On this day

So Facebook’s “On This Day” feature reminded me a couple days ago that I posted this back in October 2009:2009 Dave Ramsey

It’s almost humorous to me now, six years later, to read that. And I want to discuss what a mind shift has taken place in me since then. I spend much more time being intentional about purchases and our overall financial plan, and I feel less anxious about our bigger financial goals.

When we got married, we had budgeted enough to know that we could afford our apartment and living expenses, but hadn’t figured out what to do about debt, savings, retirement, etc. I was 27, and my husband was 26 when we got married in 2008, and I think we were pretty typical in that we’d discussed some financial stuff before marriage and in our first year of being married, but not other things. We both had mounting student loans, since we got married while we were both in school (him completing a second bachelor’s degree, me completing my master’s degree). Even before graduating in May 2009, I felt the pressure to get a good job in order to start paying my student loan debt. My husband’s debts weren’t nearly as large, but 2009 was rough for him in other ways, and he needed a new direction in life, and so we both began new jobs within a couple months of each other. We had no credit card debt and two older vehicles that we owned outright.

But when Steve’s aunt mentioned Dave Ramsey to us in the summer of 2009, we were both intrigued. I got one of his books at the library when we got home, and must have been reading through it and thinking about in October. My first student loan payment came due in November 2009, and I had just started my new job on October 6. If you’ve been reading along with me, or have read the archives, you already know how things turned out. We now have a positive net worth, no debt, and still no mortgage (at least while my husband is graduate school).

The major change is that I feel that I know a heck of a lot more about money and am much more financially savvy now. Dave Ramsey was a great first step, and the snowball method of eliminating debt worked exactly as it does, with people, on average, paying off their debts in around four years. But I’ve done a lot of other reading (and listening to podcasts like Planet Money), and feel confident in most of the financial decision-making situations in which I find myself. For example, open enrollment for health insurance is just around the corner, but I’ve already got a spreadsheet set up and next year’s spending plan laid out, so I can simply plug in some numbers to see what’s best financially for us. There’s no more big question marks looming in our financial picture. Of course, anything can happen, but there’s more security in having a plan and a backup plan than having no plan at all.




As you can see from the image there, I set up the final ‘Payoff Payment’ for my student loan. I’ve blurred the total amount for privacy, but DH and I agreed that the savings account could be put to better use. The payment hasn’t gone through yet, because even in this digital age, payments still have go through the bank rigamarole, so it doesn’t quite feel real just yet, but I’m guessing by next Friday, it will be done and gone. The savings account is taking a hit, but will be replenished over the next few months. Best of all, DH starts grad school next week, and it’s already paid for… no student loans!

To recap, DH and I started with about $52,000 in student loans combined in 2009. Yikes. All of that was borrowed between 2006-2009 while we both worked on second degrees, a Master of Library and Information Science (MLIS) for me, and a teaching certificate for him. I successfully landed a very nice promotion at work and DH was re-hired at a previous employer in 2009, and, based on the advice of one of DH’s aunts, we learned about Dave Ramsey and the concept of the debt snowball. We regularly made rather enormous payments toward the debt beginning in early 2010. We started with the smallest total (one of DH’s loans, I think it was about $2,000), paying off all of DH’s debt in September of 2011, and now all of mine in August 2013.

I’ll do another update next week when it’s all officially gone through, maybe it will have sunk in by then.

Shriveling debt and reset priorities

This month marks a pretty big occasion on our path toward being debt free: we will have more in emergency savings than in debt. We started with about $52k in student loan debt between the two of us, and this month it is down to under $10k. If you haven’t been following along since the beginning, we began aggressively paying down the debt in early 2010. I am very hopeful that we can now pay it off completely by the end of October 2013, or only three months from now! Even if it is a couple months later, like in December, that’s only five months from now.

It’s kind of surreal, but it’s really only going to be about four years of rather large extra payments. In that time, we have also (all in cash) replaced two vehicles, took at least one vacation each year, gotten some nicer long-term furniture, a new laptop, and saved a good chunk toward retirement.

So, what’s next after becoming debt free?

We will be getting out of debt basically just in time to start paying my husband’s tuition for grad school without taking on more loans. This is great, because as I previously mentioned, we were going to allow ourselves to do some things without worrying about the debt hanging around a little longer (update: she had a perfectly healthy baby boy but she is still not 100% out of the woods). We took that wonderful trip to Seattle in May, husband did register for two classes this fall, I went to Chicago mainly for work in June with one day of fun tacked on, and we are working on plans to visit Europe next summer. We’ve even gotten a couple of invitations to stay with people if we visit Germany and Denmark, so those may be added to the list along with seeing Paris.

Debt timeline

I’ve re-done some math and have determined that, even with buying our ‘new’ used car, we can get out of debt by the end of 2013, not February of 2014 as previously posted. This is less than 2 years from now, fewer than 24 months. We actually recently discussed cutting everything unless it was absolutely necessary, to see how much of an impact that could make on our debt snowball. We determined we could shorted up our debt timeline by a couple months, but it wasn’t a significant enough dent to forego some of the things we love–our lunch dates out, for instance–so we decided we’ll just try to stick to the spending plan as closely as possible so our timeline doesn’t get longer. I’ve set up one of those annoying tickers to track our debt:

The end is in sight!

Student loan saga continues

I logged into my student loan servicer account last week to check on an extra payment I made that hadn’t gone through yet, and discovered my loan balance was listed as $0. I immediately wondered where in the world my loans went this time… if you haven’t been following the story of my student loans, suffice it to say that I’ve dealt with so many servicers, I’ve lost count. I’m guessing this is somewhat normal, but it seems my loans do a heck of a lot more traveling than I do.

I called the customer service number and quickly learned where my loans had been moved, and promptly signed up for a new online account. Honestly, I think the best part of being debt free will be never having to think about where my loans are at any given moment.

I e-mailed the new servicer because my account is not fully active yet, and I’m unable to make payments. They responded within 24 hours that it will take 1-2 weeks for all of my files to be transferred. My main concern is that I’m going to miss a payment date, and that interest is still accruing at an unknown rate (because I qualified for an interest rate deduction for having auto payments set up with my previous servicer).

I’m just glad that, even having bought a replacement vehicle, these loans can still be completely gone by February of 2014, give or take a month or two. That’s less than 24 months from now, so the end really is in sight.

Debt #2 is gone

At the end of September, we were able to pay off the second to the last student loan. I think the beginning total was something like $9k. I’ll just go ahead and overshare with actual rough totals:

Debt #1 – $6k, paid off in August 2010
Debt #2 – $9k, paid off in September 2011
Debt #3 – $38k, to be paid off in 2013

It doesn’t seem all that long ago that I wrote that we’d paid off Debt #1, and it really wasn’t. How did we pay off $15k in less than 2 years? And how will we pay off $32k by 2014? By being very lucky with our jobs and living well below our means. We’re fairly average according to Dave Ramsey, with being able to get through the Debt Snowball in three years–$53k in three years doesn’t sound too shabby.

I recently heard that students shouldn’t borrow more than they will make in their first year working. After I thought, “that’s impossible,” I realized that this holds true for both my spouse and I. He made more than $15k his first year after he finished with school, and I made more than $38k. And, with not changing our lifestyles from being students to part of the full-time workforce, quickly paying off the debt and saving over $25k in interest payments has been marvelous.

So close…

We are very close to paying off debt #2.

I am a bit annoyed with the Federal Student Loan servicer because they are switching websites sometime in early October (supposedly) and then http://www.dl.ed.gov will be no more. It will then be http://www.myedaccount.com, which means all of my payment history will probably be wiped out, just as it was when I switched servicers when consolidating my debt. And, no doubt, Mint.com won’t work with the new site right away, which means tracking the debt snowball with the ‘Goals’ feature will be messed up. I can’t really see a positive to this, other than maybe the new site being easier to use… we shall see.

Husband and I have had houses on the brain since seeing a listing for a super cheap-o house in a neighborhood we like. Like, $60K cheap. The major issue that made it so cheap? No appliances. But I just saw that as a potential opportunity to have the freezer-on-the-bottom fridge, the energy efficient dishwasher, the gas range with warming drawer, and the front-loader HE washing machine that I so desire. Someone else snatched up the house within a couple days, but it got us more seriously considering getting pre-approved.

We checked with the loan specialist at my husband’s credit union, and determined our income will most definitely allow us to buy what we want (small, probably older home, in the middle of the city). However, we decided we definitely want to pay off all of the debt before saving for that down payment. And, we’d like to go on that trip to Paris before buying a house, too. Maybe even get that convertible I’d really like. Why? Because we are weird, that’s why.

I actually mentioned my dream to buy a house with 100% cash to a family member at our vacation last month, and got a very “you are really WEIRD” look, but that is absolutely okay with me. So what if we live in an apartment until we’re 35? So what if we insist on a 15 year mortgage that can be paid off before we retire? So what if we care more about being able to save money than have a McMansion? As Dave Ramsey says, normal is broke–don’t be normal.

Debt #2

In paying off a debt, there comes a point where the interest owed is just about nothing, and then you know you’ve nearly paid the whole thing off. We’ve come to that point:

This is my husband’s remaining student loan debt. There’s $6.89 of interest on this sucker. Thanks to September being a five paycheck month for us with five Fridays, this thing is going to be all gone on September 30.

I have enjoyed making payments every week on this debt instead of just one monthly lump payment. It does help my motivation more to login to Mint.com and see it dropping week by week instead of just month by month. This takes some closer attention to the budgeting, but I think it’s worth it to see this:

Probably the exact same amount of money gets paid toward interest doing it this way, but it feels more like hacking your way through a dense jungle using a machete, each chop of the blade satisfying a need to make it through vs. using a bulldozer and just running everything down with one little crank of an ignition switch. Or maybe that’s just me.

Yet another reason to pay off those student loans

With the new debt ceiling law, some benefits related to student loans are going to go away. No more subsidized loans for graduate programs, and depending on some other factors, interest rate incentives could also go away or not be offered at all.

I always tell people to think long and hard and literally do the math before applying to graduate school. For some degrees, it just doesn’t make sense to go into debt for a job you may never get. I was very fortunate to find a job in my field so quickly after graduation, but unless you’re getting a professional or technical graduate degree, it could just be a lot of time and a lot of money with little to show for it.