How Much Our Debt Costs – February 2010

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February 2010 Update – How much our debt cost

Over the course of February our debt cost us $1,189 – which is $42.46/day. That does NOT include the principal costs… that is just the cost of the interest on our debt.  The good news is, one year ago we were paying $1,328 – which was $47.43/day.  Our debt reduction efforts over the course of the last year are saving us nearly $5 every day!  That may not sound like much, but if I were to put $5/day into my Capital One 360 Savings account, by this time next year I would have $1,825 plus any interest earned!

One of my least favorite things to think about is the amount of interest we pay toward debt each month.  The good news is that it is shrinking with each passing month.  Pretty soon all the money we line others pockets with will become our own… it’s just a matter of time, sacrifice, and hard work.  What a concept eh… being able to keep the money that we earn rather than paying it toward interest on debt!

Here is the comparison between the last two months:

January 2009 Interest Paid February 2010 Interest Paid
Mortgage 1 – $585 Mortgage 1 – $584 = +1
Mortgage 2 – $293 Mortgage 2 – $292 = +1
Student Loan 1 – $160 Student Loan 1 – $160 = 0
Student Loan 2 – $117 Student Loan 2 – $120 = -3
Lending Club – $51 Lending Club – $33 = +18
Total Interest Paid – $1,206 Total Interest Paid – $1,189 = +17

A few notes about the details of the numbers…

  1. Lending Club will be GONE next month! Unless something unforeseen happens we will have this debt paid off with our March payment!  That will mean we repaid this $11,000 loan in just 7 months!  We reduced this debt by $2,300 in January 2010 and by $2,318 more in February 2010 – because of this, the interest we pay to Lending Club decreases significantly every month.
  2. Student loan interest amounts vary month to month. As promised last month, I wrote a post detailing how student loan interest is calculated to better explain why the amounts vary so much each month.
  3. Side hustle earnings continue to fund large debt payments. Once again this month, the earnings from our side hustle have enabled us to make huge strides in repaying our debt.
  4. Killing debt creates great motivation. I hope this article makes you think… and if you are not currently tracking how much your debt costs you each month hopefully it motivates you to do so.  Think about it – right now we are paying nearly $1,200 just in interest on our debt. This makes me sick to my stomach, but it also lights a fire under my britches to keep going full-speed-ahead!

The “How Much Your Debt Costs” Spreadsheet & Graph

A few months back I released a spreadsheet that does all the above calculations for you and also gives you the nifty little graph allowing you to track your progress.  I call it the How Much Your Debt Costs Spreadsheet… check it out.

The spreadsheet will also give you the interest amounts paid for each month in HUGE BOLD numbers for you to print off and stick on your fridge.

Betterment is one of my two favorite ways to earn interest on my savings! They have an awesome program for the Average Joe to save and invest simply and effectively. There are no minimum balance requirements and no transaction fees. Read my Betterment Review or open an account to get started earning now.

1 Mr Credit Card

congrats on your lending club debt (soon to disappear). keep it up.

2 Matt Jabs

Thanks Mr. CC… my wife and I are so excited! We’re going to celebrate by taking a one month break from total sacrifice and install a new “life management station” in our home.

3 Erica Douglass

I am debt-free and an investor in Lending Club, so I guess you could say other people’s debt earns me money every month…

BUT I have to say that it is far more empowering to pay off debt than it is to put that same amount of money in a savings account every month. Some sort of weird human psychology, I think.


4 Matt Jabs

That is a great point Erica… definitely worthy of its own blog post! Even better would be an article listing ideas to make saving money just as motivating/attractive as repaying debt.

5 Monevator

Good progress Matt. Really interesting idea to look at it on a cost/day basis.

Regarding what $5 a day is worth, another way to show the value of this achievement is to consider what sum of money you’d need to have in a bank account to generate the same amount in passive income.

Assuming an interest rate of 3%, for example, you need to have about $60,000 in cash savings to earn $5 in interest a day.

Hope that puts a smile on your face! 🙂

6 Matt Jabs

I just smiled. Thanks! 🙂

7 Paul @ FiscalGeek

Blast it buddy, that’s some solid work. I have to agree with Erica, it felt like a full on frontal assault on our debt and the emergency fund savings is kind of like a nerf gun fight with my boys. It’s happening but I can’t really be angry at my savings.

8 Matt Jabs

What about your mortgage? If you applied the same progress toward it as you did toward your other debt, you would own your home in just a few years!

9 Mrs. Money

Man that makes me sad about how much you are spending per day. BUT I am so proud of you that you are going to have Lending Club paid off next month! YAY!

10 Matt Jabs

I know… we are so pumped, and at least it is $5 less every day than this time last year.

11 Jizzo

This really illustrates a good principle in ridding ourselves of anything. It must continually make us sick to our stomach. Otherwise, we will not stay the course. The benefits of the behavior (IE spending money we don’t have/ the euphoria of getting STUFF) must not outweigh the consequences (debt, sick to stomach realizing what we pay in interest alone each month)

I see that applying to almost anything.

Ie. Smoking- rotting your lungs, killing others with your secondhand smoke must be more offensive to you than the nicotene, hand to mouth sensation etc.

12 Matt Jabs

That is why it is always a good idea to audit your behavior, just as we audit our finances.

13 RainyDaySaver

Congrats on kicking debt’s butt! We’re almost done with our consumer debt, and then moving on to the mortgage — it’s slow and tedious sometimes, but it eventually will be all worthwhile.

14 Matt Jabs

Yep, as soon as LC is paid off our next debt snowball victim will be our 2nd mortgage, which has an 8.8% interest rate.

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