My original plan was to apply my entire bonus and our entire tax return to our two Best Buy cards so that I would eliminate those two payments. I paid off the smaller of the two cards, and I paid off the two purchases on the other card whose promotional interest rates were about to expire. Even though none of the purchases were accumulating interest, I thought that it would be good to eliminate those two payments so I could apply them to other debt.
I have a credit union credit card that we use for our day to day purchases because it offers cash back, so I didn't want to apply it to that card because we're likely to run it back up next month and the benefit is short lived.
I have a Discover card that I transferred balances to in December, but I didn't want to put the bonus towards that because it pretty much would have defeated the balance transfers for the 0% interest for 15 months.
Our Target credit card was already paid off, our credit card with our other credit union was already paid off, and we're on a fixed payment for my consolidation loan.
Doh! My consolidation loan, the loan with the highest interest rate (10.49%). I should have put my bonus towards the consolidation loan. While the thought of eliminating two credit card balances was appealing, the majority of the purchases did not start accruing interest until 2013. The minimum payments were very minimum ($25 and $31), and they were accruing $0 in interest. Applying my bonus to the consolidation loan would have decreased the balance, decreasing the interest that is accruing on the loan, and would have put me in the position to pay the loan off at some point this year. The money that is currently going towards the loan could have then been applied to the Best Buy balances, and they still would have been paid off before they began accruing interest.
Lesson learned.
I can't get the money back that I've already paid out, however the balance of my bonus, plus our tax return that we will hopefully receive in March, will instead be applied to the consolidation loan. Paying off just over 30% of the balance of the loan will greatly decrease the interest that is accruing and in December, I will use our savings accounts to pay off the balance of the loan. And just like that, we will get $177.68 a month back in our pockets every month. Or more accurately, we will get $177.68 to apply towards the Discover Card. Depending on how my bonus looks in December, I will either use the remainder of our savings account to pay off the Discover Card, or if my bonus is looking amazing, I will pay off the balance of the Discover Card next February when I receive my bonus.
The money that I am currently putting towards the consolidation loan ($177.68) and the Discover Card ($244) each month, will pay off the balance of the Best Buy card before any of the remaining purchases begin accruing interest next year. By next July, all of our credit cards will be paid off, except one, and our consolidation loan will be gone.
And, I am going to resume contributing to my Roth 401(k) next month when my raise goes into effect. I will not be contributing at the level that I wanted to (6%) because realistically, we can't afford to right now, but I will be contributing at 3%, which is something, and when I pay off the bulk of my debt by this time next year, I will be able to increase my contributions.
None of this takes into account any raise or bonus that my husband will receive in the coming year. He receives monthly bonuses based on production and quarterly bonuses based on job safety, as well as an annual bonus based on a combination of both. It has been hit or miss whether he has gotten raises from year to year, because he works for a small company, so I never count on his paycheck going up.
I think we have decided to forgo the expensive vacation this year, in favor of saving for a Disney trip next year. If we go on vacation, it will be significantly less expensive than previous years, an less expensive than we had planned with the Disney vacation.
So yeah, right now I'm feeling pretty okay with where our finances are headed, as long as I can reign in my husband's spending. I've been making strides not to go to the store unless I need something so that I do not spend impulsively. My next goal is to create grocery shopping lists so that I do not wonder the aisles aimlessly looking for something to cook and end up coming home with a car full of snack foods and no real meals to speak of.
To close, here is the picture of our current debt distribution, after paying all bills for February. As you can see, the overall percentage of debt that is attributable to credit cards has increased, as has the overall credit card total. This is as a result of my husband buying video games, etc on an impulse.
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