On Friday we wrapped up our two week series on teaching listeners the basics of financial management.
I discussed Laurie's story, our money make-over winner and how with just a few simple tweaks, we can save her thousands of dollars in debt costs and change her future, if she's willing.
Laurie and her husband have been earning over $150,000 per year for a few years now. The problem is their spending is out of control. They've re-mortgaged their house several times to pay off credit cards and are in the same boat yet again. They're 50 years old and if they view this as a wake-up call, they can change their situation for the better, etch out a decent retirement, or, they can keep spiraling into more debt.
Their biggest problem right now is their high interest rate credit card debt. They currently have about $24,800 on various cards and are only paying the minimum payments of about $726 per month.
I calculated how long it will take them to pay these cards off the way they are going (and that's assuming they don't keep running them up) with a handy calculator I found from CNN Money (you can find this on my site at www.kelleykeehn.com and click the CBC logo).
Paying only the minimum amount, it will take Laurie and her husband a whopping 51 years and 5 months to pay off their credit card balances, costing them a total of $28,427 in interest charges.
My solution is for them to pay just $274 more per month (making their total payments to credit cards $1,000 instead of their current $726) which is only $9 and change more a day. Viewing their excess spending habits, they won't have to make too many sacrifices to find an extra few hundred a month if they get series about paying their debts.
With this option, it will only take 2 years and 7 months to pay off their current credit card debt and will only cost them $5,763 in interest - a savings of $32,664 from their current strategy.
Now, here's the important part. If after that 2 years and 7 months, they then take that $1,000 a month they were paying on old debt and allocate it towards saving for their future, (in an RRSP for 12 years) they will have nearly $250,000 saved for retirement.
This option could be the difference between them running the same negative pattern, or, retiring with a decent amount in the bank. I know it's been an eye opener for Laurie, but only time will tell if she's serious about making some changes, even simply ones for her future and her family.
Stay tuned to this blog for more details on Laurie and her progressing situation.
And I'll return back to CBC Radioactive each Monday afternoon starting April 6th.
You can catch all of our past segments at http://www.cbc.ca/radioactive/kelley-keehn.html.