$1000 a month debt payment plan

This is the second month of my new debt-repayment plan. I'm paying off $1,000 plus each month, with the idea that my student loan will be paid off by November 2012. My student loan will be under $10,000 going into 2012, which is a great feeling!

Initial thoughts on the debt pay-off plan so far

Paying over $1,000/month towards my student loans really cramps my lifestyle. I hate the fact that by this time next year, I won't be in any better position to buy a home, because I'm not putting any cash aside right now for a future down payment. I will be debt-free though - two and a half years after graduation. I only took out student loans for my final year of college, but it's going to take me 2 years of working, even with a good salary, limiting my travel, eating out, and clothes shopping, in order to pay back the money I spent in one year as a student.

I'm glad that I did take out these loans though, because it's a fairly small amount of loan to pay off, but has really given me a taste for how easy it is to get in debt, and how difficult it could be to get out of it.

Getting into debt is scarily easy

Monthly pay outs make debt seem so much larger than the original borrowing ever was.

Last year, I set myself up with a credit card that had an introductory 0% APR for 12 months. We buy plane tickets and book hotel rooms on our own credit cards at work, and it can take a few weeks to get reimbursed. Since I wasn't sure I'd always have enough cash on hand in my own account to pay this off at the end of each month (if I hadn't received reimbursement yet), I opened the 0% APR card so that I wouldn't need to pay any interest if I had to let a balance sit for awhile.

So, in April last year, let's say I had a balance of $2,000 of reimbursable expenses on the credit card. I received a reimbursement check for $2,000. But I decided to keep the cash from the check, and pay off the credit card a little bit each month, so that I would have more cash in the bank in case of an emergency.

The 0% rate expired on November 1^st, so I had 6 months of payments. Even with a small debt of $2,000, that's still over $300/month! I realized how much of a pain it was to pay that $333 each month. I realized that without sitting down and figuring out my monthly payments, I didn't really have a great idea of how much delaying repayment would take out of my paycheck each month. It took more discipline to make the monthly payments, and to avoid using the extra cash in my bank account, than it would have to just repay the money with the reimbursement check to begin with.

Luckily, if you need help with debt management, there are plenty of companies and organizations out there that will help you develop a realistic debt management plan that works for you.

Debt in the future

At some point, I would like to be able to buy a house. Preferably sooner, rather than later. Right now, I'm not sure if I'll still be living in the same place in five years, so I should probably wait to buy until then. I'm hoping that will be my only debt acquired in the next 30-or-so years. And hopefully, the debt management practices I've learned from these smaller debts will help me making paying off the mortgage a priority!

Photo by Shazwan

Related posts:

1. Plans for a debt-free life
2. Student Loan Goal