Shoeaholic No More



April 2014



How I’m Paying Off My Debts

Written by , Posted in Money & Finances

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2326083926_0df8b17bcd_zThe other day, a reader asked about my debt payoff method, interest rate and minimum payments. Today I’ll be spilling all of that info for you. But first, I want to review two of the most popular debt payoff methods: debt snowball and debt avalanche.

Debt Snowball:
The debt snowball method is promoted by popular financial guru Dave Ramsey. It involves listing your debts by total amount owed, rather than interest rate. You then pay them off according to their size. After you pay off the first debt, the payment is rolled onto the next debt. Example: if I was paying $25 to credit card A and $25 to credit card B and A is now paid off, then my payments to credit card B will increase to $50.

The idea behind this method is that you will see successes sooner and more often that if you were paying debts off by their interest rate because smaller balances will be paid off more quickly. This will motivate you to continue paying off more and more debts because you like the results. The downside is that you will pay more interest using this method than the debt avalanche.

Debt Avalanche:
This method involves paying off debts based on their interest rate. You essentially ignore everything but the interest rate, focusing on the highest one first. This ensures you will pay the least amount of interest possible, but you will not see results (zero balances) as quickly or as often. You can still roll the payments onto the next card as shown in the example above.

I have been following the debt snowball method up to this point because I think I need to see some successes to keep me motivated, this just fits my personality.

Here is a list of my debts with their interest rates, minimum payments, and total debt amount:

Interest Rate
Minimum Payment
Total Debt
CC 9
0.00 till 9/22/14
CC 4
CC 6
CC 5
CC 7
CC 8
CC 11
CC 10
Student Loan

The debts are listed in the order I plan on paying them off (mostly). As you can see, I am deviating from the debt snowball method a bit. I am choosing to pay off CC 4 and 6 before CC 5 due to the difference in interest rates, their balances are very similar and paying them off by interest rate will save me a few dollars along the way.

The minimum payments listed above are all accurate except on CC 9. The minimum according to the statements they send is only about $66. The reason I list it higher is because $148.84 is the minimum I must pay each month to pay it off in time for the 0% interest promotion. I HAVE to pay it off before the end of September or I risk being charged interest in arrears from the time I purchased the furniture. I think the amount of interest would be somewhere around $2-3k if I don’t pay it off in time.

I am also going to be paying on the debt to my parents even though they don’t charge me interest or a minimum payment. The reason is because I hate owing them and I don’t want to damage our relationship by putting them off to last. I am hoping to pay them $50-100 a month.

You’ll also see that CC 1, 2, and 3 are not listed, that’s because 1 & 2 were paid off prior to 12/31/12. CC 3 was paid off in March!

If you have any further questions, don’t hesitate to ask. What method are you using to pay off your debts?

Note: To expand on some of my car woes, (here and here) I’ve now got a broken piece in my steering wheel for my turn signals. It’s not too pressing, the signals still work they just don’t shut off on their own anymore, but it will still need to be fixed at some point. Before I started my debt payoff journey, I almost NEVER had to fix/repair or even really maintain things on my car (except gas and oil changes of course). Ahh the irony!

Another note: If you are interested in guest-posting at Shoeaholicnomore, email me at shoeaholicnomore[at]gmail[dot]com!

Check out my Pick My Brain page if you need help balancing your budget!

Photo courtesy of: Dan Simpson

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Kayla is a mid-20s single girl living in the Midwest, USA. She is focused on paying off her consumer and student loans, while simplifying her life and closet. You can join her on her journey at ShoeaholicNoMore or follow her on Twitter.


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