In the last month, I have refactored my credit card debt in such a way that I am making some changes to my 2008 goals.  I have successfully opened another card and transferred $7,250 to it at a fixed 2.99%.  This past weekend, I got my lower rate (now 16.76%), previously existing card’s limit raised $700 and a 6 month low balance transfer rate on the same card, which I used to finish off my highest card (where the $7,250 came from) and put a dent in my overdraft protection
(17.9%), which I have been counting as credit card.

This refactoring means that my balances are (no particular order):

• Other debt (0%): $523.03
• Card 1 (24.24%): $0.00
• Card 2 (16.76%): $1,605.20
• Card 3 (2.99%): $7088.00 (newest card, transfer posted on statement closing date, so first payment made)
• Overdraft (17.9%): $124.82
• Auto Loan (8.59%): $8,299.01
• Student Loan (7.22%): $16.832.35

Before the current situation, I was planning my snowball to go through my Other Debt, Card 2, Card 1 and finishing with my overdraft this year. My Auto Loan and Student Loan would then have been worked on next year.  As a result of these changes, I have decided to reorder my attack to be, in order: Other Debt; Overdraft; Card 2 and Auto Loan this year, followed by Card 3 and Student Loan beginning next year.  To accomodate this, I am restating my goals effective immediately.

2008 Goals (in order for debts):

1. GET A NEW JOB!!!!
2. Eliminate Other Debt (0%): $523.03
3. Eliminate Overdraft (17.9%): $124.82
4. Eliminate Card 2 (16.76%): $1,605.20
5. Eliminate Auto Loan (8.59%): $8,299.01
6. Eliminate $10,552.06 in debt (sum of above).
7. Increase Cash and Cash Equivalents to $1,000.
8. Increase Retirement to $3,768 (by $1,650.98 over the next 9 months, including this month).
9. Increase Stock Portfolio to $500 (by $110, over the next 9 months, originally $400 but did a $100 contribution to get in on Visa).
10. Increase US Savings Bonds to $225 ($175 over the next 9 months, originally $200, but $25 bond found and not to be included in goal achievement).
11. Increase net worth to $9,783.98 ($13,209.28 over the next 9 months, represents the sum of above applied to current worth).

This restatement of goals represents an even more agressive plan, but will be easily attained once the first is achieved.  I expect to be earning the equivalent of $40-50 thousand per year, based on my current residence (which is a relatively cheap place to live).  This means if I move somewhere that costs 50% more to live, which I suspect, I will expect $60-75 thousand per year.  With any luck, I will not move somewhere cheaper, since 50% lower cost of living puts my expected income back where it started, at about $20-25 thousand per year, though I could live off about $10,000 in said cheaper area.

Thanks to these changes, I have new baselines, so I will not be stating progress for the month.

You need a strategy for paying off those credit cards.  There is but one strategy, snowballing.  This method takes a set amount of money and applies it across all debts, paying all minimums with the remainder going to one particular debt.  There are several possible orders in which to approach this.

1. Order them from highest interest to lowest interest, focusing on the highest interest first. Paying them off in this order will minimize the interest you pay.
2. Order them from lowest balance to highest balance, focusing on the lowest balance first. You’ll gain a sense of achievement as each balance goes away and the next one accelerates when you shift those original payments to it.
3. Order them from highest balance to lowest balance, focusing on the highest balance first. This method will give you a greater sense of achievement as balances are paid off, BUT you may continue to feel hopeless since it will take longer to get rid of the balances.
4. Order them from lowest rate to highest rate, focusing on the lowest rate first. This is similar to number 2, since more of your payment is going towards principle. With this strategy you may want to consider doing a balance transfer to the lowest rate card from the highest rate card, thus combining it with number 1.
5. Order them by “duration until payoff.”  This is done by taking the current principle plus accrued interest and dividing by the current minimum payment.  This method may result in one of the previous four methods, but this is not necessarily so.  You would focus your efforts on the debt with the lowest duration.  This will most likely result in a faster sense of achievement than number 2, since the lowest balance may not have the fastest payoff.
6. Order them in the order you want to pay them off, focusing on what’s most important to you. This is a great way to do it if you include other loans, such as a loan from a friend. You’ll receive a similar result to number 2.

After you decide the order you are going to attack your debt, you need to decide whether you want to use standard or reverse (my term) snowballing.  In standard snowballing, you fix the current minimum payments and use them as the minimum amount paid each month.  Reverse snowballing can result in paying the first loan off faster, since you fix the total amount paid and apply the remainder after current minimums to your first loan.

Now that you know about snowballing, stay tuned for pairwise comparisons of the various methods mentioned above.