Debt

In an earlier post about deficits, I mentioned that when you spend more than you earn (through credit of some sort), you are borrowing against your future earnings to do so. This is a choice we can make, and if you have no family to provide for, you affect only yourself in the process.

But it can be really easy to start using such practices to finance a lifestyle that goes beyond your means. You get used to spending a lot of money, and you use a little bit of credit here and there to "make up the difference."

And so, in late 2007 my credit card's minimum payment crept over $100 per month. That, for me, was a wake up call that I had more debt than I was comfortable with, and I needed to make a change. It wasn't that I was living an extravagent life, but in little things here and there I was spending too much money.

Starting from having roughly $4,800 in credit card debt on my October 2007 statement, I began taking bigger and bigger bites out of my bi-weekly paycheck, to try and spend my money well before I simply frittered it away somewhere. By the end of February, I should be at about $2,950 left on the card - or just over $1,800 (over 1/3 of the debt) paid off in 5 months. That average is creeping up, as I spent less toward debt during Christmas, and I'm trying to put $400-$500 a month toward the debt right now. If I can maintain this pace, I should have the card paid off by September-October.

Once that's done, I'd like to use that $400-$500 a month to pay off my car faster (twice as fast as right now, where I have about 22 payments to go). I still owe about $8,800 on it, and putting 20,000+ miles on it each year is hard on it. I'd like to get it paid off, so I can use the $400 I pay on it (actual payment, about $353, but I pay a little extra each month) in other ways.

My end goal is once I have my car payment and credit card payments done with, I'll have $800 more each month available. In addition to the $650 I pay in rent right now, that puts me much closer to being able to afford a house payment, so instead of monthly rent I can start building some equity (and getting a mortgage interest tax write-off).

My debt from the past is borrowed against my future earnings, until such time as they are paid off. I'd like to get that obligation settled so that I can free up my future earnings for more productive ends.