I think about it a lot, what I’ll do when I’m out of debt again. Right now, I’m putting $1000-1200 per month towards my debt (including student loans). Once I pay off my credit cards, sometime in the first half of 2008, I will have another $875-1075 in my budget. I have several things I’ve been thinking about doing; some of them, I’ve discarded as ideas, some of them I will probably keep.
1. Max out my 401(k). This was one of my first dreams, to pay the federal maximum of $15,500 towards my 401(k). This is a good idea, but I probably won’t go through with it; I will probably up my 401(k) contribution, but not to the federal max. Instead, I’ll up it a bit and put the money to other goals. (For all interested parties, I’m currently contributing a little over half the federal max.)
2. Build an emergency fund. Technically, I’m already doing this, but I’m doing it much too slowly for my liking. Right now, I’m automatically putting $100 per month towards my emergency fund. (More on that here.) I will probably up that to $500 per month, taking away $400 of my ~$1000 I’m putting towards my debt now. That will give me ~$6800 in my fund after a year. ($6000 of contributions plus what’s already in there when I pay off my CC.) I also get sporatic bonuses at work; I’m planning on putting a part of each of those to the EF. (Right now, all my bonuses go to CC debt.)
3. Fund my Roth IRA. Looking at my payoff schedule, I should be able to pay off my CC debt before April of 2008, barring any emergencies. Until the 2007 cutoff of April 15th, I’ll probably put all of my extra money into my Roth for 2007; after tax day, I’ll work on maxing out my Roth for 2008, along with funding my EF and upping my 401(k) contributions.
4. Spend. Right now, my budget is pretty tight. There are places I could save more (there are ALWAYS places to save more), but I would ideally like to have another $100 or even $200 to play around with a little more than I currently do. If I’ve upped my 401(k) contributions, am on my way to having an EF, and maxing out my Roth IRA, I will probably take a little of the leftover money and add it back into my budget as “fun” money.
I think upping your fun money is a great way to keep debt off in the future. I had too tight of a budget and I went into debt (around $1k in cc debt) a few months ago…I was just limiting myself too much…and I went a little crazy!
I completely agree with saving diva. When I feel deprived for a while, I tend to end my saving streak with a big splurge. Not good. So, when I get out of cc debt, I’m going to send the bulk of that money to an EF, some to paying down low interest student loans, and then I’ll give myself an extra $200/month or so for fun! I can’t wait!
Oh, I should mention that I’ll probably raise my 401(k) contributions or start some Roth IRAs, but I’m not sure yet…that’s whole other post!
When I get out of CC debt, it’s going towards paying off my pretty new (well, new for me) car.
My goal is to pay my car off before it depreciates past 10k in value.
SavingDiva and Ms. M&P–Thanks for the encouragment! I always feel a little guilty adding in more fun money, but you’re both right that if I don’t, I run the risk of binging on shopping after a dry spell.
Vixen–That’s a great goal! Any idea how much it’s worth now and approximately when it will be worth less than 10k?
[...] months, I’ve been dreaming about the day that I would finally pay off the card and have extra money to work with. I can’t [...]