Tuesday, July 7, 2015

July 2015 Update and Why I Don't Snowball

We have been making steady progress on our payments, and now owe about $81,700 on our loans (not counting about $2,200 on credit cards that will be paid off this month). That's about 9,000 we have paid off in 10 months. Most of it went initially to paying off our credit card, and the remainder to paying toward our car and student loans.

Since September, a couple things have changed aside from the balance of our loans:

We went on a low-income repayment plan for our student loans.

This is mainly because we could not afford the monthly 10-year payment plan at this point, but also because our subsidized loan will continue to not accrue interest for the first three years of the plan. Also, any interest that does accrue will not capitalize. We fully plan on paying off our student loans much sooner than 10 years, and make up for the lower monthly payments by paying what we can and then making a big bulk payment each time we get a tax return.

We found out our son needed orthodontia at 7 years old!

Yikes. Well, that's life. The good news was that we had a $1,000 contribution that our insurance company kicked in, but we still have to pay $1,800 over 18 months. Thankfully it is interest-free, and HSA-eligible, which means we can save on our taxes as well if we pay through our HSA.

There are a few other house-ownership expenses that came up, like sump pumps for our window wells in May when we got 10 inches in one month. Oh, I guess I should mention too, we do have a mortgage, but I'm not focusing on that right now because this blog is about paying off all of the other debt first. But it would be great (and doable) to pay off our home in less than 15 years.

Why I Don't Snowball

Dave Ramsey has had a great influence on a number of people, but we are not snowballing our debts at this point, but rather doing them from highest interest rate to lowest. Our car loan is something like 3.25%, so it's at the bottom of the list (but will probably be paid off before our student loans are anyway!) Our student loans range from 7.8% to 5.25%, and we are focusing right now on our highest interest loan. Doing this has helped to keep me encouraged when I see the interest growing on the others, because I know that I am doing as much as I can with what I have.

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