This is part two of our debt story. You can read part one here.
Getting Serious About Debt
I wish I could say we had some “we’re angry as hell and we’re not going to take it anymore” moment. But it wasn’t like that.
What got the ball rolling is that last fall we sent our daughter to college and paid for her first year – all $17,435 of it — in cash. That felt great because it represented the first time we had saved up and paid for a purchase of that size in cash.
Then we experienced a few big wins:
- We used some life insurance cash value to pay off two credit cards.
- We used bonus money to pay off a car loan.
- We used some more bonus money to pay off a second car loan.
- I got a large, lump sum for some of my writing that we set aside for our daughter’s second year of college.
And we kept doing the little stuff too. Like
- Using found money to make extra “snowflake” payments on our remaining debt.
- Looking for ways to cut expenses.
- Starting a car replacement fund so we can pay cash – or mostly cash – for future car purchases.
And as we continued to make progress, all of our efforts – both large and small – continued to build on each other. The snowball was picking up steam and – honestly — it was exciting.
The more we paid off debt, the more money we had each month. And the more money we had each month, the more we paid off debt. I know that seems obvious, but experiencing it is really kind of cool.
So Where Does That Leave Us?
We’re not debt free, but we’re well on our way. We still have a home equity loan to pay off. And a business credit card at 0% interest. Both should be gone within a year – hopefully sooner.
We have a mortgage with a little over 13 years on it. It’s at 4.5% and we’re currently crunching the numbers to decide if we want to refinance to a 10 year mortgage at 3.25%.
Finally, we are part owners of a lake condo. Our future plans for that property are unclear, so it’s not part of our debt reduction plan at this point.
Our Plan Going Forward
Our goals are these:
- Get rid of the home equity and the last credit card balance once and for all.
- Build a larger emergency fund.
- Max out our annual IRA contributions.
- Continue to fund our car replacement fund.
- Pay cash for college educations and home improvements.
And hopefully soon I’ll be able to write the final chapter of our debt story.