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!
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?