Finances and Conventional Wisdom

Conventional wisdom used to indicate that the way to reduce debt and plan to be more secure in the future was to pay off any serial debt such as credit cards by first paying off the smallest balance or the highest interest. You would at least pay minimum + monthly interest so the balance would actually decrease. The smallest balance is easiest to pay off, so you feel a sense of accomplishment. Then, you were supposed to add the amount you paid on that bill to the next smallest/highest and so on, until you had eliminated your serial debt. That's the method I used a few years ago when I had way too much debt. It took awhile, but was effective.

Today's conventional wisdom is different. Because the world's economy has imploded and even in the world of document review there isn't too much work lately, the new plan is to pay minimum balances on everything and stash a little more into savings. Or stash something into savings. While I'm paying extra on two of my student loans, I don't have too much extra being paid out so I don't know how much sense that makes for me; it's about $80/mo so not a whole lot.

One of my colleagues plans to make minimum payments because we work for the state and it's a contract negotiation year so who knows what's going to happen. She plans to change her habits for the next 2-3 months, but has more room for changes than I do. She has a bill with Dell and a credit card balance, in addition to having wireless internet for which she pays $60/mo but doesn't use even monthly. She likes the convenience of it. Me? I'd like the convenience of having $60 more to pay to Dell or to pay on my credit card! She also pays $90/mo for a cellphone package, which includes a family plan for a husband who uses 3-min/mo. That would be an incentive to me to change my package; I did at one point pay for extra cellphone services and not use them much so got rid of that option.

My priorities are somewhat different and I have a greater need to have less debt than to pay for services I don't use. While I would like to put more money in savings, I'm not sure it makes more sense than attempting to reduce my student loans. I really want them to go away though that's going to take some time. My smallest loan used to be the highest rate of interest but has reduced itself over time and is now lowest. Meaning that with previous conventional wisdom, this is not the loan to target. Then again, the lower interest rate means more money goes on principal and I have a better chance of paying if off sooner.