Debt Payoff Progress – Feb 2012

In my last debt payoff update, I noted that we were 7 months away from paying off all our debt (minus the house).

A few days ago we paid off my wife’s student loan. When she graduated about 10 years ago, she owed about $25,000.

That leaves us with just my student loan, with a balance of approximately $8338. When I graduated 8 years ago, I owed about $20,000. In addition to the credit cards that were paid off years ago, and our two paid-for vehicles, we’ve paid off more than $90,000 in debt accrued over the past 10-15 years.

As I’ve mentioned before, we follow Rule 4 of my 10 Rules to End Your Debt and Change Your Life, which is Pay Off Your Debts, smallest to largest.

This is controversial advice in the personal finance world.

Yes, I would save a little bit of money by ranking them by interest rate, but the value of momentum and getting smaller debts off the books and out of your mind outweighs the small monetary benefit you’d getting by focusing on interest rate.

So let’s take a look at an accelerated debt payoff calculator and see if we are still on track to be debt free this summer.

 

ADP data courtesy of CalcXML.com


As you can see, if I was just paying the minimum on my remaining debt, it would take me almost SIX AND A HALF YEARS to pay it off. But by factoring in my minimum payment plus the extra $1650 we pay each month, you can see that we will pay this off in 5 months.

That means we are still on track with our goal, despite the tough spending season of Christmas.

If you’ve been following this site for a while, you know that we are also attempting to pay off our debt while saving for a European vacation that will cost approximately $5000. My main goal for the next 5 months is to do both without falling off my debt freedom schedule.

This will be tough, but we have been saving for the vacation for a while now, and will pay for it in cash. If you want to read about why we are choosing to practice conscious spending and delay debt freedom by a few months in order to take this trip, read here.

For us, we have only this opportunity this summer to take this trip, and it’s worth it to us to delay debt freedom for a few months. If we don’t, it might be a few more years before we can do it again.

 

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21 thoughts on “Debt Payoff Progress – Feb 2012

    • While I’m proud to be paying it off, I’m not proud to have been in it. It’s like throwing a party because you stopped beating your spouse 🙁

  1. That’s a huge amount of debt to tackle, you’re doing a great job. A few years ago I would have berated a person for taking an expensive vacation while in debt, you seem to have a good handle on what you’re doing and what it’s going to take to make it work!
    PFM recently posted..Frugal VacationsMy Profile

    • That was me a few years ago, until I realized that didn’t jive with my human nature. While $8300 sounds like a lot (it is), we are paying it off at almost $2000 per month so we are in the twilight of debt. I wouldn’t advise it for someone who is just starting, but if they wanted to set aside $50/month until they saved enough, I’d say go for it.

  2. Great job!! I’m at the beginning of my payoff marathon – I’ve pushed the debt off for 8 years – I’m now 30 and ready to be debt free but with over $100k it’s really daunting. My partner helps, but even still it’s very challenging. Good for you for starting your journey so much sooner and accomplishing your goals!

    • It’s been tough and here were times I wanted to give up, especially when the headlines were filled with bailouts. Luckily those handouts made me angrier at my debt and gave me the resolve I needed to bring it into the home stretch.

      Thanks for stopping by!

  3. Congratulations on paying off your wife’s student loan!

    I completely agree with you by the way. Ranking the debts by interest rate may save you a bit of money, but it’s the psychological side of things that causes people the most problems. If it didn’t, fewer people would be in debt right now.
    Cassie recently posted..It’s Time For A RaiseMy Profile

  4. I’ve still got a bit of student loan debt from my MBA, but it is consolidated at such a low interest rate, that after tax rate of it doesn’t make it worth it. I can make more in i-bonds than I can paying off my student loan. It’s getting very close to that level on the mortgage too. We still pay extra, but not nearly as much as we used to.
    CultOfMoney recently posted..Couples Strategy for building wealth and saving moneyMy Profile

    • Our loans were averaging over 4% interest, so I felt more comfortable with the guaranteed return of paying off the debt. My dad tried to tell me to slow down, but I have such a mental aversion to the debt that I want to get rid of it out of principle.

  5. I believe you mentioned that you have to visit Las Vegas as well to attend a wedding? How does that factor in? When, and how much do you need for that trip? If it goes as well as one of mine, perhaps that trip will pay for itself as well as fund part of your European trip!!

    Paying cash for a trip to Europe is nothing to feel guilty about. Enjoy life while you can. Don’t worry, Dave Ramsey will NOT be standing on your shoulder reminded you of the minimal amount of debt you have left to pay. Sounds like you guys have been working your butts off and deserve a nice vacation!
    Matt @ RamblingFever Money recently posted..Bodyguards, Boobs and a Pocket Full of CashMy Profile

    • Thanks Matt! In addition to the Vegas trip, I have another bachelor party in Nashville that is going to challenge the budget and plan. These types of obligatory spending are hard to deal with. I think I will write a post about this soon.

  6. Nice work, dude!

    We’re actually going to talk about debt repayment on the podcast next week. The idea of smallest to largest is compelling, even if it isn’t the fastest way to pay off debt. I’m wondering if there are even better methods to help visual people stay motivated while paying it off in a more analytical manner.
    AverageJoe recently posted..Getting Through the “Broke Week”My Profile

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