by Ashley
It’s that time of month again….time for my monthly debt update!
As I warned you at the beginning of the month in this post, our income for this month is drastically lower than we’re used to (remember, we live on last month’s income so our income for March is actually the money we earned in February).
Our income is variable from month to month, but whereas we’ve averaged about $7,000ish/month, this month we only have about $4,500 to live on. A huge chunk of that is taken up with non-negotiable expenses (rent, preschool, etc.), so we’ve necessarily had to make much lower debt payments than we have in previous months.
Here’s how things look right now (remember, my ACS bill is paid at the very end of the month, so that’s why it says the last payment was from February):
| Place | Current Balance | APR | Last Payment Made | Last Payment Date | Original debt, March 2014 |
|---|---|---|---|---|---|
| Capital One CC | - | 17.9% | - | Paid off in March 2014 | $413 |
| Mattress Firm | - | 0% | - | Paid off in May 2014 | $1381 |
| Wells Fargo CC | - | 13.65% | - | Paid off in May 2014 | $7697 |
| BoA CC | - | 7.24% | - | Paid off in June 2014 | $2220 |
| License Fees | $1092 | 2.5% | $75 | March | $5808 |
| PenFed Car Loan | $15489 | 2.49% | $50 | March | $24040 |
| Navient - Federal Student Loans | $4256 | 8.25% | $116 | March | $4687 |
| Navient - Dept of Ed | $72472 | 8.25-6.55% | $260 | March | $69191 |
| ACS Student Loans | $21040 | 7.24% | $77 | February | $21035 |
| Medical Bills | $6261 | 0% | $75 | March | $9000 |
| Totals | $120,610 (Last month = 120,800) | $653 | Starting Debt = $145,472 | ||
If all goes well in terms of income for this month, I’m hoping to eradicate the last of the license fees next month. I should also be paying off the larger of the two medical bills (we currently pay 2 separate entities: one $50/month, and one $25/month), so it would decrease that monthly expense down to only $25/month.
I’ve also continued to pay extra every month toward my highest interest student loan (Navient – Federal Loans). It’s a $16 minimum payment, and I’ve been paying $116 every month, including this month. However, I’ve paid minimums on my other student loans, medical bills, and license fees. The other BIG thing that probably sticks out is my PenFed car payment. My car payment is technically $450/month. However, I’ve been paying WAY more than the minimum for a long time in an effort to try to knock down that debt. Because of my pre-payments, no payment is due for over a year. I could have literally paid nothing this month and been fine. So I chose to decrease my normal payment to $50. This covers the interest (plus a little extra), and gave me more wiggle room so I was able to still make a larger student loan payment on my highest interest debt.
It’s a tough thing when you literally don’t have enough money to go around. This month has definitely made me feel grateful that I’ve been so on-top of our debt situation since starting to blog. Had I not been making extra payments on the car, we simply wouldn’t have had enough money for all of our minimum debt obligations. I would have had to turn to using a credit card just to buy groceries and put gas in the car (I’ve been there before and remember those days all too well. Scary stuff!)
Fortunately, I’m thinking that this lower level of income was only a one-time thing (fingers crossed). But, just-in-case, I really feel the need to safeguard us a bit. Getting rid of some of these monthly obligations (like the $75/month license fee and $50/month medical bill) will be really nice. And I CANNOT WAIT until the car payment is gone forever. Although I was able to cut back this month and not make the full payment without any penalties (again – since it’s been prepaid), being able to allocate that $450/month payment elsewhere will feel like a big weight lifted.
If you didn’t have enough money to cover all of your bills, do you know how you would handle it? Do you have any wiggle room with any of your debts?
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!
I’m going to make one last pitch for you to get those student loans to a reasonable level.
Can you see that in a year, your ACS and Navient loan balances have INCREASED? I know you want to get rid of the car debt but really this is hard for me to understand. At 2.49% why not just pay a little above the minimum car payment – enough so that it pushes your actual due date forward (like you are) but don’t focus on it.
An average interest rate of 7.5% on 72 grand is a LOT of money. But that’s just me. Like I said, this is just my pitch – i know you’ve said you have the emotional thing with the car but really, it’s such a big balance there too, it’s not like you’re going to pay it off this year. In other words, you paid off 8500 of the car in a year but your loan balance grew 3300. If you had allocated that money to your loan, your overall debt would be lower!
Ok, the accountant in me will give it a rest but does anyone else see what I’m saying?
Sigh. I do see. It’s hard to argue with those numbers. I’m going to stay focused on eradicating these two much lower debts first (the license and medical bill), and then we’ll see. At a minimum, I want to start paying enough to account for the interest with the student loans so the balances don’t keep growing. It’s hard. Not only is there the emotional aspect, but they’re so much larger that it will take forever, whereas I could possibly get rid of the car payment this year! Plus (and I haven’t talked about this here before, but Adam documented a similar struggle) paying extra on certain loans is a HUGE pain with my loan company. It’s not bad with the Federal loan because its separated out. But all of the Department of Education loans are grouped together so if I want to pay only on the highest interest loan, I have to call every.single.month to have the money applied correctly (and, even then, my understanding is that its sometimes a battle and they STILL allocate the funds incorrectly). I’m not there yet so I haven’t had to fight that battle yet, but I’m very much NOT looking forward to it. Just let me make it through this month and next month (when I’ll hopefully knock out those small debts) and we’ll see where we’re at.
I know that loan seems huge, but I’m gonna to just comment here that something funny happens when you tackle a really large number. At first, it feels pointless, and you plod a long and suddenly you take a look and go, okay it’s still huge but not that bad, then at some point you go…oh wow, I can totally kill this, and that is the most motivating thing ever!! I guess what I’m saying is avoiding looking at the huge loan is actually taking up more mental energy than you think; it’s like that giant elephant in the room, best to acknowledge it and tackle it head on. Are you really paying off the car first because you care about it more emotionally or because it allows you to avoid looking at the large loan for awhile longer? Just something to think about; perhaps your focus on the car is really just avoidance in disguise.
I like your perspective. Before I started blogging here I 100% avoided the student loan situation (didn’t even know the full amount I owed until I added it up for my first post here!). And, maybe there’s some level of avoidance, but here’s what my thought process is….
Every single student loan has an interest rate that is MUCH higher than my car interest rate (most are 6.55, but they range up to 8.25%). The way I see it, let’s say I put the car on the back-burner and work on the highest interest student loan. Then when its gone I’d have the intention to go back to the car. But even if I were to do that, everyone here is going to argue that I need to focus on the next student loan (still double the APR of the car loan). And so on and so forth. It feels like it would never end. So then I’d be stuck paying minimums on the car all the way until the end of its loan because I’m continuing to throw extra toward the student loans.
Instead of that option, I prefer to get the car out of the way. It’s a quicker and more attainable goal (15K versus 95K), and then it frees up the extra $450/month to put toward the student loans.
I do agree that I need to be paying more on my student loans – at least enough to cover the interest so they don’t continue to grow. I agree with that 100%. But I just don’t think the right move for me is to pay minimums on all other debts in order to tackle these student loans first. It’s trying to take on a mountain instead of knocking out smaller, quicker wins first. So that’s my thought process. I’ve actually been planning a post on the topic of the student loans (in my head, not written yet), so you’ll probably see something next Monday on that topic.
Oh yes, I totally get your perspective in wanting a win; I’m just saying that you can start to feel the motivation and win before you actually get there if that makes sense. I also think that the largest loan is probably causing you stress not because of the higher APR, but because you are constantly staring at a mountain you know you have to climb eventually. I think if you got those mountains down to small hills and then went back to the car to get a quick win your overall satisfaction with where you are in the debt pay off would improve. Also, consider if you do the car first, all you have left is a large mountain to climb with few wins in sight, but if you plan the car in the middle after killing one of the larger mountains, you’d get a good boost after doing something arduous. I guess I’m saying combine the two so you don’t burn out when all you have left is a large mount of student debt that feels like it will never end. Does that make sense?
Tough month, but you got thru it! Keep your chin up and your enthusiasm up – that’s key to not giving up!
I totally support your paying off the car loan first – it’s an emotional win and will feel great when it’s accomplished, then you can gear up for the student loans and attack them!
Who cares which way you do it. Attack your debt how you want to. As long as you total balance is decreasing, that’s what matters. Great job Ashley!
You really should get your car loan prepayments applied to principal. Otherwise, prepayments are just you giving the bank an interest free loan of ~4000 (450/mo car pmt x 9 months prepaid at this point), you will owe the same total balance and lifetime accrued interest. Meanwhile you’re paying 8% on other debt that prepayment money could have been applied to. It could be $240 in your pocket or theirs. Don’t let them take advantage of you.
I called to try to have the payments allocated to principal only (wrote about it here: https://www.bloggingawaydebt.com/2015/02/paying-down-principal/ ). They said they did it, but it still didn’t change my next payment due date (nor the interest paid). I was told that by over-paying I’d be shortening my loan length (duh) and therefore paying less interest. I called twice and got the same response each time. I don’t understand it (which is why I wrote about it here), but I’ve given it two attempts with the same results each time.
My car loan was the same way. I could tell the interest portion of the payment was dropping, so I stopped worrying about it and just committed to paying off the car ASAP.
Yeah, another commenter left me this link: https://www.reddit.com/r/personalfinance/comments/2tulai/it_isnt_your_banks_fault_it_takes_so_long_for_you/
which really helped me understand it a bit better. Still not going to say its 100% clear (because I still don’t get why the due date gets pushed back), but the math all makes sense to me.
Tough month it seems to be. But I suggest to be enthusiastic enough and hopeful- that will be a powerful key to find a way out and to attack your debt as you wish. And your idea of paying the car loan first, I think it is a great job.