by Ashley
With all my making and changing goals, I wanted to give a quick re-cap of my current financial plan of action (see last full plan of action post here, and an update with details about my race to 20K here).
So here are my current goals, in order of priority:
- License fees. We still owe approximately $4,000. The original goal was to try to have it paid off by August 2014. I’m still holding onto hope that this could happen, particularly if we reduce our checking account buffer. (Goal date = August 2014)
- Car loan. This is my officially named “Race to 20K” since we owe a little over $20,000 on the car still. My goal is to pay approximately $3,000/month toward the car after the license is paid in full, which would take about 7 months after it becomes the focus (Goal date = March 2015)
- Sallie Mae 8.5% and 8.25% student loans. About $5,000 is owed toward each of these loans. Since I’m starting to make payments toward my student loans now (the ACS student loans started this month and Sallie Mae repayments start in August), I’m hoping I can actually have these loan paid off while I’m working on my race to 20K. I don’t know what the “rules” are with income-based-repayment, in terms of if I can choose where the money goes (e.g., focus it on one loan, or if its equally dispersed across all loans). My guess is the latter (equal dispersement), but I’m still hoping to add a little extra money here and there and chip away at these higher interest rate loans concurrently with my race to 20K goal. (Goal date = ???)
- ACS and remaining Sallie Mae student loans. These loans have a lower APR than the above loans, and they also have much higher balances (ACS was a single loan for over $20,000 for example). So they get prioritized slightly below the higher interest/lower balance loans above. (Goal date = ???)
- Remaining medical bills. I have diligently been making our monthly payments (remember, I have monthly payments to 3 different entities), and have realized that 2 out of the 3 will be paid off in just a matter of months. Once paid in full, I plan to snowball those funds toward whatever debt I’m focusing on at the time (likely the Race to 20K). My guess is that by the time we get down to paying off the remaining medical bills, only a single bill will remain and it will hopefully have shrunk down to only a few thousand by that point. (Goal date = ???)
So that’s my thinking.
One question – what would you do about the higher-interest student loans (item #3)? Would you put any extra toward those loans while still working on the Race to 20K or do you think I should focus exclusively on the car loan race? I know Ramsey suggests one thing at a time (focused attention), but those interest rates are pretty high for student loans and the balances are low enough that I’d like to still chip away at them here and there….still putting the majority of our funds toward the car, but maybe an extra $50 or $100/month toward the student loans, if we have extra funds available???
Thoughts? Opinions?
Also – a quick update…. I got notice that my Skype interview is going to be TOMORROW! Eeek!!! I’ll probably peek in tomorrow afternoon to let you know how it went. In the mean time, fingers crossed!!!
Hi, I’m Ashley! Arizonan on paper, Texan at heart. Lover of running, blogging, and all things cheeeeese. Freshly 40, married mother of two, working in academia. Trying to finally (finally!) pay off that ridiculous 6-digit student loan debt!
Ashley –
First I would like to say thank you for including links when you are referencing other posts (either yours or someone else’s), it makes it much easier to review.
I think as far as lining up the debts to knock out, you should make a firm decision about what will get your snowball and stick to it. It is easy to think that since you are sending so much of your snowball to one thing that it is okay to pull a little bit out and redirect it, but that defeats the purpose of the snowball. I feel that you are starting to gain such momentum that you are spinning a bit trying to figure out the best direction.
I think its a good idea to take a moment to regroup and decide what will help you and your husband to feel the most success in your journey, either: a) continue on your journey of the race to 20k and completely eradicate the car note and the last of your consumer debt, or b) take a break from the race to 20k for a few months and knock out the high interest student loans. At the rate you have been making snowball payments it sounds like you would be able to knock them both out in approximately four months after paying off the license fees (which means crossing all those items off the list before the end of the year and leaving them behind in 2014 forever!!!)
My personal opinion would be to focus on the student loans first. Being able to cross two items off your debt list may help you to regain your focus. Plus, then you could do another thermometer for the car debt as it will take you a bit longer to complete!
I wish you super good luck for your interview tomorrow, please pop in and let us know how it goes!!!
Cheers,
Meghan
I also think you should focus on the student loans first. Interest rates are your highest left and the balances are low. And you still have your husband’s truck situation and teeth situation hanging out there. The student loans are more achievable at this point. If you focus on the car and get distracted by the student loans AND the car AND the teeth, soon you will be treading water. You are doing a fantastic job!
I also think you should focus on your most important debt – really throw everything at it and snowball it!
In past posts you gave us good reasons why your car debt was your highest priority so I think you should focus on that, send minimum payments to your student loans, and once your car is paid off you can get rid of those student loans fast!
Try to not scatter your priorities – that dilutes them and then everything takes longer. Focus!!
Good luck with the interview!
Agree. Laser focus on individual debt categories is what seems to be giving you the most success. I, too, hope your interview goes well.
Previously, I voted for you to get rid of the car debt first. But now, I think at least one of the smaller two student loans makes more sense. Not only for the interest, but also for just yet another minimum payment you have to make. I might even get rid of both of those before the car. I would also struggle with the medical debt after those, since it’s just yet another payment (and at only a few thousand by that point, achievable in the short term).
No matter which way you go, I agree with paying the absolute minimum on everything else. Sending extra to anything other than your highest priority only prolongs having multiple payments to make and higher interest to pay.
I vote for the student loans before the car. You could sell the car to get rid of the debt. The student loan debt will always follow you.
I always think getting rid of highest interest rate is the best.
You’re doing so well on your debt reduction. I’m impressed!
If you’re inviting votes, I would go with getting rid of the two small student loans before tackling the car. But I really like the feeling of quick wins. Knocking out small debts always gave me such a great feeling, and trying to slog through a high debt first always made me feel stuck and terrible. But as always, you gotta do what feels right to you. Good luck tomorrow!
I vote to get rid of the car payment. If I recall correctly, it’s about your largest single minimum payment, so eliminating it will free up a whole lot of cash flow toward the snowball.
1. The interview was today so I sincerely hope all went well.
2. I love reading about how you decide to payback your debt because it gives me some insight into my own repayment plans and our debts are student loan to other debt are very similar. I think I struggle with emtional aspect of eliminating debt. Like, I want to target my car loan even if it is at a lower interest rate than my student loans because the student loans can be deferred (and I never know when I might need that) AND because I would love to be commerical debt free by 30.
3. Also, I am struggling with the decision to pay back student loan debt by interest rate. For example, if you have loan A) $30,000 at 3% and loab B) $6000 loan at 8%, the yearly interst on the respective loans is A) $900 and B) $480. This interest is capitalized when the minimum payments don’t cover the accrued interest so it seems like even though loan B) is at a higher rate, you would save more money paying off loan A) first, no?
4. I think the other posters are right and that it should be about focusing on one. But sometimes even choosing that “one” is hard. Best of luck, I will continue to cheer from the sidelines.
Tough call for me. I do think I’d focus on one category first instead of trying to chip away at both.
Normally I take the view that if you have to stop paying for some reason, they can take your car, but they can’t take your education. So it would make me want to take care of the car first.
But those student loan rates are very high and the balances are not so high. It seems like you could knock them out fast which would provide some momentum and free up some minimum payment.
So if it were me, I would probably end up doing the student loans first and then the car even though in most other cases I’d do the car first.
Side note: I’ve never really understood the Dave Ramsey logic of selling the car to get out from under the payment. You’re probably underwater on it, which means you’ll have to take a personal loan to make up the difference, and then you’ll have to buy another car that you’ll have to finance too. Only makes sense to me if a car payment is actually beyond someone’s ability to pay.