Milestones can be so hard to reach. Everyone has bills and almost everyone has debt. It’s taken us over a year to be able to start paying some off. A lot came from previous marriages and idiotic mistakes that we’ve made when we were younger. I learned the hard way that creditors can “refresh” your debt lengthening the time that entry spends on your credit report. For example, I had a $44 bill on my report that was unjustified. They refreshed the debt after I inquired about it because it was dropping off that year. It refreshed the debt for another three years!
Some necessities do require a small amount of debt and these I can live with. Over the summer, we needed a new mattress desperately because the one we had hurt Babydoll’s back. They had the option of 90 days to pay without accruing interest. Needless to say, we had 90 days to pay and it is PAID! Had we accrued interest, we wouldn’t have bought it. No more debt!
I have five student loans and they’ve haunted me for years. We are now on a doable payment plan for all of them and it is helping the five different entries on my credit report. Ouch! I paid a previous small loan and now its off my report. Whohoo!
So far so good. We have a few more big bills to take care of and we are well on our way to becoming debt free. It feels so good to even pay one bill off and it is highly motivating. It’s a baby step with huge impact. If you are in a situation like we are with past debt that are now with creditors, the calls do not stop. We get calls for some companies up to eight times a day, they are relentless. In most instances, the creditors are offering discounts on the total balance. Often you will get a bill from a collection agency in the mail to negotiate your bill so they can recoup someone of their money for buying the debt from the original creditor. How can they do this? They buy debt for pennies leaving them ample leg room to negotiate. I negotiate as I go further saving money and also paying off debt. While this isn’t ideal, by all means if you have the money pay off the debt entirely. But we’ve been able to settle for almost 40% of our total debt.
We chose to take the bills that had the highest interest or didn’t hit our credit reports yet and work on those first. These were our primary focus. We ordered our bills highest to lowest based on the fees and interest accrued. Tackling the highest interest first. This seems to work best for me and still leaves us money in the bank. I keep one folder in our files for past debt. I throw out the last bill and replace with the new one eliminating paper clutter. Each month we pay something. Every little bit helps and it is better than ignoring it. Once paid off, I ask for a paid invoice stating my debt is now $0. This goes gets stapled to the last bill that I have with a call reference number and the representatives name. If needed, this information can save you later on if the payment isn’t posted correctly or if you didn’t receive a payoff letter. After the payoff letter is stapled to the last bill, I file it in a folder labeled paid debt and keep it filed until the debt drops off my credit report. Then I shred it. This has saved me in the past big time! I went for my car loan and a past bill I had wasn’t posted on my credit report as paid/settled. With the payoff letter and rep information, I was able to submit this letter with my application and the bank accepted it. Good record keeping comes in very handy.
Does anyone use the Snowball Method by Dave Ramsey for paying off debt? Leave your comments below and let me know if it works for you.