I’ve Paid For This Twice Already…

Archive for the ‘numbers’ Category

Since we paid off my spouse’s student loan this month, everything else just got the minimum treatment last week.  This week, we haven’t done anything towards paying off debt as far as paying money out directly, but I’ve been working on collecting snowflakes to be able to pay off the car loan in full next month.

I figured out last week that I’d need about $490 above and beyond the snowballed debt payments to be able to pay off that car debt completely in November.   My spouse’s first paycheck in November is on the 14th, and that is where the snowballed debt payment part comes from.  My plan is to be able to pay off the car loan that following Monday, the 17th.  If nothing happens between then and now, at least.

Paying off the student loan last month took everything we had saved as far as debt payments, and a little more besides.  It was a stretch but I really wanted to get it done as fast as possible.  The income from the blog and taekwondo that have come in since then this month have gone towards replenishing the money saved towards paying estimated taxes.  I am about $45 away from bringing that back up to what it was before we did the loan payoff, and then all future non-spouse income this month (minus taxes) will go towards the car loan payoff snowflake fund.  Since it is the end of the month, I anticipate getting about $350 in blog-related income in the next two weeks, and then I should get paid about $350 from tutoring in October.  After subtracting 30% for taxes (we are not in the 30% tax bracket - but self-employment income is subject to 15% self employment/social security taxes) that should leave almost enough to pay off the rest of the car loan.  The about $45 we’d need will hopefully come from a few survey payments I have pending.  If all goes well and nothing unexpected occurs.

Hopefully unexpected can wait until after November 17th.   :)  With any luck, only one more month of paying the minimum towards my own student loan!

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The reality of having paid off my spouse’s student loan is setting in.  When I started making up my list of November’s bills and allocating them to paychecks, I didn’t have to include my spouse’s student loan.  When I was calculating the total amount left of our non-mortgage debts, I only had to add two together instead of three.  I was barely used to only having to add up three instead of four!

This paying off debt thing is addicting.   I may have to seriously revisit the idea of paying ahead on our mortgage once we are down to just mortgage debt and see if that would make sense for us.  I don’t think we can knock out a $100K+ mortgage in this short a time, and we have other savings goals that I think might be higher in priority, but the idea of trying to knock it down a bunch is tempting.

With that, I paid the minimum payments to my student loan and the car loan this past week, which is all we had left in the budget for debt reduction this month after knocking out the spouse student loan.   The numbers now look like this:

Debt at start of blog (6/19/07) : $36,451.71

Current total as of 10/21/08: $12,175.07

Principal paid to date $24,276.64

Broken down into:

• Credit Card: PAID OFF 2/7/08

• Student loan (at 7%): $11,025.19

• Spouse student loan (at 9%): PAID OFF 10/7/08

• Car loan (at 4%): $1149.88

NCN Network Chart:  66.6% of debt paid off

The goal is to find enough money by November 20th to pay off the car loan in its entirety.  Although I still lean towards my student loan first (probably because it is, after all, my student loan, and I am sick and tired of more than half my minimum payment every month going towards interest) I do see the benefit of creating increased flexibility by knocking out the smaller balance.  It will cost us an extra $6-7 in interest over the course of the rest of the payments doing it in the opposite order, but I am okay with that.

We have $437.59 in our debt snowball, freed up by paying off the credit card and spouse student loan.  Add that to the minimum payment on the car loan ($228.32), that’s $665.91.  We’ll need approximately $1154 to pay off the car loan, so that leaves $488.09 more we’ll have to come up with through snowflaking alternative income (blog revenue, survey payments, tutoring, and other miscellaneous things).  I think I will try and add a few extra tutoring hours in the next few weeks to add to that, and we may be able to knock out the car loan next month.  Now that I break down all the math, it seems more likely.  The power of that growing debt snowball.

As for my student loan, that will be a little while longer.  But once the car payment is gone, the entire budgeted $810.41 a month for debt repayment will go directly to my student loan.  Add on to that snowflakes of alternative income, and I am starting to feel pretty excited by the whole thing.  My spouse still owes me $7 for deviating from my highest-interest payment plan though.  I think he needs to sell something. 

And then we need to start saving for a new-to-us car so that once one of ours gives up, we don’t go back into debt.  :)  But for now, on to next week!

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As far as debt goes, nothing has changed since last week.  I used every spare dollar I could scrape up to push us over the edge last week and pay off my spouse’s student loan, so I’ve had to hoard my money since then and be very frugal to make sure we make it to payday (this Friday) without raiding the emergency fund.  So no debt movement until next week after we get paid, when I pay the minimums on the other two non-mortgage debts for this month.

Only two debts.   It still feels a bit unreal, but in a good way.

So, this month I’ll only be paying the minimum payments on my student loan and the car loan (like I have been doing all along) but next month, I’ll have extra to put towards one of them.  Even if I don’t have any snowflakes (there’s Christmas to save for as well as some dental work on my gums I’ve been having this month and will need to pay for next month after insurance gets through with it), we have a budgeted minimum of $810.41 that goes towards debt per month.  Now that the credit card and spouse student loan are paid off, that leaves $437.59 to allocate to one of those debts above its actual minimum.

The car loan next month will have an outstanding balance of about $1150 at a 4% interest rate.  My student loan has an outstanding balance of about $11000 at a 7% interest rate (and the interest we pay is deducted from our income for tax purposes).  I ran those numbers through the snowball calculator to compare the amount extra we’d pay going balance order vs interest order on these debts.   Depending on how much we pay per month to debt (I did a number of scenarios ranging from the budgeted minimum of $810.41 up to $700 extra added to that in snowflakes a month, and different numbers in between) and found that ignoring tax implications, we’d pay an extra $6-7 in interest by going balance order vs interest order.  We’re in a pretty low tax bracket so the tax implications at this point are pretty negligible for the amount of interest we’re affecting.

That’s really not a whole lot to free up an extra $228.32 a month (minimum car payment) in case of emergency.  Me personally, I think I would stick with the interest order and start piling extra onto the student loan, but my spouse leans the other way and wants to free up more money just in case.  At this point, we’re still letting it percolate, but I think if I can gather enough snowflakes to pay off the car in full next month (about $500 above all the budgeted minimum available), that is what I’ll do.  If I can’t do that, I may put the extra towards the student loan and stay the interest order course until I can pay off the car in one fell swoop.  Kind of a weird hybrid strategy.

I know I might sound crazy, and I don’t deny I am.  I kind of just want to write a check for the entire car loan, or just wait until I can instead of paying over a bit at a time.  I have no idea why. 

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Well, my spouse’s student loan, anyway.

October is a three paycheck month for both my spouse and I (I get paid at taekwondo on the same schedule my spouse gets paid at his job).  Since I budget on a monthly basis based on two paychecks for each of us,  in the two months a year we get three paychecks I treat those as an extra paycheck each.  So instead of incorporating them into our budget, I use them to further our financial goals. My spouse got three paychecks in April, but that was the month our furnace died, so instead of that extra paycheck going towards debt, it went towards a new furnace.

I treat the first paycheck of the three-paycheck month as the extra one, so it shifts us into handling future months better.  So on October 3rd we each got our “extra” paycheck.  I sat on them at first, moving them into savings and thinking about what I was going to do.  Then I decided I was going to be crazy and go ahead and do a big thing.  I moved the money back into checking, added that to our budgeted minimum payment for my spouse’s student loan, and added all the money I’d saved to snowflake in the past month.   I was going to pay off my spouse’s student loan.  It was kind of crazy to do so right this second, because my spouse is out of town this week on business, and it wouldn’t hurt anything to wait a few weeks and be sure.  But I am crazy like that, so this morning, I logged into Sallie Mae and authorized the payment to pay off the student loan in full.

When I logged in and looked at the 10-day payoff number, it said $2601.54, so I clicked on the “Make A Payment” button on the dropdown menu to make that payment.  But on that page, it told me the 4-day payoff was $2599.76.  So that is what I authorized to pay.  $2599.76.  I know it isn’t official yet because it takes a day or two to process, but it feels official.  One student loan - gone.  One more student loan and a little bit of a car loan to go.   Things will be very tightly controlled, money wise, the next two weeks until we get paid again because this was a big stretch to do even with the extra paychecks and the snowflake money, but if something comes up for my spouse in California (where he is on business this week) we do still have the $1000 emergency fund to fall back on.  I’m reasonably confident it won’t come down to that, but just in case.

With that, here’s what the numbers look like:

• Debt at start of blog (6/19/07) : $36,451.71
• Current total as of 10/07/08: $12,458.06
• Principal paid to date $23,993.65
• Broken down into:
  • Credit Card: PAID OFF 2/7/08
  • Student loan (at 7%): $11,084.68
  • Spouse student loan(at 9%): PAID OFF 10/7/08
  • Car loan(at 4%): $1373.38
• % of debt paid off according to NCN Network Chart: 65.82%

So next month, that’s $437.59 ($200 credit card budgeted minimum and $237.59 student loan minimum) that I used to be paying to my spouse’s student loan that gets snowballed into the next target debt payment.  Which debt that target is, is still under discussion, but I can hardly wait to make things happen. 

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As I predicted last week, we haven’t made any new payments to debt this past week, because I’ve already made the monthly payments to our three remaining non-mortgage debts (including snowflakes to the student loan)  for September.  I have about $170 in survey payouts and blog advertising income that are sitting in our snowflake savings account for October, which is a far cry from my monthly goal of $900, but since my taekwondo income this month was diverted to pay for my certification class, I knew this would happen.  October is a three paycheck month for my spouse, so the actual amount we pay to debt over and above our budgeted minimums should be larger than that when it is all said and done.  I’ll be putting $1000 from that first of three paychecks (this Friday) into our snowflake savings account, but I may leave it there for all of October just in case and put it towards debt in November.  The economy has got me increasingly unsettled and I might want to have $2000 in emergency savings instead of $1000, at least for a while.

On the other hand, having debt is making me increasingly unsettled.  Which is why I am leaning towards maybe paying off the car loan after all after the first student loan is knocked out.   My spouse’s student loan should be paid off by the end of the year, maybe even November, and I think we could knock out the car loan the month after that (so 3-4 months early, depending).  I originally was going to start right in on my own student loan, but the idea of having less minimum payments is an enticing one.  Not so that we can stop paying as much to debt per month - we’re still snowballing our original payments, but again, just in case.  Bailout, no bailout, the world seems rather unstable right now and I’m not sure what to think.

I appreciated all the opinions and insight left on my post a few days ago about the bailout.  I’ve read a lot and I do understand a little more, but at the same time, I’m more confused that ever.  Not about what’s happening exactly, but about the long-term ramifications of what is happening today.  I was prepared to open my kids’ 529 accounts this week finally, but now I feel kind of on the fence about it.  I guess I am more risk adverse than I thought.  We’re not doing anything crazy like taking all our money out of our 401K or IRAs or anything like that, but I’m finding it hard to pull the trigger and put more money into the market through 529s.  Maybe I’ll feel differently tomorrow.

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