Paying it Down

Most of my readers are in the mindset debt is bad, but most of us NEED it, to live the life we want to live.  We are working hard at keeping our debts to a minimum, and paying them off as quickly as possible (Who HATES those truth-in-lending statements that show you what your home or car REALLY costs, after the bank takes their TREMENDOUS chunk?) There are various schools of thought on HOW to pay off debt (if you have it....once again, those who don't have debt, you are awesome, congrats, wish I were there with you, but I am not!!!) Paying off the highest interest rates first saves you money paid in total interest...smart for the bottom line of how much interest you pay, but may not help the money going out every month as much as our method.  We are squeezed tight right now, due to increases in most everything (except our paychecks).  To make more money in our budget, we need to reduce the bills that go out every month. I have shared earlier how we divide up our monthly bills into four chunks (one per pay check our household receives each month) so that we are paying about the same amount in bills each pay day. The leftover amount is just never enough!!!  So we need to increase the amount of leftover money after bills!  Tax time is coming soon, and rather than spending (ok, confession, I am sure I will spend some--but frugally, on something we TRULY need, more to come later) or saving (smart to do, will save what is left over), we are making priority one with our taxes paying off debt that eats up our budget every month.  Two items wiped off our bill list will save us close to $400/month (or $100 per paycheck!) and should feel like a "raise" on our paycheck.  However, the interest rates are relatively low, 9% and 4%. If we paid the same amount to our highest interest rate (17%!!!) it technically would save us more in dollars, but would not provide immediate relief to our budget  (saving perhaps $20/month).  So with tax time coming (or when windfalls come your way---I see I have a lot of Europeans reading my blog, sweet!!! I don't know when tax time comes in Russia...?) Think carefully about those extra chunks of money that come your way, and make them work the way that is best for you.  When I was younger, and money came my way, my mother would tell me, "You can spend it any way you want, but you can only spend it once." Simple, but oh so true.