Bring it on, Debt-Load!! You're goin' DOWN!

So, task #1 is to get a handle on the debt we have. It's not that bad, really. I've seen scarier numbers than $30K in debt. It's actually a bit higher than that when you take into consideration some personal loans we've both had (thanks to amazing family who are nothing but supportive:)). We want to take care of those debts as well, but as any of our family would tell us, taking care of the ones that are charging interest is the priority right now!

So here's the plan, I have a house that I have to remortgage anyway to take my ex off the title (he graciously gave me two years to get my income established as a self-employed individual before I had to take the mortgage on myself). So going through that now gives Dave and I the perfect opportunity to draw on some of the house's equity (though there isn't much) to take care of the most costly debt; the credit.

Credit is a wonderful thing when you know how to use it properly, but unfortunately for most people, even if we know how - we don't. The road to hell is paved with good intentions, and never in my life have I found that more true than in how i intend to use credit and where I actually end up!

Credit is great when you have the discipline (and that's all it is, people - discipline) to only use it when you actually have the cash on hand to pay it immediately. Doing that can help you establish an outstanding credit rating, which makes getting a mortgage or other loan super-easy when you need it. Also, if you have a credit card that earns you some kind of reward points, that can be a great way to build those up and reap those benefits. Those are the good intentions:)

The reality is that we end up using our credit for purchases we don't have the cash for but believe we can pay off easily or to help sustain us through periods when money is tight. That is how we end up with maxed out credit cards we can only make the minimum payments on and paying hundreds of dollars a month just servicing our debt and making the credit card companies rich on our interest. Credit Hell.

So with the remortgaging we are going through right now (as soon as I manage to get my taxes done :P ), we can pay off both credit cards and more than half the line of credit. Dave also has a decent tax return coming and we will use most of that to pay off more of the line of credit and some personal debts. With these high interest-charging debts taken care of, we can use the money we were putting towards servicing those debts every month (roughly $1000) towards paying off the rest of the line of credit (now much more manageable) and those personal debts (...not to mention my taxes from '08...YIKES!! The joys of being self-employed :) ).

In this way, by the end of the summer we will have about $30K of our debts completely paid off (well, about $20K will be refinanced into the mortgage, but that is a preferable option to simply maintaining high interest debt) and be well on our way to financial recovery! Sounds very ambitious, I know, but doing this work now will have so many long term benefits, that the few short-term sacrifices will be well worth it. And it's the first step in working towards the simple, sustainable, abundant, worry-free and joyful life we want.

In the next posting, I want to talk about how we are decreasing our household expenses and managing our cashflow in an intelligent way.

'Til then, folks!!

e