17 January 2014

How I Gave Myself a 20% Raise

Costs are going down. Image sourced from SalFalko on flickr.
One of my goals for 2013 was to pay off my debts. While I've already detailed the progress that was made on that front, I also had a big boost along the way. I got a 20% raise. But, it's not what you think. My boss didn't call me in and say that he valued me that much. In fact, he couldn't do that anyway due to company policy. I was already quite a ways up the pay scale and there wasn't 20% left to give me that much of a raise.

No, I got my 20% raise by refinancing my debts to substantially lower interest rates. I've spoken before on tricks that can save you a few bucks here and there (and lots of time) via overpaying and paying early. But those pale in comparison to reducing or completely eliminating your interest charges completely. Which is exactly what I did. I started by paying off my car note with a 0% balance transfer. That was followed by a loan from Lending Club which allowed me to pay off a card that has a mind-boggling 29.99% interest rate*.

However, I still had to pay off some other cards. This was accomplished via both a loan from my retirement account (cue the choir...) as well as balance transfers onto new cards with much favorable terms, i.e. 0% interest for over a year and of course no annual fee. Originally, I'd intended to transfer and close. Then I realized the folly of closing the old ones since their history is substantially longer, but they now sit dormant and will continue to do so. Especially the one with the ~30% interest rate. (Except for the Chase Rewards when a 5% cash back category rolls around that I actually use.)

As a result, I now have 20% more money every month to throw around at debt. Of importance is reducing the 0% balances before their introductory periods end and the interest charges start. However, that's equally challenged/balanced by the fact that with their extended time frames, it might make more sense to attack other balances that are currently charging me interest (i.e. Lending Club and my student loan). But if I'm not able to pay them off and pay off the transfers before their intro period ends, it makes more sense to leave them alone and finish the payoff schedule. I'll have to play it by ear. Nonetheless, I still expect to be able to pay everything off completely within a year.

But enough about me, what about you? Have you been able to refinance any of your obligations recently? Do you have any debts that you'd like to refinance? Any tips on other ways to make paying of debt easier? Share with us in the comments or via email. Auf wiedersehen!

*That's the normal rate, not a penalty APR due to late payments because I've never paid late. Card was originally 0% on first $250, then 16.99% for anything above. Over the years, the limit and rate both increased substantially. Original limit was $750, it now is over $10k. I've shredded the actual card and they owe me $1 due to the rules and power of compounding.

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