Managing Credit/Debt

Since the first step in reducing debt is calculating your total debt I added up all my debts. They are listed below with the interest rate and lender name.

None of the student loans has to be repaid until I’m finished with school. I’m paying off the Wells Fargo loan now because it has the highest interest rate. The next debt I’ll pay off is the Discover card because the 0% rate ends in August. After that I’ll start paying on the Grad Plus loan. The Access Group Stafford loans are consolidated but listed seperately now because only the unsubsidized one is accruing interest now. I’m saving a lot of interest by having the subsidized loans.

I’m not sure if I should consolidate the 6.8% loans in with my 4.75% loans when i graduate. I’m thinking if I leave the 4.75% loans seperate I could stretch out the payments on them since their interest rate is below what I can currently get in an online savings account. Unfortunately I will need to get one more student loan to finish my schooling. So my debt will go up before it starts going down. I am going to try and at least reduce the overall interest rate and have no debt other than student loan debt. If anyone has any recommendations on how to best pay off or manage this debt I’m interested in hearing them.

I recently read a couple of blog posts about reducing debt that I found informative.

Reducing Debt-Where did we start? from Blogging Away Debt.  If you need an idea on how to start paying off your debt this post is very helpful.

A Step-by-Step guide to reducing debt on an irregular income from Grad Money [Matters]. This post was especially interesting to me because I usually have irregular income. The post tells how to budget and pay off debt on an irregular income. I still have to get $A + $B < $C but I should be there soon and will start implementing the budget then.

These tips are for those who are having trouble controlling their credit card spending but do not want to cancel their credit cards. (Cancelling your credit cards can lower your credit score and reduces your leverage if you need to negotiate with the credit card company.)

1. Don’t carry your cards-If you have to return home and grab your credit card before you make a purchase it should give you time to reflect on whether you really need to make that purchase. I only carry my credit card(s) if I’m traveling or am going to use it for a specific purchase. I’ve found this method very effective in reducing impulse purchases.
2. Freeze your cards-This is an old trick. Just put your cards in a large plastic bowl or glass filled with water and place it in the freezer. Since it will take a while to thaw you’ll have plenty of time to think about your potential purchase.
3. Give away your cards-Give your cards to a trusted friend or relative. Having to ask for your card back and possibly explain what you are purchasing should make you think twice before making an impulsive purchase.
4. Cut up your cards-With your cards cut up you shouldn’t be able to use them, except possibly online. Once you’re confident that you can control your spending you can ask for a replacement card.
5. Wrap up your cards-Wrap your cards up in a piece of paper like a birthday present. As an added measure write a financial goal on the outside of the paper.

Bonus method-This method is probably not a good idea for those who are having trouble controlling their controlling their credit card spending. Put a large 0% balance transfer on your card. You won’t want to make a purchase after that because you will usually have to pay off your entire 0% balance before you can pay off the purchase and stop the interest charges.

I’ve used a couple of these methods and found them very helpful. If anyone has any other suggestions let me know and I’ll add them to the list.