Plan of Attack After Paying Off Credit Card Debt

Plan of Attack After Paying Off Credit Card Debt


I have a three-stage plan of attack for my credit card balance, student loan debt, and emergency fund.

Stage 1: Credit Card Debt

As I explained in story-form over here, I already paid off a $4K balance on this credit card back in 2010. Then I stopped using the card completely and had a good credit-card-free life for all of 2011. Just one look at the chart above shows that 2012 was when trouble began repeating itself.

At the end of 2011 I began to fall into a severe depression that really hit in the winter/spring of 2012. The bulk of that is from 2 weddings I was in, moving into a new apartment, and $350/hr psychiatrist appointments.

This hit it’s highest balance in August 2012 at $5,176. By the end of the year I had become emotionally stable enough to stop using the card completely and began aggressive payments to get rid of the balance, once again.

Currently the balance is in the three digits at $998. I will finish it off with two $500 payments in August and September. In a perfect world, I will no longer have a balance on my Discover card by the end of September! I am so excited about this and am already strategizing what to do with this “extra” $500 when I no longer have a CC payment.

Stage 2: Emergency Fund

My EF is currently at $2K, which is fine but I would like to boost this up a bit. I plan to put the $500 that used to go toward my CC and instead put it in my savings account. If I do that for the rest of the year (Oct, Nov, Dec), I will then have $3,500 in my savings account to start 2014.

That is 2-months of bare-bones living. I am happy with a safety net of that size and will then put a hold on further savings so I can start stage three.

Stage 3: Student Loan Debt

I owe $17K in Federal Student Loan debt with a 3.38% interest rate. After the CC debt, this is the only other outstanding debt I have. This number started at 27K. I haven’t had the opportunity until now to really attack this debt and have always brushed it to the side because of the low interest rate. However, now I would like to do away with it for good.

Once I hit my EF goal, I will then put that $500/mo toward my student loan balance. If I did the math correctly, in a perfect world, I will have this paid off by 2017 (3 years). This will also meet my goal of being 100% debt free before the age of 35.

I have a reach goal of paying off the loan in 2 years, which will require payments of $750/mo. I think I can do this but will want to test run it for a month or two to see how do-able the payments are. This is more likely when taking into consideration I should be earning a higher salary within the next two years as well.

Is this the right strategy?

I am one of those people who eats each food on my plate one at a time. For that reason, this singular focus of each savings or debt goal works for me. I realize I can contribute to my savings account and pay off debt at the same time, but I would rather put a large chunk of money to one thing rather than a small amount to both.

I would like your take on this readers. What works best for you? Tackling everything at once or big individual attacks?


16 Replies to “Plan of Attack After Paying Off Credit Card Debt”

  1. Good for you for getting serious about your debt! I think it is good that you are getting rid of your high interest debt then upping your EF and paying off the rest of your debt. When the bf paid of his debt he focused on getting rid of it asap and because of it his EF dwindled. I was happy to see him get out of debt so quickly and he definitely didn’t have any debt fatigue.

    1. It’s tempting to use half my EF to pay off the credit card bill right-this-second but I’d rather wait the two months and have more of a cushion in case something unexpected comes up. That’d be just my luck!

  2. I like attacking each thing separately as it motivates me more to get to the next goal. However, I know of many people who like to do things equally, so I guess it’s up to the individual person!

  3. I like this plan! I have found it easier to tackle one thing at a time. When my attention was spread too thin, I was treading water — and since I’ve started concentrating on my Emergency Fund as my main goal, I started it in March and it’s going to hit my target ($2,500) in the next two weeks. I was amazed at how painless it was compared to when I’ve tried to do ten things at once. Might be my ADHD talking, but I think the one-at-a-time strategy could be right here, too. :)

    1. Congratulations on being so close to your goal!! I know my EF hasn’t been above $2K in a looong time so I’m sure you’re really happy about this! I do think, mentally, we like seeing something increase or decrease in big chunks so focusing a lot of resources on one thing makes it seem like something is actually happening.

  4. I like this plan.

    As a lot of people know, I”m a strong EF proponent. Even when you’re young, don’t have a car, don’t have kids, etc., having a buffer of readily available cash is a good thing. There are all kinds of things that can happen where having an E-fund is good.

    But in your situation you probably don’t need $10k or 6 months income or anything like that. Not yet. So continuing your saving thru the end of the year, then moving that payment to aggressively paying off your student loan sounds perfect to me.

    I also think that you’re smart to consider that you have room to grow salary wise and career wise as well. Giving yourself a “push” goal to allow for that is a good thing, too.

    Good luck!!

    1. I can’t imagine not making more money three years from now! I mean, who knows, but if I’m not making more money at my current job then I will certainly look elsewhere within the next few years. In the post I kept saying “in a perfect world” because a lot can happen in three years!

  5. This post is really exciting! :-D I love a good money strategy. I’m looking forward to following your progress.

    I’m definitely of the “one thing at a time” variety. I’ve known bloggers who save for many, many goals at once, and I kind of envy them. But I like checking one goal off the list quickly and moving on to the next. The slow progress that’s made when you do multiple savings/debt goals at once is just too frustrating for me. #impatient

    1. If the slow progress isn’t frustrating enough, I also just hate knowing I have debts out there. Picking them off one by one feels better than them all disappearing at once. It also helps that the loan is low interest so it can be a lesser priority without being too damaging for me long-term.

  6. I think once you build up enough of a comfortable e fund for you, then attack the debt. Hope your plan works! It’s good to visually map things out…helps with motivation I think. I need one for my retirement. That’s a project I’m tacking today!

  7. I think it is a fantastic and focused plan! I always have to do things little by little to keep my attention. For example, I have 4 or 5 short term money goals right now and I may fund them literally $25 or $100 at a time.

    1. Thanks for mentioning small amounts. Sometimes I feel that only giant payments are helpful but, in the end, every little bit helps!

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