One goal to rule them all…

One Goal To Rule Them All

Current Debt: $40,251.65

My plan is to be debt free by August 2019. That’s two years to recover from ten years of frivolous spending and regain control of a situation that has otherwise been controlling me. I don’t feel that two years is an unrealistic goal – in fact, I hope overshoot that target. However the future is uncertain and given my plan involves being particularly strict on my allowances, two years is a comfortable goal for me. Along the way I will be setting a series of much shorter term goals which will keep me motivated and allow for regular celebration of my achievements – however this main goal is my “light at the end of the tunnel”.

Debt Breakdown:

Limit Balance Interest
Credit Card 1 $9,000.00 $6,803.24 0% until May 2018, then %19.74 p/a
Credit Card 2 $13,500.00 $12,813.41 0% until January 2018, then %13.25 p/a
Personal Loan $0.00 $20,635.00 14.39% p/a

*Minimum monthly repayments of approximately $1,400

Pretty scary numbers right? Now keep in mind that this is the result of years of over spending, minimal balance repayments, balance transfers and paying out balances in full and then foolishly re-spending  – the interest alone right now is scary enough without considering the past damage. For example, my personal loan alone is in its second last year of a five year contract with the original credit at $43,701 (that’s $17,919 in interest for anyone keeping track). To make matters even worse, this is after refinancing the original loan over a lengthier period to consolidate some other smaller credit cards that were floating around. Not even I am game to look deeper at the interest \ fees paid.

At this point though, it’s a case of “the past is the past, and what’s gone is gone”. Onward and upward!

Income:

As an individual I do quite well – as a family we do even better. My wife is a Nurse which affords the “luxury” of being in high demand, which equates to no shortage of available shifts, which equates to regular additional income. It is this extra income that has allowed her to pay off the majority of her personal debt over the last couple of years.

For the last few years I have earned just over $100,000 per year in salary. As of writing this post, I have just started a new job which earns me $115,000 per year. Let’s say this equates to $1,500 net in bank each week. For a normal debt-free single person this would be considered, in my opinion, a very reasonable living. Certainly for the average person it should be enough to cover a comfortable lifestyle with creature comforts, a mortgage, savings and likely some investments. For someone in my situation – that being a debt covered, Sydney renting, father of three dependants – the same does not apply.

With that said, here is a breakdown of my weekly expenses, which have undergone their own deep dive and have been thinned where possible. As time goes on this will likely be further reduced.

Description Weekly
Household expenses $750.00
Subscriptions $11.67
Mobile phone $9.33
Parking $26.83
Fuel $40.00
Personal expenses $100.00
Savings $50.00
Personal loan (min) $242.00
Credit card 1 (min) $32.00
Credit card 2 (min) $62.00
Total $1,323.83
Excess $176.16

As it stands, some of these figures are generous to allow a small buffer and any excess will be contributed to excess at the end of the week for debt reduction. In future posts I will provide more detail about various items in the above, including our household expenses (and how we have tried to reduce them over time).

Debt Reduction:

If you’ve spent any time researching methods to tackle debt, you’ll be aware that there are numerous schools of though on the smartest way to achieve this. These methods and their success vary from case to case, financial situation to financial situation and personality to personality. I plan to add a post in the future that compares these methods with references to expert opinions on their suitability, as well as tools that can be used to compare these methods for your own situation – such as undebt.it  which I have been using to get to the bottom of my situation and formulate my own plan. For the time being though, let’s just say that with the combined minimum payment on all my debts, plus an excess income of $176 per week, I should mathematically have my balances (including interest) paid in full by June 2019 – a mere two months short of my goal!

This simple graphs shows my target and tracked actual’s from June 2017 onward – note that I am already ahead of schedule due to some additional income available throughout July / August.

 

So there you have it, a ten year dire situation painted brightly with a very achievable two year plan. This is just the beginning of the journey, and there will no doubt be some obstacles in my way, but I’m looking forward to facing them head on in my journey to creating a better us.

 

How do you feel about my target goals? Have you had any experience setting goals like this before? We’d love to hear about it in the comments!