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Q: I consolidated two credit cards onto one with a 3.9% introductory rate. My six months has expired-what could I do to get $3,000 paid in full by the summer of 2000?
A: Well, it's difficult to give specific advice without understanding your total situation, and what works for some may not work for you. But now that I've made my attorneys happy ;-) and warned you that your results may differ, and that any decisions you make must ultimately be your own, let me share my favorite tips in this scenario.
First, by all means stop using the cards. You can't bail a boat if water's pouring in over the side. This is very important. You must go into a "cash only" mode of operation until your balance is zero. Hide the cards, give them to a trusted friend, or lock them away. (I don't recommend cutting them in half; in the case of a true emergency, it can be tough to reestablish your account and get funds.)
That done, the next step is to plan. Begin with the end in mind, establish a system. O.K., how much to we need to pay off? Well, it's $3K now, but with the interest, it will be more. You didn't mention the new rate after the 3.9% runs out, otherwise I would run the numbers for you, but let's assume that accrued interest during the next 14 months or so will bring your total to $3250. That's the "how much". We also need a "when." You said summer of 2000-let me suggest July 4th, 2000 as your personal "Independence Day."
Now, we can do the arithmetic. Let's say you put your new plan into effect on April 1, 1999. That gives you 15 months, or roughly 65 weeks. That means you'll need roughly $200 per month, or $50 per week (very rough numbers here) to reach your goal. So, we need to treat this just like any other expense...budget for it as if it were a bill that was due every week. Having this bill "on the table" will help you prioritize it with everything else, see what to cut and what not to cut, and how to make the payment plan work.
This may seem simple, but believe me, many people have used just this scheme to pay off enormous debt. Imagine how great you'll feel on July 4th of this coming year. Plus, stemming the tide now will prevent the problem from becoming even bigger. Plus plus plus, on that date you'll automatically get a "raise" of $200 per month!!!!!
The big question, of course, is what do you do if you don't feel you can swing the $50 a week? Well, you've got to set priorities. Can you swing $40 a week? If so, maybe it would be worth it to move the deadline toward the end of 2000. Are there some other expenses or purchases that you could postpone? Would it be worth time away from your family to get an evening or weekend job to cover the difference and get this behind you? These are questions you'll have to answer for yourself, but now you have the information you need to make your best decision!
Jane Chidester (Jane@TulipTreePress.com) is the author of BudgetYes! 21st Century Solutions for Taking Control of Your Money Now!
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