Debt pay down update, 1/2012

I ran the numbers about a day earlier than I normally do, on 1/30 instead of 1/31, but no payments are going through in the next day, so these numbers are effectively accurate. As I blogged about a year ago, I like to take a snapshot of our debts once a year, at the end of January. I also pay quite close attention to it all year, but these snapshots provide a nice point of comparison to see how much progress is being made year-over-year. In Fall of 2010 I also began keeping a huge spreadsheet with the balance, payment, principal payment, and interest payment for all our debt accounts, as reported on each month’s statements, and have used it to help planning our payment stacking, projected payoffs, budgets, savings, and for forecasting how changes, large purchases, et cetera will affect everything over time. Hooray, spreadsheets. This year is the first year I have a full year’s worth of data in the spreadsheet, so I have an extra number or two to share.

First off, the old numbers: Last year at this time we owed $29,439 in consumer debt (including our auto loan) and $39,840 in student loans, for a total of $69,279 in debt. When I posted last year, we’d just paid off one of our cars; a few months later we sold it to my sister. This year we’ve paid off another credit card, and expect to pay off our remaining car in March – plus we replaced two computers, which died, with an iPad 2 and a new Macbook Pro, and decided to buy an HDTV for my birthday. We’ve been getting far enough ahead on our debt payments that I’ve been able to add line items to the budget for things like future computer replacements, new tires (bought a full set in the Fall) every couple of years, vehicle license tax, and other annual-or-less-frequent expenses we’d always had to treat as an unexpected/emergency expense. This is a huge relief, and it’s nice to see our savings account growing and know that the next time a tire blows out or a computer fails, we’ve literally got money in the bank to pay for repairs or replacements. Not everything is covered by this, yet, but we’re a lot, lot, lot better off now than we once were in not just being able to afford living expenses but to plan for those big, rare costs. Of course, those budget items bit into the debt stacking and are eating the car payments from my sister entirely, so we didn’t pay down our debt as much in the last year as we did the year before. Here are the new numbers: Our outstanding consumer debt (including the car) is $21,855 and we owe $38,797 in student loans, for a total debt of $60,652. This means that since last year, we paid our debt down by $8,627, which is still quite a nice amount, even though it is only 57% of last year’s phenomenal number.

Since I have the spreadsheet full of data, I can also give a few other numbers. For the calendar year of 2011, based on numbers from the statements received in 2011 (which is to say that the following numbers represent a slightly different period and may actually represent several different periods): We paid roughly $10,268 towards the principal owed across all our accounts, and we paid roughly $6,488 in interest. Of that, $2,128 was student loan interest, which is tax deductible. If we want to look on the brightest, most skewed side of life, we can pretend that means we only paid an effective 6.15% interest rate on the $70,795 we owed in January 2011, over the course of 2011. On the other, more pessimistic hand, we paid nearly as much in interest in 2011 as our outstanding debt went down from 1/31/2011 to 1/30/2012. Still, we’re making headway.

Potentially big things ahead: We should hear within the next month (or two…) about whether Mandy’s application for a teach abroad program in Japan was accepted. If it is, this will incur some up-front costs (we’ve already set aside the known program costs) and some large expenses in the late summer (airfare for myself, plus living expenses for the first month there), but on the whole it will be a great experience and a good thing for our budget. Unless the economies of the US and Japan experience some radical and unexpected adjustments in the next couple of years, the pay for the position will comfortably pay for our living expenses in Japan while allowing us to pay down our debt significantly faster than we currently do, even accounting for the cost of currency conversions. If we don’t end up going to Japan, the money we’ve got planned for it will likely go toward taking a couple of road trips this summer, at least to visit Mandy’s family in Wyoming, and possibly to visit the Wizarding World of Harry Potter in Florida. Either way, we should still end up paying down our debt by approximately $9k-$11k, or possibly more.

Things change. Things always change. I can’t be certain what the next few years will hold. Barring a lot of unknown unknowns, though, we expect to have our consumer debt paid off by mid-2014, and it looks like the student loan payoff has slipped to mid-2017. These figures are both about six months further out than I was projecting when I posted about all this stuff at this time last year, and it’s because of all the stuff I’ve added to the budget (along with the as-yet-unbudgeted versions of same, such as replacing our computers & tires). A little of it is in “disposable/entertainment” categories, but a lot of it is simply the things we were going to have to pay for anyway but hadn’t managed to plan for before. The tires, the VLT, oil changes & misc. repairs for the car, plus computer upgrades and replacements, plus most of the costs of running my business (web hosting & domain registrations, tax license fees, et cetera, plus a little budget for writing in Starbucks) in case for some reason it stops being profitable… And budgeting appropriately for food, clothes, and entertainment (books, music, movies, games, apps) is important to remaining in the black – we’ve lost over 100lbs between the two of us over the last two years, and the clothes costs kept wreaking havoc with our budget. I think we’ve got everything just-about-balanced now, and mid-2014 isn’t that far away. Being totally debt-free in time for our ten-year wedding anniversary in 2017 will be pretty nice, too.

Maybe to celebrate we’ll take out a mortgage on a house.

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