paying off debt – Frugal Things Every Day

What Would You Do With A Lump Sum Of Money?

If a lump sum of money all of a sudden came your way, what would you do with it? A lump sum could be $100., $300., $1000., or even $ 10,000. It really doesn’t matter how much or where it came from. It could be a small amount up to thousands. Do you ever dream about winning the lottery when there is a large jackpot? I am sure most everyone has at one time or another.

Would you blow the money on eating out, going to the movies, on a shopping spree, or on a vacation? Or would you put all of it on your credit card debt, an extra principal payment on your mortgage, or pay off your car loan?

We have been there many times in our life. Whether it was a small inheritance, or a tax refund, overtime pay, or any check that we were not expecting.

We have lived it so we know what we did. We gifted some, we gave some to various charities, and we invested the rest. We were able to because we had no credit card debt or car loans when the money came our way. Our mortgages had all been paid and our last two homes we paid cash for. We also had a good size emergency fund and plenty of investments.

Why were we in such good shape? Because we spent the majority of our lives making extra principal payments on our homes to pay them off quickly. If we got an extra $50., or $100.(use your imagination), it got sent as a principal payment on the mortgage or sent to pay off our car loans we had 25 years ago. We saved and invested regularly also.

We always had our eye on the future. You should too because let me tell you, life goes really fast. Before you know it, it’s time to retire. I know some people work till they die but I don’t think anyone really wants to do that unless they really love their job.

Here is a calculator for you to use. Play with it to find out how many years you could cut off your mortgage and how much interest you would save if you made extra principal payments every month:

Mortgage Calculator

And here is one for paying off your auto loan early by making extra principal payments:

Auto Loan Calculator

Lastly, here is one for your credit card debt:

Credit Card Calculator

Now what would I do if I had all three debt payments to make every month and I got a lump sum or many lump sums? I would build at least a $1500. emergency fund if I didn’t have one. That would give me some money to pay for a broken appliance or a repair. If every time you have something go wrong, you put it on your credit card you will never get out of debt.

Next I would never again charge anything on credit cards. I would work to pay off the credit card debt as quickly as possible by making extra payments. I know people say “But I had to use it(the CC), it was an emergency”. The problem with that is there will always be an emergency in their mind. Buying new clothes, going out to eat, going to the movies, etc. are not emergencies. Then I would work at putting extra payments on the credit card debt I owe.

When the credit card debt is paid, start paying extra on the car loan or student loans.

When those are paid, use all of your extra lump sums of extra money to make extra monthly principal payments on your mortgage.

Then when all your debt is gone, start saving for your next car. Put money into retirement accounts if you haven’t been doing it already. And then book a vacation or any other fun you want to have.

I have heard so much whining in my lifetime about how people will never get their debt paid off. I don’t make enough money. Well, then take another job temporarily until you do have the credit card debt or auto loan paid off. Oh I hear more whining about that!

The bottom line here is you created the debt so you have to pay it off. It is up to you as to whether that will take a couple of years or a lifetime. I know which way I would go.

So please don’t waste your lump sums on consumables that you won’t even remember a year down the road. Put them on your debt. You will be so much happier in the long run if you don’t owe debt that is stressing you out.

Updates on Our Two Families

I quickly heard from one of our couples this morning. Their lives have become hectic with Noreen working her part time job so she hasn’t been able to e-mail me as often. The following is what she told me this morning.

She and Bruce have paid $5300. on their $21,000. debt since the end of September. They have been able to do this with her part time job paycheck and cutting every expense that they can since the last time we spoke. They expect to continue doing that until the credit card bill is paid and then they will reevaluate where they are at. They are making one exception. They are going to use $300. this month of her paycheck to purchase Christmas gifts for their son and some nieces and nephews. Any extra will be used for some special food items for Christmas.

They have not spent anything for clothing or eating out. They have cancelled all entertainment and hobbies except for Netflix. They decided that gave them enough things to watch.

Through careful planning, they have cut their monthly grocery bill down to $100. They had a small stockpile and they have been eating some of that which is helping their grocery budget.

Noreen says that Bruce has always gotten a Christmas bonus from his company. So if that happens this year, they will apply it to their debt to pay it down faster. They also expect that they may get a Tax refund in early 2019, so that will be put on the debt also.

I have to say that I am impressed that they have stayed the course. They are doing really well and are still very motivated to get all of their debt paid in full. They have done what needs to be done to get themselves on secure footing again. So many people start working on it and then give up. Some people continue to use their credit cards for every bump in the road and that gets them no where….just farther in debt. But not Bruce and Noreen. They have not used a credit card since they started this journey.

I have not heard from the Joneses. I have e-mailed and e-mailed and get no response. I am wondering if they have given up. I hope not because they were doing very well! If I ever hear from them again, I will let you know.