I was playing around with my trusty calculator last night to see where our debt stood. As of this month we owe a bit over $80,000 ($80,400). While this number seems impossibly large can we please remember that just two years ago our debt was closer to $109,000 (highest non-mortgage debt close to 139k). Since starting this blog, we’ve paid off $29,000 in principle debt, most of which was paid down in the last 15 months since my return to work full-time after my year long maternity leave.
While $29,000 is a decent accomplishment for 24 months by anyone’s standards, I’d like to attempt to kill $70,000 (of the remaining $80,000) in 36 months.
Why not worry about the other $10,000?…
The last debt that we’ll be paying off is my nationally issued student loan. A loan I currently make interest-only payments on and a loan which I can claim the interest paid as a tax deduction. Once the other $70,000 is paid off it will only take about five more months to pay this 10k loan off and again, all interest paid is a tax deduction where all other debt is not.
- Pay off 0% interest loan first: $13,064 to be paid off in 12 months= $1088/month while making minimum required payments on all other debts. Total monthly debt total required: $2,064.
- Come October 2015, 0% loan will be paid off and in following 24 months pay off remaining debt which includes student lines of credit and vehicle. I choose to pay the balance of the vehicle next for a few reasons. One, I like the idea of the vehicle being paid off in case something happens to it. Two, our auto insurance will likely decrease with paid off vehicle and three, it’s the largest single debt payment per month with a large portion going towards principle allowing us to pay it down quickly by snowballing out previous debt payments.
- From Nov 2015- June 2016 (kiddo’s 4th bday!) pay off vehicle balance of what will be $13,200 (payment required $1,650/month)
- From July 2016- Dec 2016 pay off two of three student lines of credit. Balance between the two will be about $9,800 (payment required $1735/month)
- From December 2016-November 2017 (final payment the 1st of the month) pay off remaining $23,000 student line of credit (payment required $2,010/month).
- December 2017 debt remaining (national student loan): 10,376 which will only take 5-6 months to pay off.
I have to be honest this is my ”life happens” plan. I’m fairly confident we should be able to do this. The evening out of some months being great and others not so great should make this plan possible. Though I am hopeful we can be done earlier than projected, I have to remember that it takes $2,000 extra just to knock off one month of this plan so realistically this is the plan that we’ll execute within a month or two.
Finally, if you are looking for a good resource on paying off your debts, consider getting a copy of Dave Ramseys The Total Money Makeover. I don’t use Dave’s snowball or avalanche payoff strategies, but millions of people have found his books useful.
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