Over here at the small house, we’re still celebrating the sale of the big house, which eliminated $152,089.82 of debt that’s been on the books since we started this blog! Woot! 🙂
Journey to Debt Freedom Recap
When we started this debt-free journey in April 2015, we had a large, 1,500 sq ft house and $204,971.31 in debt. Between April 2015 and October 2015, we managed to pay off $16,515. 72 in credit card debt.
In September 2015, we took on a mortgage for our small, 536 sq ft house, so our debt ballooned to $240,352.35. We hedged our bets that the big house would sell soon enough, but it didn’t until May 2016 and the sale left us without equity to put toward our small house mortgage. Well then.
If we subtract the big house mortgage from the all-time high of $240,352.35 in debt, we had $88,262.53 in September 2015 when we downsized to the small house.
Since September 2015, we’ve paid off another $22,280.56 in debt.
And at the end of May 2016, I happily report that we have $65,981.97 of debt remaining, which includes student loans and the small house mortgage.
Small House Mortgage
Currently, the balance of our small house mortgage sits at $35,227.87. This 15-year loan has a 6.5% interest rate, which is high compared to the interest rates of conventional home loans; our loan is not conventional as it is specific to a manufactured home. Our standard payment is $649.12 (includes the escrow); this regular payment is taken automatically from our checking via an ACH transfer. (Actually, all of our payments are paid automatically from our checking–LOVE!) We don’t limit ourselves to the $650 payment as you’ll see in a moment.
Student Loan Specifics
With respect to the $29,496.38 student loan balance, this is the total for all of my student loans. Here’s the breakdown:
Student Loan #1: paid in full
Student Loan #2: paid in full
Student Loan #3: $4,358.44 –> 6.8%
Student Loan #4: paid in full
Student Loan #5: $3,821.43 –> 6.8%
Student Loan #6: paid in full
Student Loan #7: $2,703.70 –> 6.8%
Student Loan #8: $11,819.89 –> 4.5%
Student Loan #9: $6,852.12 –> 4.5%
As for the interest rates, the 6.8% interest rate represents graduate school debt. And the 4.5% interest rate is representative of undergraduate debt. After many changes of hands, Navient is now the company I pay for these debts. My monthly payment is $474.88. (We paid off Garrett’s student loans awhile back.)
Because I have ACH set up for this payment as well, I receive a discount of .25% on the aforementioned interest rates. Woot!
Crush the Debt Plan
Based on my review of the debt snowball vs. the debt avalanche, we decided on the debt avalanche plan.
Our small house mortgage is the largest loan and accumulates more interest faster than Student Loan #3, which has a 6.55% interest rate. We’re throwing every extra dollar we have at the mortgage. Since we aren’t paying two mortgage payments, we have more than $1,300 extra each month to apply to the small house mortgage!
I know we aren’t adhering strictly to the debt avalanche principles, but the mortgage principal offsets that .05% interest rate difference. Consequently, we pay the standard monthly payment to Navient. Perhaps it goes without saying, but once we’re debt free, every extra dollar will go to eliminating those student loans.
We have a lofty goal to be debt free this year. We anticipate being free of our mortgage in October. Then, we’ll tackle those student loans! We’re hustling and working on Side Hustle to crush the remaining debt! Other than side hustling, we have many other strategies for cutting our expenses, rocking the frugality, and crushing our debt.
Housing & Utilities
- Eliminate streaming services, like
Huluand Netflix. (We eliminated Netflix, but we kept Hulu, for now.)
- Shop insurance policies for better rates before renewal at the end of June 2016. (This is my big project for June.)
- Monitor electricity usage seasonally to identify opportunities for improvement, phantom electric usage, etc. (We keep the air conditioning at 75 and turn on the TV only a couple of times per week, but this is still an area for continuous improvement.)
- Turn in electric smart cars at the end of their leases in December 2016. (This will dramatically reduce our electric bill and our insurance premium.)
- Continue excellent maintenance of aging Volvo.
- Cut our grocery spending to $500 per month. (Garrett tackles spending later this year, but signing up for a local CSA helped us reduce our spending.)
- Cut all extraneous food-related spending (i.e. convenience store stops and fast casual). (This happens when we travel–not working well for us at the moment, which represents a great opportunity for improvement.)
Kaizen, for the win!
- Analyze: We analyze our spending and our budget weekly (with respect to time and money).
- Identify: We find trends in the data to make improvements.
- Implement: We implement the small, but necessary changes.
- Learn: We continue to consume others’ blog posts, books and podcasts to find new ways to improve. (Return to step 1. Repeat.)
UPDATE: We’re completely, 100% debt free!