Tonight I hung out with my good friend who is a CPA. We went out for wings and after a few hot ones the subject of taxes came up and somehow that led to my debts. He asked how much debt I had and I mentioned to him the events of the last couple of months and the current balance with CITI. I explained to him that my goal is to pay off the smallest debt first and ignore CITI for a few months. He asked me about interest rates and suggested that I pay off the higher CITI balance which accrues interest every month, around $100. Here is the breakdown of the debts by interest rate:
CITI: $10,983 balance, interest rate is 11.99%, minimum payment is around $225.
CITI Professional: $1,758, interest rate is 0% until August 2008 with minimum payment.
BEST BUY: $1,706.59 0% until January 2011 with minimum payment, usually $20.00.
ROOMSTORE Furniture: $549.59, no payments, no interest until August 2008.
So I’m debating whether to pay off the furniture in March and make some progress (the Ramsey method) or pay off CITI and save some interest until July (his advice). I really don’t know how to proceed, I think I want to pay off the furniture and be done with that account… that way I will only have 3 accounts on this blog instead of four.
Any advice?
Friday, February 29, 2008
Talking to a CPA
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7 comments:
Personally, I love the Ramsey method. It may take longer & in the long run, you will end up paying more, but it's the psycological factor. Tackling the largest debt first is only for the toughest & most perseverant of people. It can be overfacing. You know you own personality & what you are capable of. It'd be nice to be able to scratch that furniture debt off your list though eh? :)
I'm also a fan of the Ramsey way (balance order). My family is down to only two debts, which will be only one in a couple of months. That feels sooooo good! And it keeps me motivated. Even though are last debts is a big one ($27,000 HELOC), it is going to be great to focus all of our efforts on that one thing! I wish you the best of luck!
Sorry to be a pain but this is 6th grade math here. PAY OFF THE HIGHEST INTEREST LOAN FIRST. Plain and simple. You'll have more money to pay off the others and will get out of debt faster. You have to separate your emotions from the process. (this may also help prevent your impulse buys).
Keep reading the HBB - you'll learn a lot.
Sorry to be a pain but this is 6th grade math here. No pain! you are correct, CITI should be gone in the next few months.
I was planning to pay off the lowest card first, but now I have changed my mind and I am paying off the highest interest card first.
I was struggling with paying off a huge debt & I was really in two minds whether to give up. Then I discovered this snowball method. It went against everything I had read before, in terms of tackling the highest interest debt first, but I decided to give it a go & I really haven't looked back since.
I'd say go for it!
If it were me (and I wasn't going to charge anything else on the cards), I would pay down the Citi Professional first, then the furniture. Then focus all efforts on the Citi card. Make sure that you have a method in place to completely payoff Best Buy 1 month before the January 2011 cutoff!
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