Out of Credit Card Debt in 2011!

cutting credit.

My biggest goal for 2011 is to be completely out of credit card debt. I have one card left:

American Express: -$29,158.08

I cut some big expenses over the last two years, but didn’t ever do a hard budget. I’ve just used my debit card for everything and whatever was left at the end of the month went toward my enormous debt. This year I want to get more deliberate and aggressive on this plan.

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Here is my current budget:

Fixed Monthly Expenses:

  • RV Loan: $514
  • Medical Insurance: $440 ($5,000 deductible) My husband got invasive melanoma three years ago, so this skyrocketed. (We pay $880 total.) We both need to be on our corporate group policy in order to keep his coverage.
  • Rent House: $400 (The difference between mortgage and rental income; my husband pays half of the $800.)
  • Student Loan: $228
  • T-Mobile Cell Phone: $100 (The only cell service that works where my husband lives.)
  • Verizon Internet: $65
  • Auto/RV Insurance: $50 (I split a $98 Geico premium with my husband.)

Total Fixed Expenses: $1,797

Variable Monthly Expenses:

  • Camping: $500 (I hope to decrease this, but want to give myself some pad here.)
  • Diesel: $350 (1,500 miles at $3.3 per gallon at 15mpg; 0.22 per mile; This would be a decrease!)
  • Groceries: $300 (This would be a decrease!)
  • Personal Care: $200 (Includes dr appts, meds, etc.)
  • RV Maintenance: $100 (or saving for same)
  • Dining: $100 (This would be a big decrease!)
  • Misc: $100 (Web site fees, credit monitoring, bank fees, etc.)
  • Travel/tourism: $50
  • Propane: $40 (This will go up as camping fees go down.)
  • Unknown/Other: $200

Total Variable Expenses: $1,940

Total Budgeted Expenses: $3,737

i need a loan

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Total Debt:

  • American Express: $29,158 (prime+6%)
  • RV Loan: $41,857 (6.5%; 10 year balloon)
  • Student Loan: $41,644 (2.125% over 30 years)
  • Rent House: $236,222 (6.75% fixed 30 yr; interest only; pymt of $2022 includes taxes and insurance; needs a refinance but is upside down.)

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Should I Keep My Austin House?

My biggest question is with regard to keeping my house in Austin. Of course, I didn’t have the option to sell it (or not without locking in a significant loss in the middle of the recession), and later decided to hang on to it as a long term investment rental property.

Is that a good idea or a bad idea?

It costs me $800 a month, or $9,600 a year. After I pay off my credit card debt, I can start making big principal payments so it would possibly be cash-flow neutral within 3-5 years and paid off in 15.

It is in a very prime neighborhood in Central Austin — all the value is in the lot. (Literally, my appraisal values my house at only $2,400.)  Just north of the University of Texas, it is also always in a good rental market. (Currently rented at $1,450.)

I like this plan because it is a forced investment plan. I fear I won’t stick with a voluntary one. Also, I lost my entire (meager) 401K in the tech bust of 2000, so feel burned by my ability to make good market investments.

The amount I’d save on interest with an early pay off is more than the current amount I owe! I love the idea that in 15 years I’d have a paid off income generating asset and it is hard for me to see how I could confidently build that with another investment strategy.

But this house would likely be my only investment/savings plan. I don’t know how to calculate a rate of return on this and figure out if this is the best strategy or not.

find x

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p.s. I’m kind of obsessing on my finances right now, so that is why the budgeting thing is coming up a lot.

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