My apologies to all who find this to be boring crap, obvious crap, useless crap, or otherwise crap.

For the last 12+ months my wife and I have been in rather large debt, primarily owing to her student loans, but also loans to pay for immigration forms and some credit-card stuff, and now our new car is on that list too.

It got so bad we moved back in with her parents, where we’ve been since November last year.

But, things are looking up again. She now has a full time job, I have the promise of casual work and possibly a permanent part-time job at an after-school program (will hear from them tomorrow, hopefully). We have a budget surplus of around $300/mo after all the income and most of our outgoings are paid for. If I get the part-time job then our outgoings increase slightly (gas, mostly), but our surplus will increase to around $800/mo. Now, we need to save something, in case of emergencies etc, and $800/mo isn’t really enough to comfortably move out again. My plan for us to change our circumstances doesn’t come from moving out and then paying off debt, it comes from paying off debt and then moving out.

See, right now we have two credit cards, one of which is more than twice it’s limit, the other we are trying very hard to keep below the limit, and as close to $0 as possible (so far we are succeeding). We also have a couple of loans that are either small or rather annoying which we can get rid of fairly quickly. My solution is to take about $400 of our surplus per month and put it towards a single loan.

For example, the over-limit credit card charges us about $50/mo. If we add $400 to that, we can pay $450/mo until it is paid off. That will take roughly 3 months. Then we can take that $450 and put it towards something else, like one of our smaller loans that is $65/mo, so we’ll be paying $450 + $65 = $515/mo until that is paid off. A third smaller loan is about $75-80/mo, so we can take the $515 from our two previously paid off loans, and add it to the $80/mo, and be paying $595 on an $80 loan payment – how fast do you think that loan will go away? I think fairly quickly. And all it costs us extra per month is the $400 we put in to begin with. Once those three payments are knocked out, we could take our $400 back out again, and we’ve just found an extra $195 a month, bringing our budget surplus up to nearly $1000 – we’re getting closer to being self-sufficient now. The other two loans we have are $138 and $159, and I haven’t done the calculations based on how quickly these would have an effect on our current loan balances, but I envisage we could be fairly debt free (one loan has a huge balance) within 24 months.