First Person: My Mid-Life Plan to Get Out of Debt

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When it comes to getting rid of debt, I know I have two options. I can either earn more money or reduce the amount of money I spend. As a woman in her 40s, my strategy for getting out of debt is a lot different than it was in my 20s. I now have a husband and two college-age children as well as aging parents who sometimes need financial assistance. A recent article by The Street pointed out that the personal debt trend is troubling at a time when the overall economy is showing positive signs. According to The Street, the average consume debt per household is $7,200. Consumer debt in the United States has reached $11.3 trillion, which is truly mind-boggling. I've come up with a plan to pay down my mortgage debt of $94,000, car debt of about $19,000 and credit-card debt of about $4,000. When I was younger, I had a lot more energy to boost my earnings. Now, it's easier for me to reduce spending.

Stopping the gravy train

As a member of the sandwich generation, I'm often torn between paying my own bills and those of younger and older family members. When I was single, I didn't have to worry about anyone besides myself. It's a little trickier to juggle my personal finances when so many other people are involved. I didn't want cut off family without warning so I instituted a family "credit limit" of about $80 a month to help pay for unexpected bills or a yearly limit of $1,000. I also had to temporarily suspend holiday and birthday presents or include it as part of the yearly allowance.

Cutting out costly ingredients

I also had to figure out where I could cut my spending in order to allocate more money for debt repayment. I recently read a U.S. News & World Report article that listed a few of the items that will be more costly in the near future such as chocolate, bread and beef. Although I don't need to worry about the rising cost of cars or houses, I do need to be aware of sticker shock when shopping for food or clothing. I am planning to spend less money at the grocery store by using coupons and cooking meals that do not call for the more costly ingredients. I save money on clothes by shopping my own closet.

Following a written plan

As part of my budget, I calculated how much extra I could send to the mortgage company and the credit union that handles our car loan. Since the interest rate on the car is so low, we can double up on the monthly payments so it's paid off in just 2 years. An extra payment of just $300 a month means our house will be paid off in 10 years from now. I also wrote down a plan for paying unexpected bills as well as how to invest windfalls such as a tax return. If we can't pay off our one credit-card bill with a tax refund, I will use some of my contributions to a Roth IRA to knock it out.

In my 20s, I wanted to get out of credit-card debt so I could improve my debt-to-income ratio and become a homeowner. At this stage in my life, I'm more worried about having my home completely paid off so I don't have as many expenses when I retire. I don't consider my home to be "good debt" because it eats away at what could be my discretionary income. Since I started working my plan last year, I've been able to stay on track. I just have to remind family members that we will have much more in the future if we give up just a little now.

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