Dave Says - September 10, 2007
Graduate wonders what to pay off first
Dear Dave,
I’ll be graduating college in December with a degree in elementary education, and I have a job waiting for me. It will be the first time in my life I’ve made more than minimum wage, and it will bring our household income up to about $75,000. I’ve got $15,000 in student loan debt, $6,000 to pay off from a repossession a while back and $3,000 in credit card debt. How should I handle this salary increase?
Mickey
Dear Mickey,
Congratulations on your degree and the decision to get serious with a plan for your money! And here’s some more good news for you. If you guys keep living the way you have been and put the rest toward debt, you can have it knocked out in about a year.
But just because you’re making some money doesn’t mean you should double your entertainment budget or pick up a car payment. Sit down together and work out a written monthly budget. Give every dollar a name before you spend it, and don’t forget to work the debt snowball, too. List your debts from smallest to largest, pay minimum payments on the two largest and then attack that credit card debt with a vengeance! Chances are you can get these taken care of in a month or two. Once you’ve paid that off, roll the money from that payment over and apply it plus any other cash you can scrape up toward the car repo. If that debt has any age on it you can probably work a deal for fifty cents on the dollar and get out paying just half.
Once you done this you’ll have a bunch of cash to throw at those students loans and get the debt off your back once and for all. Good luck, Mickey!
- Dave
