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How Much Interest [Autumn 2011]

11.11.2011 by Matt Jabs //

My regular updates on “how much our debt costs” have been irregular for a reason. I can’t tell you why now, but promise to later. For now know that our debt free adventure is in full swing and progress is made every month.

How much interest we pay on debt

If you have never considered how much interest you pay on your debt you need our How Much Debt Costs Spreadsheet.

Recent amounts we paid toward interest on debt:

  • August 2011 – $256
  • September 2011 – $248
  • October 2011 – $242

For you numbers geeks, like me, that means the interest on our debt costs a rounded daily average of $8/day for the past 3 months. Not bad but still $8 too much for me.

Regular readers might notice the huge reduction in our interest costs, but as mentioned earlier I cannot discuss the reason now – but stay tuned.

Where I’d rather spend $8/day

This list could go on and on so here are just a few things I’d rather put my $8/day toward:

  • Food or clothing for fatherless children.
  • Flowers for the women in my life (think wife, moms, and sisters).
  • A virtual assistant.
  • My savings account.

I have a lot of ideas, as I’m sure you do too; just about anything is better than spending money on interest from debt. Think about this long and hard and be sure to run your own calculation so you can see how much the interest on your debt costs you each month and each day.

More debt = less power

He who issues debt holds power, he who has it is in servitude. Use this article to find your numbers and gain motivation to eliminate debt.

Less debt means more freedom. Trust me, over the last 3 years I have watched my debt dwindle and freedom grow… and there is a direct correlation.

****

Categories // Debt Tags // Debt, interest

Control Credit Card Debt

10.10.2011 by Miles Williams //

For many Americans paying with credit cards is now commonplace. Once the monthly balance cannot be paid in full credit card debt creeps in like a homewrecker – and this is where many people find themselves today, in credit card debt.  In some cases, people are filing for bankruptcy due to their excessive credit card debt.  With so many different things dependent on a person’s credit score, this can be devastating to young families, leaving them without the means to make big-ticket purchases like replacing a refrigerator or stove.

Credit card debt in America

45% of Americans have credit card debt.  8.3% have a balance of over $9,000 on their card accounts.  The average credit card debt is $2,000.  Surprisingly, 23% of Americans do not even have a credit card.

Matt’s note: Betsy and I belong to that surprising 23%. 🙂

These statistics are compiled in part from the Federal Reserve’s Survey of Consumer Finances taken every three years.  The 2007 survey showed that revolving debt, which includes credit cards was $904 billion out the total consumer debt of $2.6 trillion.  This figure includes student loans, auto loans, mortgages, and other non-revolving debt.

The numbers may not mean much to you, but if you’re part of that 8.3% perhaps you should take notice.

8.3% may seem like a small number, but the average income for those people is only $48,600 per year.  That $9,000 along with other living expenses and non-revolving debt is usually a lot of money.  On top of the large debt amount are the interest rates credit card companies charge each month for the “privilege” of using their money.  The average credit card interest rate is 16.80%, so if you are paying only minimum payments each month a lot of your debt could be interest charges rather than the principle on the account.

So the general idea – and necessity for some people – is to be part of that 32% or even the 23% in some cases rather than the 8.3%.  This may not be easy to accomplish, given the rising cost of food, fuel, and other necessities, but it can be done.  You have to develop a plan and stick to it, resolving to control your credit card debt, or eliminate it altogether.

Build your debt reduction plan

The key to controlling your credit card debt is in controlling your spending overall.  Of course, American society does not make this easy since our economy relies on spending.  However, in this case, you can’t think of the Country’s economy, but rather your personal economy.  If you have the willpower, you can get a grip on your finances rather quickly.

  • Put your credit cards away for one month.  Instead of pulling out the plastic to make purchases, use cold, hard cash.  This does not include a check.  It’s important for you to see where the money goes, and how fast it can disappear from your pocket.  The only exception to this rule is in paying bills that require a check, like your mortgage or the rent.  Write out the checks and deduct them from your bank account before you withdraw any money to spend.  In using cash instead of your credit card or checking account, you will have a better idea of your spending habits.
  • Free up more cash by reducing other expenses.  Take a closer look at some of the amenities you have.  You may consider changing your cell phone plan to a less expensive one, cancelling or changing your cable/satellite plan, and buying less expensive brands for groceries.  Conserving energy will also put a few more dollars in your pocket.  Take that money you are saving, and use it to pay off debt – especially those high interest credit cards.
  • Buy only what you need, not what you want.  Knowing the difference between your needs and your wants is important.  For example, you need food, but you don’t need dinner in an expensive restaurant.  Transportation is a need, but not in a $50,000 BMW.  Clothing for your children is a need, but not the $100 designer jeans for your 10-year-old that is still growing.

Impulse buying is the biggest culprit in creating credit card debt.  Those purchases are usually wants, not needs.  If there is something you need, then buy it.  But if it’s something you can do without, keep your money in your wallet.  If it is something that you really want, only buy it if you can pay cash for it without compromising your ability to save for retirement or pay off debt; but until you have no credit card debt you should avoid those purchases, no matter how much you want them.  If you stick with your plan, you can be a member of that 32% that does not contribute a single penny to the $904 billion in revolving debt, and you’ll have more money in your pocket to boot!

Categories // Debt, Money Management Tags // credit cards, Debt, Finances, frugal, goals, interest, Reduce Expenses

How Much Interest We’re Paying – March 2011

03.22.2011 by Matt Jabs //

Every month I calculate how much interest we’re paying toward our debt.  I figure the monthly and daily numbers and compare them to past amounts.  I display them publicly as an exercise in motivation and accountability.

I hope the exercise will motivate you to do the same and have made available the spreadsheet I use to crunch the numbers.

How much interest in March 2011

In summary, the interest on our debt cost us $1,042.41 this month which amounts to $33.63 daily.

Compared to January of 2009 when we paid $1,328 and $42.84 daily, we now have an extra $9.21 going into our pockets every day.  Woo hoo!

While the numbers are still $33.63/day higher than I would like them to be, I am very happy to watch them decrease month after month.

Do you know how much interest you pay on debt each month and each day?  Perhaps it’s time you did.

Other thoughts for the day

It’s no wonder that our progress of getting out of debt has slowed since I left my career position back in November of 2010.  Since leaving I been through a lot of emotional ups and downs related to what work I should be doing, what my purpose in life is, and how to best go about serving that purpose.

Here are just a few specifics of what I’m beginning to call my mid-life crisis:

  • First I was going to be a full-time blogger to pay the bills
  • Next I started DFA Missions in an effort to live more purposefully
  • After that I jumped at an opportunity to become a Certified Financial Planner
  • Now I am again pursuing full-time blogging, but with clarified and strengthened  resolve

As you can see, and may have noticed, I’ve been jumping all over the place over the last 6 months… and it hasn’t been easy.  The good news is that the Lord has helped clarify things along the way and I have been moving forward with a combination of several of these things.

Although I dropped the ball on following through with several DFA Mission posts, and in my efforts to grow blogging income to full-time salary replacement numbers… I am forging ahead and excited for the future.  I apologize for my lack of follow through on DFA Missions and will be publishing articles to update you on the progress.  While I failed miserably with The Bible Mission (reading 23 chapters of the bible each day,) The Wardrobe Mission was actually very successful.

I will publish more details about past and future missions soon, and am excited and confident about moving forward with blogging full-time.

As a point of clarity, blogging full-time is better defined as content production and marketing, which is cool because it allows you to get up every day and create something that brings you joy and helps other people… which is my ultimate goal.

Thank you for you patience and prayers, please keep them coming!

Categories // Debt Tags // Debt, How Much Interest?, interest

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