Debt Reduction and Savings Statement – February 2010

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Our goal progress for February 2010

Our debt snowball just keeps on rolling…  :)

Each month I post these Monthly Debt Reduction & Savings Statements so I can continually compare our current debt against our starting debt from back in January, 2009 – when my wife & I began our Debt Free Adventure – and summarize our progress toward debt free living.

Like charts/graphs better? Look in the sidebar for those.

A debt free adventure can be a long, dry road… but continued progress in all areas of personal finance is a sweet breath of fresh air!  Based on our financial goals for 2010 here is the progress we made through February of 2010.

1.  Lending Club debt goal

WE WILL PAY OFF THIS DEBT WITH OUR MARCH PAYMENT!  Stay tuned for the announcement later this month.

Our personal debt consolidation loan of $11,080 – secured through Lending Club in August of 2009 – has been reduced down to a principal balance of $1,925.20 in just six months.  If you’re interested in doing something similar for your debt situation read my advice on debt consolidation and my Lending Club review to see if borrowing through Lending Club is right for you.

February debt reduction progress = $2,318.48.

2.  2nd mortgage debt goal

We are paying double principal payments on our 2nd mortgage until after we pay off our Lending Club loan, however… lately I have been considering paying off my student loan before this 2nd mortgage.  I will be writing a post about it later this month to ask your opinion.  The interest rate on the 2nd mortgage is 8.8% compared to just 6% on the student loan.  At this point both are unsecured loans (since I’m upside down on the home value.)

February debt reduction progress = $71.71.

I also created a SmartyPig savings account as a way for DFA readers to contribute to our debt reduction if they would like.  As of right now Frugal Dad is the only one who has contributed, and for that I give him a big ole shout out!  Thanks FD.  If you want to contribute, just look in the bottom of my right sidebar.

3.  Emergency fund savings goal

We save $100 each month through our Capital One 360 automatic savings plan and will continue to do so until we reach $3,000 (one months expenses.) This is not the preferred Dave Ramsey $1,000 plan, but rather the preferred Matt Jabs 75/25 savings plan:-)

February savings progress = $100.00Interest earned on this account for February 2010 = $2.39.

4.  Side income growth goal

The income growth for DFA continues upward.  As I mentioned on my February 2010 interest paid post, we earned enough this month to cover the cost of our 1st and 2nd mortgage payments.  Woo hoo!

I have a few other ideas to diversify my income, but I will not report on them specifically here… possibly in a future post as things develop.

Other savings

The other savings accounts we have that make up our 75/25 savings plan include:

  • Vacation Fund = $100 added – interest earned for February 2010 = $0.72
  • Next Auto Fund = $100 added – interest earned for February 2010 =$0.60

Thoughts

I don’t really have much to add this month that I didn’t already say above, but to recap… keep an eye out for these posts due out soon:

  • Lending Club pay off announcement!
  • Should I pay off my 2nd mortgage or student loan first?
  • More alternate sources of income.

Thanks for reading… you all rock!

photo by kamshots


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1 Kate

Congrats on paying off the Lending Club loan this month, I know what a high it an be to eliminate a bill.

As for student loans vs 2nd mortgage – would paying off the 2nd mortgage allow you to not be upside down in the house? If so, that would be my suggestion.

2 Matt Jabs

Most likely, but the equity is of course dependent on the fluctuating value of the home. There is a chance, however unlikely, that the market could come back allowing us to sell the home and pay off both mortgages (we plan to sell as soon as we’re above water.)

With the student loan it will always be unsecured, which is what is making me consider paying it off first… despite the lower interest rate.

3 Mike Ramsey

Nice going on getting the Lending Club debt paid off. Doesn’t it feel great?

Personally, I’d pay off the 2nd mortgage before the student loan. For one, it’s a higher interest rate. And while it might technically be unsecured right now, I’m guessing it’s probably legally secured by the equity of the house, which means if they were to call it in you could find yourself losing the house.

The student loan is truly unsecured, so there’s less risk there if something were to happen.

4 Matt Jabs

I haven’t paid off LC yet, but will with our March payment – and yeah… it feels great! I need to do more research to decide which debt I’ll attack next.

5 RainyDaySaver

Congrats! A victory over a debt is always reason for celebration. I love reading about others’ financial journeys.

6 Matt Jabs

Yeah, we plan on treating ourselves a little as incentive to keep going.

7 Awareness Home Funding

Congrats, you are an inspiration to others. Keep up the good work and for sticking with a plan (even if you do modify it a little).

8 BibleDebt

Congratulations on entering your second year of debt reduction. You are well on your way to being debt free! It will be an amazing feeling and will give you a lot of freedom and peace. I look forward to rooting you on as you progress!

9 Matt Jabs

I’m very happy to see the progress we have made over the last year… a little sacrifice yields great results!

10 Jizzo

I know a sweet place out west for you to vacation.

11 Matt Jabs

Good idea… I need to plan a frugal vacation to Oregon!

12 Financial Samurai

Gotta feel good paying double principal yeah?

I’d pay off your 2nd mortgage first, esp if its a higher rate.

13 Matt Jabs

It is… and that is where I’m leaning. The only reason I wouldn’t is because I plan to sell my house as soon as the market recovers (if it does.) If I could pay off my student loan and recover the cost of the 2nd mortgage in the home sale… then I win. The other option is to pay off the 2nd mortgage first, so I can sell whenever I want… but then will have to take a loss in the sale – unless the market returns.

14 Neil

Is there a good reason for paying off your student loan first? Is this a “lowest balance first” thing, because that’s just a psychological boost…it is certainly the more expensive option. Lowest balance first is only good for people who are prone to abandoning their repayment plan, which doesn’t seem to describe you.

Are there different tax treatments to the debts? I don’t know US tax law very well, but in my country the student loan would get a tax credit, while the mortgage would not.

15 Matt Jabs

Great questions and points Neil. This is definitely NOT a lowest balance thing – normally I pay off the highest interest loan first, regardless of amounts… like you said, the psychological boost isn’t a necessary factor for me.

The reason to pay off the student loan first would be in the hopes that the housing market returned, and I could sell my home and recoup the value of the 2nd mortgage in the sale… all the while paying off my student loan.

This is off course subject to the markets, and I don’t see them coming back anytime soon.

16 Jolyn@Budgets are the New Black

Congratulations! We just paid off the last of our consumer debt last month. Next step: 2nd mortgage. But first we are going to sock more away in savings, and probably start a fund for future purchases that we need and want. Both of those steps are important for avoiding future debt, after all!

I am curious what your student loan balance is. For what it’s worth, we waited on our 2nd even though it’s the highest interest rate. Our consumer debt was actually on a 0% APR CC, which helped to snowball it fast.

Are you thinking you can make real headway on the student loan? Meanwhile, the market may help you recoup the loss on the Second? It’s a quandry, for sure. The important thing is to keep attacking it! Good job!

17 Matt Jabs

My student loan balance = $31k at 6%
2nd mortgage = $39k at 8.8%

Like you said, the housing market will help me out – IF – it rebounds. The hope that the market would rebound would be the ONLY reason I pay off the student loan first.

18 Budgeting in the Fun Stuff

Congrats! I just wandered over from Free Money Finance and cannot wait to see your next update. Good luck!

19 Matt Jabs

Thank you for stopping by, and for your encouragement.

20 Brett

Matt, I would consider paying off your student loan first because typically the interest paid on your second mortgage is tax deductible while the student loan interest may not be. Just my two cents. Congrats on your progress.

21 Matt Jabs

Thanks Brett… for me both are tax deductible, although the limit on student loan interest deductions is $2,500/year and between mine and my wife’s… we pay more than that each year so the interest deduction on the 2nd mortgage is definitely more substantial.

22 Ronnie

Congrats on great progress this month!

You know, the more I work and pay on my loans (and I’ve got 3 separate loans higher than yours, and plenty that are lower too :D), the more I want them gone before anything else. It’s not psychological for me, it’s really more the I CAN NEVER GET AWAY FROM THESE STUPID THINGS feeling. Garnish the wages, liens on accounts and refunds, never gone in bankruptcy, that type of thing. It actually makes them the worst debt to have in my opinion, low interest rate notwithstanding (that said, I’d still pay off the credit cards first). But they’re also by far my largest debt, so I might be biased ;).

23 Matt Jabs

Just keep chugging a long. A great thing to do, if you haven’t already, is to figure out how much your debt costs you each month. Use my How Much Your Debt Costs Spreadsheet to figure your amounts. Break it down into how much the interest on your debt cost you each day… talk about motivation! Right now my debt costs me $42.46/day but is declining every month.

24 Forest

I finally have my debt management in place and am just getting settled financially… hopefully next month I can start that Emergency fund!!!

It’s inspiring to read these posts. Thanks.

25 Matt Jabs

Awesome Forest… just keep chugging along man. Discipline and faithfulness, that’s the winning recipe.

26 Forest

Thanks ;), i’ll keep working at it….

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