The successful short sale of our home brings an end to our financial uncertainty and a revitalized focus on our debt snowball.
A new budget
In case you hadn’t heard, we moved to Hendersonville, NC and are renting a house. We plan to rent for the foreseeable future while we continue to pay off debt and save.
A return to fixed housing costs has quickened our ability to fine tune the budget and set aside a precise amount for accelerated debt repayment. We have a few less bills and very low recycling and trash costs. Our monthly utility costs (electric, water, Internet, mobile phone, and trash) will average a total of $250, $50 less than our previous home. In total, our new budget requires $850 less each month than our previous.
Since we prefer to balance debt repayment and saving we’ll direct $500 toward our student loans and $350 toward savings.
Student loan debt
As the student load debt graph in our right sidebar reports, at the time of writing we have $58,000+ left to repay.
The interest rate on my loan is higher than Betsy’s so we will pay minimums on her loan and add the extra $500 to the monthly minimum on mine.
Our current earning potential will allow us to repay my loan in 3.5 years versus almost 13 years when paying the minimums; it will also save us nearly $9,000 in interest over the life of the repayment.
Our extra monthly contribution to the snowball will increase in direct correlation to our earning power. This means our standard of living will remain the same as our earnings increase. It also means the time and interest required to repay the loans will shrink, which is the point.
Once my loan is gone we will focus on Betsy’s; then we’re DEBT FREE!
Interest on debt
Always worth a mention is my spreadsheet that calculates how much the interest on your debt costs every year, month, and day. Tallying these number is one of the ways we maintain our motivation to eliminate all debt.
It’s financially backward to pay interest toward debt rather than earn interest on investments, and maintaining these calculations is a constant reminder. If you’re not already doing it, you should start now.
Kevin @ SpringCoin says
Wow, saving an extra $850 is huge! Looks like those student loans are gonna get kicked in the butt!
Matt Jabs says
Good luck! Sounds like you have a great plan in place and are going to plow through that debt.
Matt Jabs says
Thanks Jason, that’s the plan.
It’s not the principle, it’s the interest that kills you! I do the same thing to stay motivated. Have you ever figured out how many hours of the week you spend working to pay the interest? It can be inspirational!
Matt Jabs says
Yep. Back when I worked a salary job it took my first 2.5 hours of every day just to cover the interest on our debt. Now that we have much less debt and I am self employed, it’s MUCH less. When we started our DFA we were paying around $45 in interest on debt every day! Now it’s down to less than $8/day.