Monday, November 5, 2007

How Did I Get Here? – Part VI: The Pruning Gets Easier

While working on conquering the student loan beast, I took a look at a few other things I could do to pare down my monthly payments and make my snowball bigger.

The first thing I looked at was my credit cards. I did a balance transfer to a 0% card a couple of years ago, and although I mostly paid it down during that year, I wasn’t on a plan like I am now, so I ran up my other cards in the mean time. Needless to say, this wasn’t helpful. Still, I knew I could do that again and use my newfound financial ambition to get rid of the debt before the 0% went away.

All of that was floating around in my head when I was at the bank one day shortly after my initial financial revolution. The guy behind the counter was looking at my account and said I was pre-approved for a 0% card. I was VERY hesitant to sign up because I didn’t want to act on impulse, but I figured that 0% was 0% and it would be nice to have the card at my current bank because making payments through their online funds transfer would be really easy.

It turned out that I wasn’t really pre-approved (why the guy said that, I have no idea), and after they signed me up for the card my rate turned out to be 1.9%. With a 3% balance transfer, this wasn’t as good of a deal as I’d hoped, and I wish I had done some more research before acting, but overall it’s still a much better situation than I was in with balances on four different cards at upwards of 20% on most of them. Over the period of time before I pay these off, this saved me about an average of $13 a month.

The next thing I looked at were some of my smaller monthly bills. I took Netflix down from three-at-a-time unlimited to one-at-a-time unlimited, which saved me $8 a month. I took texting off my cell phone and removed the insurance, saving me $5 a month. I lowered my grocery allotment from $240 to $200, and have since gotten it all the way down to $140, saving me $100 a month.

One last thing I did was to shop around for car insurance. Since I’d recently moved and my current policy would be expiring soon, I needed to update my insurance anyway. I got quotes from a few different companies, but my current company was still the lowest, and because an accident I got into a few years ago was no longer on my record, my payments went from $160 to $100 a month.

Total Savings: $186 a month, and it wasn’t even that painful.

This post is part of my Financial Revolution Series, which is my personal financial story. Each post gives a piece of the story, detailing how I got into debt and how I turned things around.

Next Time on TVG&M: Increasing My Income


Matt and Carol said...

That's awesome! We found shopping insurance to be a great saver. Don't forget to ask for discounts! We have our home owners and auto through AAA - the savings for more than one ins. and the savings for having AAA for both of us actually pays for the AAA roadside assistance annually. Does that make sense? Am very tired :).

TV Girl said...

I asked about discounts but didn't qualify for any. I've been thinking about getting AAA though. My parents love it, and if it would pay for itself it'd definitely be worth it.

Matt and Carol said...

Something else I was thinking about... if you do have other opportunities to surf your balances to a 0% or other low balance - it's not a bad thing at all! And even though that 3% fee isn't great, that's 3% one time rather than 25% a year or whatever. We did that a number of times - I don't think we paid interest at all for the last 3-4 years with our last CC [yes, it took that long to pay off, but we really weren't working that hard at first...]

TV Girl said...

My balance isn't high enough to make that necessary. I'll have it paid off by May/June-ish or sooner, and the 1.9% isn't up until August.

Although... *thinking as I type this*... would it be worth it to surf the private student loan to a 0% card? Is that even possible? How bad would it hurt my FICO? Do I care if it hurts my FICO? How does deductible interest figure in? Hmmm....

Matt and Carol said...

Hmmmm.... I don't know about private student loans. I'm not sure how they work as all we have is federal ones. I would think that the interest wouldn't be tax deductible any more but... Let me see if I remember the numbers [and I'm using easy ones...]

If you have a taxable 50G income and you pay 1G in tax deductible interest, you're now paying taxes on 49G. The taxes on 1G would probably be in the 250 range. So you're paying 1000 in interest to keep from paying 250 in taxes. If you really want the tax deduction, you could always give 1000 to your favorite charity.

Does that make sense? That's how Dave talks about mortgage insurance - so the concept should be the same.

As for how it would affect your FICO... I don't really know. In theory - you shouldn't need it except to get another 0% card or maybe a house someday but you can find manual underwriters for that.

I'd think about it - I don't remember how much you have in private loans without looking - think about it - how much would you save a month? How would it affect your payoff dates [there's some great sheets on the JimnKim site I like to where you can input a few numbers and it'll change everything to show you payoff dates etc.] Weigh the pros and cons of it and then decide. Is there more risk with paying the loans off with a 0 or low interest cc? What happens to those loans if you were to die or become disabled? Are they treated different than federal loans - where they go away if I die?

Just some stuff to think about, but I don't really know anything about private loans per se.
C [who would never turn down a tax break but who won't go into debt to get one :)]

Anonymous said...

"Does that make sense? That's how Dave talks about mortgage insurance - so the concept should be the same."

I meant interest of course :).

TV Girl said...

I'll probably do some more research on this issue at some point in the near future, but my initial gut reaction is that it's either not a good idea or it's not possible. If it was, I would think I'd hear more about people doing it successfully. With all of the financial stuff I've read in the past couple of months, I can't imagine there's a way to save that much on interest and nobody is talking about it. Maybe I'll email some of the bloggers and ask what they think.

TV Girl said...

Dave had someone on his show yesterday who asked about surfing a mortgage balance to a 0% credit card, and his answer made a lot of sense. Basically it just comes down to the risk involved. CC Companies can change your rate at any time and they're always looking for reasons to charge you fees. I just don't trust them, and I'd rather have my loan at SM where I'm reasonably sure they'll be fair with me.