Financial Limbo

So, I went ahead earlier this week and up’ed my 401k contributions to 10% of my gross income (up from just under 5%).

This will result in a considerable hit to my monthly income, presumably starting with the next paycheck, so I’ve come to the conclusion that it would probably be a good idea to alter my debt repayment strategy in advance to compensate for the smaller amount coming in and so as not to get caught with my pants down next month.

Currently, I’ve been paying my mortgage payment (obviously my largest debt) one month in advance. I also set up that additional $25/week that goes towards the principle. I’m not going to change that.

My auto loan is currently 6 months ahead of itself. Next payment due date is January of 2008. Auto loan rates are generally so low, there isn’t a lot of benefit to paying them off early, but with most of my credit card debt sitting on promo rates right now, the rate is actually higher than the total combined average of my credit card accounts. Even so, I plan on cutting this back for the rest of the year to half of what I’ve been paying on a regular basis. Usually I send $350/month… now the plan is to send $175/month at least through December.

Next come the credit cards. From my deck of plastic, the only cards in play right now are the Bank of America Business MasterCard (9.9% APR), the CitiBank AT&T Universal MasterCard (0% APR until April 2008), and the Chase Bank Visa (4.9% APR). As of today, their balances are $5484, $6200, and $7000, respectively.

For new readers, the balances are so high because we ended up financing our most recent (and on-going!? argh?!) home renovation by spreading the damage across various credit cards by utilizing creative balance transfer techniques and those annoying convenience checks they include with your monthly statement.

In regards to those convenience checks, if you’re not one to use a specific credit card but keep the account open, keep an eye on those each month — you may have to wait months or even years, but they do eventually sweeten the deal enough to make it worth your while.

Anyway, I don’t think my plan of attack will change much from what I laid out a couple of weeks ago:

I guess the plan is to continue aggressively on the 9.9% card, throw $250 each month at the 4.9% card, and $100 each month at the 0% card (while keeping in mind that it will jump to 13.49% in 8 months).

The big change, with the smaller paycheck, will be how aggressively the $5484 balance on the 9.9% card comes down. This month, to-date, I’ve sent them $975.65. By months end, the total will be $1125.65 due to a $150/week payment I have automatically set up.

I’m thinking I’ll continue the $150/week auto-payment, but pull back from writing a check for any additional payments.

For the ING Savings account, I’ve got it set-up to pull $100 from my checking account bi-weekly to coincide with my pay day. Nothing huge, so I’m going to keep that up as well.

Hopefully just cutting back the auto payment and the credit card payment will be enough to absorb a roughly $700/month hit on the monthly income we’ve grown accustomed to.

I know we can do…it will just take some time getting used to.