A funny thing has happened since we paid off our last car and a credit card with some medical bills on it: personal finances has gotten a bit boring. Actually, this has been a trend for awhile, but it’s gotten much more evident in these past couple of weeks.
With YNAB, I’m always budgeted a month a head of time, relying on last month’s paycheck to pay this month’s bills. I wake up every morning, shower, get ready, sit down at the kitchen table with my laptop and an OJ in hand. Quickly visiting the various accounts I have, I scan for anything unexpected and download the latest set of transactions to import into YNAB. Since every receipt I have is already entered into YNAB, it’s usually as quick as approving matches for the transactions. Double-check budget categories to ensure we’re on track for the month. Close laptop.
Less than 10 minutes to complete my daily financial check. When a new month arrives, I spend maybe 30 minutes updating some tracking spreadsheets. Done.
The past 8 months I have spent building up YNAB, various spreadsheets I use to track things like retirement contributions and Net Worth. Now, that groundwork has done. Our non-mortgage debt is almost gone outside of a few remaining student loans with small monthly payments.
It’s now about patience.
My wife and I are now car debt free for the first time in 5.5 years, with the final payment for her car happening a couple of days ago. If all goes to plan, this will be the last time we ever have car loan.
Interesting article on how financial crises can be detected when personal debt (not government debt) reaches a certain level (via The Atlantic).
I have officially paid off my first major loan, the car loan for my wife’s Subaru Forester. What a fantastic feeling that is! Yet it opens up a new dilemma that I am still struggling to figure out.
The question is, what is next?
After some careful deliberation, I have narrowed it down to three possible options:
- Pay off one of my student loans (this one is a private loan with Sallie Mae). This loan has the smallest balance of either my wife or I”s loans and would probably take about a year to pay off if all goes right. It currently has the lowest interest rate (3.25%) of any of our loans, but it is also a variable interest rate that has gone as high as 8.5% in the past. Plus there is always the benefit of getting Sallie Mae out of my life.
- Pay off the other car loan for the new car (2009 Hyundai Elantra SE). This would probably take near 1.5 or 2 years to do, but has a higher interest rate (5.5%) and the loan is only 7 months old. This means right now I am paying a lot of interest on the loan and paying now could save significant money down the line. Plus the huge benefit of not having any car payments and this would net a significant boost to the next debt snowball.
- Take the money we would put towards payments and have it go to a savings account. Given the economy, it never hurts to have some money stashed away. If the account balance gets larger then one of the loan’s balances, I can always due one big payment and close out the loan. If an emergency comes up, then we have money readily available.
Tough choice. Still thinking it through.
Operation Debt Reduction is going well. Thanks to paying off some old debt, tightening up the finances a little bit, and working with the good folks at Comcast to reduce my monthly bill, my debt snowball is starting to work. Also due to this month being an extra paycheck month (5 weeks = 5 paychecks, instead of the normal 4 paychecks a month), I will be able to apply the extra paycheck towards debt reduction as well.
I now have about $224 a month going directly towards debt reduction. Doesn’t sound like a lot? It will nearly pay off $1000 worth of debt every four months. At my current pace, I will have my last credit card with a balance paid off in August. Actually, counting my extra paycheck this month and the profits from some eBay sales I just pulled off, that credit card could be paid off by the beginning of July.
With no more revolving debt, I will start taking care of some of my installment (loan) debt. First to go? A student loan with a $550 balance as of this moment…what a good feeling that will be to get rid of my first student loan. Good news is I will be paying about $250 a month on that student loan thanks to the debt snowball, so that will basically be paid off in just two months.
After that, the most likely candidate to be targetted is my car loan. I did some rough math and counting interest, in theory I could have it paid off by October 2009 (roughly a year and a half away), about two years before its original payoff date.
Wouldn’t that be nice? No car loan, no credit card balances, and even a student loan paid off. Gotta get the first part done first though!
As of today, I have no debt related to technology. My HDTV has officially been paid off. My computer equipment (Macbook, printer, router, etc.) and PS3 have been paid off for awhile.
Spending on technology is a weakness of mine. Give how quickly technology depreciates, it is something really hard to keep in check. I hope I can stretch the Macbook’s life to last another 2 years, especially since I replaced the hard drive recently. I just bought a new printer recently, so that should last awhile. The PS3 should not need replacement for at least 4-5 years if I can help it.
The last bit of technology I may need/need to replace in the near future is my wireless router. I currently have a Linksys WRT54G running the DD-WRT firmware. The router itself is almost 4-years old and works great. However, I am being very paranoid about backing up my Macbook. I have come to the conclusion that unless I fully automate the process and do not have to rely on plugging in my external USB hard drive, I will not have up-to-date backups of my Macbook. This bothers me big time.
I think buying a 1TB Time Capsule will be a very sound investment. Then I can use Time Machine to automatically back up my Macbook every hour wirelessly, without having to worry about plugging in a hard drive. Storage won’t be an issue, by the time the 1TB fills up consistantly, there will probably be USB hard drives I can plug into Time Capsule at least twice that size. Not to mention, my wife doesn’t have to worry about doing anything to have backups.
Time Capsule does not solve the off-site backup issue, but it resolves the up-to-date backup that is immediately available issue.
Maybe I will set aside $10 a week until I save up enough to buy one…
I just sent in the payment that will officially pay off my HDTV two years early (I had no interest until 2010 on it). Why pay off something I have no interest on for two more years? Because I am following the Debt Snowball method of reducing debt. It is completely right too: tackling the smallest debts first allows for some really quick/easy wins that add up extremely quickly. Plus it is simply awesome to delete a company from my bill pay list! So far we have been able to payoff/close three credit card accounts completely and pay off one of my wife’s college loans.
Next up is paying off my last credit card with a balance. It still has about $1300 on it due to a car repair bill I am still paying from nearly a year ago (before my wife and I had an emergency fund, plus before the debt snowball started). With the debt snowball, I think I can get it paid off in ~8 months assuming I have no major unexpected bills come up, get a little overtime here and there, and reducing expenses where possible. I think I am going to try calling Comcast and see if I can threaten to switch to satellite over their video quality problems…maybe they will lower their monthly rate for a few months.