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How Much Our Debt Costs – November 2009

11.18.2009 by Matt Jabs //

Debt Costs So Much!

Nothing new here… just me trying to convince you to GET RID OF YOUR DEBT again.  I have decided to really hammer this point home in the hopes that I might pass some of my “I HATE MY DEBT” passion on to others.

Here are the other posts I have written about How Much Our Debt Costs.  Check them out AFTER you read this article.

  • Interest Amount Paid – Establish a Proper Relationship with Your Debt
  • How much Interest are YOU Paying?
  • How Much Does Your Debt Cost? – on FiveCentNickel.com

So yeah… as you can tell I am really trying to drive this point home.

I decided to do a few things.

  1. Post monthly updates reporting how much my debt costs me.
  2. Create a spreadsheet that calculates it out automatically.
  3. Share that spreadsheet with you!  Tomorrow’s article will give more details on this and will have a link to my Google Docs Spreadsheet.  It will be free of change and will easy to use… just the way I like it.  It will have calculations for each month and will include the cool graph that you see above – which is reporting my actual principal/debt amounts each month.

November Update – How much our debt cost us this month

*Shrugs* Writing about this always makes me mad because I can’t help but think about all the things I would rather be doing with MY MONEY!  Oh well… soon enough.  Patience young Jedi!

Without further ado…

October 2009 Interest PaidNovember 2009 Interest Paid
Mortgage 1 – $587Mortgage 1 – $586 = +1
Mortgage 2 – $294Mortgage 2 – $294 = 0
Student Loan 1 – $156Student Loan 1 – $161 = -5
Student Loan 2 – $115Student Loan 2 – $126 = -11
Lending Club – $83Lending Club – $70 = +13
Chase Credit Card – $2
Total Interest Paid – $1,237Total Interest Paid – $1,237 = 0

You may have noticed several things…

  1. Our October interest is $2 more than previously reported. That is because we paid off my wife’s Chase credit card in September and were hit with a $2 interest charge on the preexisting balance and I was unaware of it when I posted.
  2. Our Lending Club interest was quite a bit lower. Hooray!  This was because of our enormous extra principal payment in October.  We are able to pay a little extra in November too but not nearly as much.
  3. Our Student loan interest was higher this month. What’s up with that right?  Although we did indeed reduce the principal student loan interest is calculated daily and our automatic payment date fell on a Saturday and therefore had to be pushed back to Monday, adding two extra days of interest charges.  In the long run it doesn’t effect us because next months calculation will be on two less days so it will look deceivingly lower.  This is an important point to note when considering the monthly interest paid on your student loans.

The “How Much Your Debt Costs” Spreadsheet & Graph

As I mentioned above, I have created a really cool spreadsheet that does all the calculations for you and also gives you this nifty little graph allowing you to track your progress.

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.

I will be releasing the spreadsheet tomorrow… don’t miss it!

Categories // Debt Tags // Debt, How Much Interest?, interest, spreadsheet

How much Interest are YOU Paying? Get Mad at Debt!

10.27.2009 by Matt Jabs //

Back in April I calculated how much money we were spending in interest on debt each month.  I highly recommend you do it too – NOW.  This post is my 6 month update to see how much less interest we’re paying now.

I was encouraged to write this “interest paid update” after reading that Matt Breed of FinancialMethods.com found calculating how much interest he was paying was also one of his great motivators.  He agreed – as everyone seems to once they run this simple calculation – that figuring out exactly how much money you pay others in interest every month is one of the best motivators to help you move against your debt.  Way to go Matt.

My Debt Costs Me $58 Less Now!

If you want to take a truly sobering look at just how much your debt really costs you, follow this simple guide to figure out what your monthly interest amount paid is.  Once you complete the exercise you will have finally developed a proper relationship between you & your debt!

What I mean by Interest & How Destructive it is…

While there are several definitions of “interest”, for the purpose of this article we focus on the interest amount paid toward our debts and will define interest as a fee paid on borrowed assets; and/or the price paid for the use of borrowed money.

Simply put, interest destroys your ability to build wealth by taking your hard earned money and misappropriating it toward paying rich people (the people who loaned you the money.)  I will demonstrate this fact by listing my interest amount paid from last month (March of 2009).

How Much Interest I Pay Each Month – compared to 6 months ago…

So here is my favorite part of the post because this is where I report how much less interest I am paying out now than I was six months ago.  I have actually included both amounts side-by-side for easy comparison.  Enjoy the interest shrinkage… I know I did!

I am paying $58 less interest to banks than I was 6 months ago!  YES!

As you can see, I saved the largest amount by consolidating my debt through Lending Club.  I consolidated my debt for two reasons:  to simplify monthly payments, and to save money on interest payments.  Well… it worked.

So what’s my advice?  If you have high interest credit card or auto loan debt… consolidate it through Lending Club to save!

How I Arrived at the Above Amounts…

Follow these simple steps to find out your monthly interest amount paid:

  1. Write down a list of all your loan amounts including your mortgages, student loans, auto loans, credit cards, etc.
  2. Either look at the statement each account mailed you last month, or log into their associated web sites to find the amount of interest (a.k.a. finance charge) you paid over the past month.
  3. Write down the numbers you find above next to the associated accounts
  4. Calculate your very own monthly interest amount paid.

After completing the above steps, you will most likely be filled with anger!  I was.

Anger Toward Debt Grows…

Going through the exercise of calculating your interest amounts paid on all debts shows you exactly how much money you pay to bankers each month.  Does that make you angry?  It should.  The goal is to eventually make that money work for you instead of banks.

Seeing these numbers gives real meaning to Proverbs 22:7, “The rich ruleth over the poor, and the borrower is servant to the lender.”

Motivation and Encouragement to pay down debt faster…

This step is simple but crucial.  If this is your first time calculating your interest amounts paid, don’t allow yourself to slip into the trap of becoming overwhelmed.  Realize that you can turn this around, but you must stand up and fight.  You must take control of your own financial destiny.  You must work toward your own financial freedom.

Becoming overwhelmed will paralyze you, so instead focus on the fact that a journey of a thousand miles begins with a single step and start stepping now!

Real Steps to Reduce, Lower, and Eliminate Interest & Debt…

By using a focused, goal oriented approach, I was able to lower my monthly interest amount paid by $58/month in six short months.  I will use this as motivation and will continue to keep track of how much I reduce my interest amount paid each month.  You should do the same.

  1. Hold on to the list of interest amounts paid you formulated above.
  2. Call each creditor & attempt to get your interest rate lowered.  This can give you a HUGE jump start in lowering that initial amount.  DO NOT skip this step!
  3. Each & every month record the interest amount paid for each debt.
  4. Calculate your total interest amount paid every month.
  5. Track your progress by listing your lowered amounts.
  6. Place these monthly amounts somewhere you can see them every day, like your refrigerator.
  7. Balance your focus by paying off both small debts & high interest debts.  I use both methods in tandem.
  8. Some would say reward yourself once a month by treating yourself to something you want, but for me the lowered amount of interest I’m paying is reward enough.  Use what works for you.

The more we eliminate our interest amount paid each month, the more we can use toward paying ourselves.  So what are you waiting for?  Get started ASAP.

Like this article?  Here are 3 free ways to join the community and follow the progress – Sign up for email updates, Subscribe to my RSS feed, And/or follow me on Twitter.

DFA is passionately dedicated to helping people break the bondage of debt and work toward financial freedom using biblical principles.

photo credit to Éamonn

Categories // Debt, Expenses, Tips Tags // Debt, How Much Interest?, interest, Lending Club

Interest Amount Paid – Establish a Proper Relationship with Your Debt

04.15.2009 by Matt Jabs //

Your Debt Costs You More Than You Know

If you want to take a truly sobering look at just how much your debt really costs you, follow this simple guide to figure out what your monthly interest amount paid is.  Once you complete the exercise you will have finally developed a proper relationship between you & your debt!

This article will address the following:

  1. What is interest & how destructive is it
  2. How much interest I pay out each month
  3. How I calculated that amount
  4. The anger I gained toward my debt after completing this exercise
  5. The incredible motivation this information gives you
  6. Real steps we can take to lower, reduce, & eventually eliminate the interest we pay

What is Interest & How Destructive is it?

While there are several definitions of “interest”, for the purpose of this article we focus on the interest amount paid toward our debts and will define interest as a fee paid on borrowed assets; and/or the price paid for the use of borrowed money.

Simply put, interest destroys your ability to build wealth by taking your hard earned money and misappropriating it toward paying rich people (the people who loaned you the money.)  I will demonstrate this fact by listing my interest amount paid from last month (March of 2009).

How Much Interest I Pay Each Month

Please note that I will have to pay these amounts each & every month until I eliminate the associated debts.  However, on the bright side, the amounts will lower each month as I lower the principle debt amounts.

  • Mortgage 1 (80%) – $592
  • Mortgage 2 (20%) – $296
  • Student loan 1 – $165
  • Student loan 2 – $120
  • Auto payment – $52
  • Credit card 1 – $30
  • Credit card 2 – $19
  • Credit card 3 – $11
  • Credit card 4 – $8
    • Total interest amount paid for March 2009 – $1,293

Let it be stated that this is approximately 20% of our gross family income (amount after taxes).  A convincing explanation of how this interest amount paid greatly hinders our ability to save and become financially free is simply not necessary; the numbers speak for themselves.

How I Arrived at the Above Amounts

Follow these simple steps to find out your monthly interest amount paid:

  1. Write down a list of all your loan amounts including your mortgages, student loans, auto loans, credit cards, etc.
  2. Either look at the statement each account mailed you last month, or log into their associated web sites to find the amount of interest (a.k.a. finance charge) you paid over the past month.
  3. Write down the numbers you find above next to the associated accounts
  4. Calculate your very own monthly interest amount paid.

After completing the above steps, you will most likely be filled with anger!  I was.

The Anger I Gained Toward My Debt

Before I completed this exercise I was certainly angry about the amount of debt I had, but now that it has been so plainly laid out in front of me I have entered into an entirely new realm of DEBT HATRED!

Similar to how the bible teaches us to HATE SIN, I am learning more & more to have a righteous hatred toward my debt.  It gives new meaning to Proverbs 22:7, “The rich ruleth over the poor, and the borrower is servant to the lender.”

It is important that we use this information as motivation to push us into a much more passionate, much more driven, much more functional stratum of debt repayment & elimination.

How to Channel Your Anger Into Motivation

This step is simple but crucial.  You must not allow yourself to slip into the trap of becoming overwhelmed.  You must realize that you are the only one who can turn this around.  You must stand up and fight.  You must take control of your own financial destiny and your own financial freedom!

Consider, meditate, and memorize this quote and use it as a daily battle cry against your debt:  “A journey of a thousand miles begins with a single step.” ~ Lao Tzu

Solidify in your mind the realization that you got yourself into this mess & just the same you are the only one who can get yourself out.  Now stand up and take responsibility for your own actions and commit to establish a new financial mission of debt free living.  A mission that will change your existing relationship with your creditors.  A mission that will enable you to take control of your own financial situation.  A mission that will allow you to finally begin building your own wealth with the money you have long been squandering on interest and debt.  A mission strongly fortified with direction and goals.

Real Steps to Reduce, Lower, and Eliminate Interest & Debt

I would like to start this section by happily reporting that Credit Card 4 from above was eliminated with this past months payment!  That means that I will now be paying $8 less interest every month, and when I add in the reduction of principle of the other debts, that number actually grows to $12.

By using a focused, goal oriented approach, in one month I was able to lower my monthly interest amount paid by $12.  I will use this amount as motivation and will keep track of how much I reduce my interest amount paid each month.  You should do the same.

  1. Hold on to the list you formulated above.
  2. Call each creditor & attempt to get your interest rate lowered.  This can give you a HUGE jump start in lowering that initial amount.  DO NOT skip this step!
  3. Each & every month record the interest amount paid for each debt.
  4. Calculate your total interest amount paid every month.
  5. Track your progress by listing your lowered amounts.
  6. Place these monthly amounts somewhere you can see them every day, like your refrigerator.
  7. Balance your focus by paying off both small debts & high interest debts.  I use both of the following methods in tandom:
    • The Dave Ramsey snowball method of paying off small debts first to motivate yourself & see entire debts eliminated
    • Focusing on the highest interest debts – doing so will be the fastest way to lower your interest amount paid
  8. Some would say reward yourself once a month by treating yourself to something you want, but for me the lowered amount of interest I’m paying is reward enough.  Use what works for you.

The more we eliminate our interest amount paid each month, the more we can use toward paying ourselves.  This disciplined approach, if properly employed, enables us to begin building wealth and will help guide us down the road toward our ultimate goal of FINANCIAL FREEDOM.

DFA exists to help you become debt free. If there is something you like or dislike; something you would like to see more of or less of, no matter how trivial it may seem to you, please let us know.  The best way for us to improve for your liking is to hear it straight from the horse’s mouth. If you have been reading but have never commented, I encourage you to do so now.

Categories // Debt Tags // amount, Debt, How Much Interest?, interest, lower, monthly, paid, repayment

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Disclaimer

Content on Debt Free Adventure is for entertainment purposes only. Rates & offers from advertisers shown on this website may change without notice: please visit referenced sites for current information. Per FTC guidelines, this website may be compensated by companies mentioned through advertising, affiliate programs or otherwise. We respect your privacy. Privacy policy.

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  • Debt Testimonials - Encouraging Success Stories!

Disclaimer

Content on Debt Free Adventure is for entertainment purposes only. Rates & offers from advertisers shown on this website may change without notice: please visit referenced sites for current information. Per FTC guidelines, this website may be compensated by companies mentioned through advertising, affiliate programs or otherwise. We respect your privacy. Privacy policy.

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