Feb 10 2012

Update from Courtney #9 almost 2 years into getting out of debt

This series features my friend, Courtney, as she works her way out of debt. We’re approaching the two-year mark with her journey here. In March 2010, they had about $54k in debt. She and her husband have made incredible headway and are truly an inspiration to me! Catch up with previous parts of her series here. Take it away, Courtney!

We have lost some motivation for paying things down and staying on track. For example… We were over our January budget by nearly $3,000! Now, a big part of that was our Discover card bill for our mattress (we do still use our credit card, but we pay it off each month). We had extra money from my husband’s side job, so we didn’t have to dip into our emergency fund. That said, seeing that overage was definitely a big fat wake up call! We need to buckle down and get Sallie Mae paid off so we can have some fun with our money!

I think in the last update I said we weren’t following Dave Ramsey to the T any longer. Since then, we have a fully funded emergency fund–6 months of expenses for us (not including any ‘extras’–entertainment, extra debt payment, etc.) which is about $12,000. I don’t plan to contribute to the emergency fund and it is in our regular savings account which has a pitiful interest rate. I looked into some different higher interest rate banks/options, but my husband prefers to have the money liquid and easily accessed (our bank is local to our area/state, not over the internet with ING or something similar). Since it’s only for emergencies and we aren’t looking to invest that money, I’m fine with leaving it where it is.

We also opened up a Roth IRA and fully funded it at $5,000 ($5,000 is the maximum yearly contribution). At this point we aren’t budgeting for the Roth IRA and just plan to use money from my husband’s second job until Sallie Mae is gone–after that time we will have a more concrete plan for retirement and probably open up a Roth IRA in my name so we can max both out. The Roth IRA is just sitting in the low interest IRA account right now. Our bank has investment services, but they take like a percentage of every single deposit off the top and then a percentage of the earnings thereafter. That didn’t seem like a great plan for such a small and important fund! So, I’m looking forward to your retirement series! I need retirement help!

I’ve also changed jobs… again… I am a serial job-ist (or something). I’m making less, but the stress is gone and I’m very much enjoying not having much responsibility! Maybe that isn’t very grown up of me, but at least I’m honest. It’s a pay cut (effectively about $100/month) so our budget was shifted a bit–not so much for “incidentals” but otherwise our budget has been the same for a while now. Incidentals and entertainment are our overages–I’ve gotten the grocery/gas/fixed expenses down to where they don’t vary by much each month.

As of this moment we now owe Sallie Mae $19,818.38. We also have our mortgage, but there are no more loans/debts! WOO! Sallie Mae is a pain in the rear! You can pay online, but if you pay any extra they just apply it to “future payments” so you are only very nominally decreasing the interest. So, in order to pay down the principal you have to mail in a check and WRITE OUT explicit instructions (including the loan number and your account number). AND you have to pay the interest on the loan before you can pay on the principal. Annoying and complicated–and even when I wrote clear instructions I had to call because the payment wasn’t applied correctly. All the more reason to get Sallie out of my life FOR-EV-ER!

Kacie again:

The Sallie Mae balance in March 2010 was $27,379. They have made tremendous progress on the student loan, especially considering they paid off all their other credit cards and car loan and whatnot and built up a six-month emergency fund in that time. I think it was smart to build up the emergency fund before tackling Sallie Mae, since the balance is still quite large.

I know she’s motivated to seeing this debt pay-off through. I’m sure it won’t be that long until we get Courtney’s debt-free update! She estimates it’ll take another 18 months or so. That’s amazing.

Paying off these debts has helped them have so much more freedom in life. She’s able to switch jobs to suit her life better, rather than being hopelessly tied to a paycheck.

Many of you have been reading here when Courtney first shared her story two years ago. When reflecting on your own situation, would you say you’ve made improvements over the last two years?

11 Responses to “Update from Courtney #9 almost 2 years into getting out of debt”

  1. Courtney is doing great! In the last 2 years for us we paid off the van and saved $5000 to pay cash for my son’s braces. We are currently saving hard for my daughter’s braces. I sense an ongoing theme in my future. 4 kids and they will all need braces. $20,000 worth of orthodontics makes me want to beat my head against the wall, but hopefully we will be able to pay it all in cash when the time comes. My daughter this summer, my third child next summer and I don’t know yet about my youngest, but just looking at her mouth I figure there will be no way to avoid it as teeth are coming in sideways and creating new rows to make space, she has a very small mouth!
    Jennifer´s last post ..Hello Groceries!

  2. Wow, she really is an inspiration! Just like your story was an inspiration to read as well!

    Thanks so much for sharing. It really does help to read about other people with debt and how they tackled it. It makes you realize that most people can do the same thing and eventually be debt free too.

    In the past year, we’ve paid off over $10,000 in credit card debt and will have paid it off completely by the end of this year. Also, we’ll have our car paid off next month as well… which is about 8-9 months early!

    Thanks for the inspiring stories!
    Mary´s last post ..Paying our car loan off early

  3. Mary it sounds like you are doing a fantastic job!

    Jennifer — yikes on the braces. It’s great that you are doing this for your kids though. I had braces as a teen and I’m thankful. Can you fund a FSA so you can at least pay for the braces with pre-tax dollars? That helps save a bit. I don’t know if the new “invisalign” type braces are any cheaper than the standard metal ones, or if there are cheaper options out there nowadays.

  4. That’s great progress, especially considering everything else she’s gotten done. It’s too bad they make it so complicated to pay extra on the loan, but that’s definitely the way to go.

    We are working on paying off our mortgage, and are down to $33,772.92 on that. I can’t wait for it to be GONE!
    Jackie´s last post ..Reader Question: Credit Score Confusion

  5. We are Dave Ramsey graduates as well. Paid off 2 car loans, both almost 2 years early. Paid off our home equity loan…$10,000+ in less than a year.
    Gazelle intensity is an amazing thing

    On another note. Please proceed very cautiously with respect to using invisalign instead of braces. I won’t go into major detail, but our ortho explained to us about how now regular dentist can do invisalign after a basic seminar. Where as a typical ortho has years of training. There are many things you cannot correct with invisalign that require regular braces. So please proceed cautiously with respect to invisalign. It can b great for someone with minor issues, but for more complex things, be sure to get second opinions. Just my 2 cents.

  6. Thanks everyone! It has helped me a TON to be able to share on this blog. I was embarrassed to know how much financial trouble we had gotten in despite both being college graduates! Unfortunately, there are MANY things you don’t learn in school that you have to figure out on your own (or with the help of awesome people like Kacie)!

    We’re so stoked to pay off Sallie Mae and not have to worry about finances half as much as we did two years ago!

  7. Courtney – looks like my comment got lost in moderation. I’m just curious why Sallie Mae is so difficult – we’ve paid extra online all along and not had any issues. I had linked to an article I found a few years ago on this – if you search for the “paid twice” blog, then Sallie Mae on her blog she has some info on their experience (good info in the comments as well).

  8. Sorry Sarah — I searched for your comment but couldn’t find it. Thanks for trying again!

  9. Sarah–sorry didn’t check back until I just saw your comment! If you pay additionally online it does NOT go towards the principal. It does “future payments” which does not reduce your total amount owed nearly as much as paying down the principal. In order to pay on the principal amount you have to send in a check with a separate piece of paper that has written instructions on which loan (I have several–one for each semester of college) you want to pay off or pay on the principal. Even when you do that, the interest of that loan has to be paid before any amount can be applied to the principal.

    I did look at that blog and I don’t know if payment options have changed (the blog post is from 2008) since the time it was written or if for some reason I don’t have that option? I had “borrower benefits” but made one late payment (their website ate my payment and I didn’t realize until the day after the payment was ‘due’) and don’t have those benefits now, so maybe paying online was one of those benefits?!

    When I try to do the double payment online as suggested in the blog I get this message:

    Bill group 1-01: Total Payment of $600.00

    The payment exceeds your payment amount due by $600.00. Please add this additional amount to the loan(s) you wish to allocate the extra payment. It’s important to note that for each loan receiving a payment, a separate transaction will show on your bank statement.

    Please ensure the sum of the amount(s) equals $600.00. Or, if you’d like Sallie Mae to perform the allocation, leave all the loan amounts blank. This will result in one transaction with your bank.

    I have done this option before, but it does NOT apply the amount to the principal–it applies it to future payments. So I wouldn’t owe a payment on x loan for x months, but that’s not the same as the principal. Not sure if/why some people would have a ‘pay on principal’ option or not?!!??

    I certainly wish I could pay online like that instead of the frustrating pay by mail (especially since I’m never sure exactly how much interest will accrue by the time they get and process the payment)!

  10. Ahhh Sarah you are my hero! For whatever reason I just tried it again–with one specific loan–and was able to get this message:

    How do you want to apply the additional payments?

    Apply toward my principal balance

    Apply toward my next payment due


  11. Actually, Sallie Mae is still a total pain and completely unethical in their practices. I’ve used the “Apply toward my principal balance” option exclusively for my payments and the payment has most certainly not been applied to principal correctly. Despite their own wording which says the next payment due date will not change, my payment due date is now nearly 6 months in the future. Principal payments should not push out the due date. I’d exercise caution with this supposed principal payment. Perhaps they’ll come back with an appropriate response to my most recent message concerning this issue, but somehow I seriously doubt it.

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Hey! I'm Kacie, wife to Shane and mother to Jonathan (7), Vivienne (5) and Amelia (2) . I write about my family's finance: how we save money, improve our spending, and plan for the future.

I hope I can inspire and encourage you to improve your situation. See disclosure.

I'm adopting a much slower-paced posting schedule, and treating this as a hobby blog now.

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