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Our 2012 Debt Snowball

02.15.2012 by Matt Jabs //

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.

*******

Categories // Debt Tags // interest, student loan

How Much Interest Are You Paying?

01.18.2012 by Matt Jabs //

How Much Interest Are You PayingHow much interest are you paying on your debt?  Most people never stop to think about it… yet the answer drastically affects their financial lives.

I’m talking specifically about how much money you pay to finance your debt.  If you have a mortgage, student loans, auto loans, and/or credit cards you are likely paying interest on all of that debt.  How much interest are you paying per year?  How much per month?  How much per day?

If you know the answer to this question you will know how many hours/day you have to work each day just to cover the interest on your debt, and I guarantee it will motivate you to get out of debt faster.

Use the spreadsheet I use to figure it all out…

How Much Interest spreadsheet

Use this spreadsheet to determine exactly how much interest you are paying each month and to track your progress.

The spreadsheet includes:

  • The Data Sheet – This is the main sheet where you input the data and see all the calculations take place.
  • The Chart Sheet – (on Google Docs version only) This a cool chart that graphs out your monthly progress over the course of the year.
  • The Print Sheet – This sheet pulls your monthly interest amounts, puts them in bold red font for you to print off and stick on your fridge.  This will help motivate you and your family to continue to destroy your debt!

How Much Interest – Google Docs Template

How Much Interest – Microsoft Excel Template

  • Download template for Excel

How Much Interest – OpenOffice Template

  • Download template for OpenOffice

How much interest are you paying?

Let us know how much you’re paying by leaving a comment… and if you have feedback on ways to improve the spreadsheet, please let me know.

Categories // Debt, Money Management, Tips Tags // Debt, How Much Interest?, interest, Money Management

10 Most Commonly Missed Tax Deductions

01.02.2012 by Matt Jabs //

10 Most Commonly Missed Tax DeductionsTax Deductions are your money, don’t miss out on it

We’re coming to the end of tax time once again… and for those of us who do our own taxes that means zeroing in on every tax deduction possible.  At this point in my life I don’t have many out of the ordinary deductions, which makes filing easier from year to year.

The tax deductions I frequently claim include:

  • Donations to charity
  • Mortgage interest
  • Property taxes
  • Student loan interest

In fact, these four main deductions account for 97% of all our deductions combined!  That said, regardless of the amounts every deduction is important, worth finding, and worth using.

In the spirit of hunting for every possible deduction I wanted to bring to your attention an awesome article resource I found while poking around on the TurboTax website entitled ‘The 10 Most Overlooked Tax Deductions.’

Top 10 overlooked and commonly missed income tax deductions

Use this brief list to get ideas and follow the links to read about each one in greater detail.

  1. State sales taxes – useful for those living in states with no income tax. {read more}
  2. Reinvested dividends – easy to miss if you automatically reinvest your mutual fund dividends.
  3. Out-of-pocket charitable contributions – be sure to include mileage and other lesser considered contributions to charitable organizations.
  4. Student loan interest paid by Mom and Dad – the IRS now treats this as a gift to children.
  5. Moving expense to take first job – fresh out of college?  move more than 50 miles away?  this deduction is for you.
  6. Child care credit – useful if your child care costs exceeded your tax-favored reimbursement account at work.
  7. Earned Income Tax Credit – a substantial credit for low-to-moderate income workers that is very frequently missed.
  8. State tax you paid last spring – you are eligible if you owed state income taxes after filing last years return.
  9. Refinancing points – points from refinancing can be deducted equally each year for the entire life of the mortgage.
  10. Jury pay paid to employer – make sure you do not pay taxes on jury fees you must turn over to your employer.

Some of these are deductions while some are actually credits.  Some can be quite substantial while others tend to be small.  Regardless of the size or type… if you can reduce the amount of tax you owe then you would be a fool not to do so.  Hopefully this article will help a few DFA readers keep more of their hard earned money where it belongs… in their own pockets!

Don’t miss these deductions

Before reading these tips I had forgotten about a donation of cash and mileage to the Salvation Army – topic #3 above helped remind me to claim it!

Categories // Taxes Tags // deductions, interest, Taxes, turbotax

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