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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.

Post monthly updates reporting how much my debt costs me.
Create a spreadsheet that calculates it out automatically.
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 Paid	November 2009 Interest Paid
Mortgage 1 – $587	Mortgage 1 – $586 = +1
Mortgage 2 – $294	Mortgage 2 – $294 = 0
Student Loan 1 – $156	Student Loan 1 – $161 = -5
Student Loan 2 – $115	Student Loan 2 – $126 = -11
Lending Club – $83	Lending Club – $70 = +13
Chase Credit Card – $2

Total Interest Paid – $1,237	Total Interest Paid – $1,237 = 0

You may have noticed several things…

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.
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.
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!

There are many ways to reduce costs in our every day lives, so to help do just that each Monday I will post a money saving “Tip of the Week”.

“And he said unto him, Well, thou good servant: because thou hast been faithful in a very little, have thou authority over ten cities.” Luke 19:17

This weeks tip involves…keeping a budget!

One of the single best pieces of financial advice you could ever receive is simply to keep a budget. This is far from new information, but is something that bears repeating over & over & over again until it is adopted! In Philippians 3:2 Paul says, “Finally, my brethren, rejoice in the Lord. To write the same things to you, to me indeed is not grievous, but for you it is safe.” I too am saying it is not grievous for me to mention your need to budget your money, and indeed for you it is safe.

Budgeting

There are several approaches you can take to budgeting:

Manual – use a pen & paper to create a physical copy of your family budget. You do not see this option mentioned on a lot of modern finance blogs and may think of it as “out-of-date” or “unstylish”…however…despite all that modern technology has to offer, this can be one of the most effective forms of budgeting available even today; it all depends on your specific situation.
Spreadsheets – use MS Excel…even better…the free OpenOffice Calc or Google Docs Spreadsheet. This is an option a lot of people prefer due to the control you have, the privacy you have, and the flexibility you have. A draw back of this option is that it can be both time consuming and tedious to set up the spreadsheet, especially if you are not versed in the use of spreadsheets. There are many good free templates out there, but again…if you are not a seasoned spreadsheet user, this can be a tough road to hoe.
Online tools – Using a piece of software built for the purpose of budgeting. There are both free & pay options available. Some of the best free tools include Mint & Wesabe. Two fee based software packages that are not free but are very effective budgeting tools are YNAB (YouNeedABudget) and Mvelopes. I am actually in the process of reviewing both of these and will be posting my results soon.

What do I use to budget? Currently I am using a combination of all three methods.

Because my wife has a serious aversion to computers & technology, we use a Moleskin journal to record our family budget. The journal is used as a simple & quick overview for our income & expenses. We do not go into detail here, but simply list the basic monthly debits & credits of our money.

The one technology interaction I request my wife does participate in is Mint.com. We both have separate Mint accounts and use them to help us budget and keep track of our spending & individual transactions. Keeping track of this information in a handwritten journal is both time consuming & impractical when free tools such as Mint.com exist. Another benefit Mint provides us is the ability to view spending trends which enables us to visualize & identify problem areas, then develop a plan to curb them accordingly.

As I mentioned above I am currently in the process of downloading, installing, using & reviewing both YNAB & Mvelopes software budgeting tools. Both of these softwares come highly touted and offer free trials, of which I am taking full advantage. YNAB provides a 60-day free trial and Mvelopes offers a 30 day free trial. Some differences between the two include but are not limited to the following:

Software type – YNAB is a software you purchase once & install on your PC whereas Mvelopes is a web & fee based subscription service.
Data importing – Mvelopes automatically downloads & imports your banking information for you while YNAB requires you to manually import the data.
Acessibility – YNAB is only accessible from the computer you install it on, but is more secure in that wise. Mvelopes is accessible anywhere you have an Internet connection and browser therefore making it susceptable to security hacks and is also unusable if the Internet connection goes down, but if all is well gives you the ability to view your information from any Internet device.
Cost – YNAB is a one time purchase whereas you must pay for Mvelopes every month you use it indefinitely.

What do you think? How do you budget & which methods mentioned above do you use? Like I said, I am currently using all three & hope to narrow it down here in the near future. Please share any experience you have for the benefit of all readers.

Click here to see all our past DFA Tips of the Week.

How Much Our Debt Costs – November 2009