plan is wishing to fail. The current plan is to use the money from my second job to pay towards debt. I bring home about $400 – $1500 a month extra from my second job, so I should be able to pay off everything by the end of the year. Also, if getting my spending together (using a budget) for my primary income will also provide some additional income. If you can remember I had a month where I spend $400 on food (groceries and eating out). Therefore it is very important that I follow my budget closely, and so that I can use that extra for debt and savings.
2. Debt Snowball vs Avalanche
It makes more financial sense to pay off items in order from highest to lowest interest rate, but it is easier to motivate people when paying things off from lowest to highest because you are more likely to see progress. In my case, I am using more of a debt avalanche than a snowball because of my pure hatred of my car note. I am paying off the debt with the highest monetary amount, and paying off my credit card bills second.
3. Emotional Debt Payment
Despite the advantages between the snowball and avalanche debt payments, I chose to pay off the debt that I despise the most and takes the most money from my life which is my car debt. Between the car payment, and my full coverage insurance, I am paying more for the car than I do for my rent. Michigan’s car insurance rates are known to be ridiculous, and I can’t wait to not have to carry full coverage insurance anymore. Paying off my car payment first would give me close to an extra $1000 a month that isn’t doing toward debt.
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