Month 1 Goal Exceeded

I am happy to announce that Mr. Debt Albatross and I exceeded the $8,800 payoff goal that we set for our first month.  In total, we paid $9,405 towards our debt!

What helped us:

  • A nice tax return
  • Keeping to our $110/week grocery budget
  • The pup getting kicked out of doggy day care (poor pup!)
  • Filling up our cars at the same time so we can both use our acquired fuel points
  • Self control

What hurt us:

  • The $675 vehicle registration fee for the new car I bought last year
  • A $68 interest charge on my credit card and the $63 I spent on tax filing
  • The $113 bi-weekly charge for home cleaning services
  • Our restaurant spending

We decreased our total spending from previous months but we still haven’t cut spending enough to meet our year-end goal.  We still spend an exuberant amount of money on bills and utilities and we haven’t cut out some unnecessary luxuries including restaurants and home cleaning services. We did use gift cards when we went out to eat but that didn’t cut out the cost completely.

Month 1 Spending
Home $3,303.28
Auto & Transport $1,279.68
Food & Dining $652.18
Bills & Utilities $582.36
Pets $171.11
Fees & Charges $68.34
Taxes $62.60
Shopping $41.00
Personal Care $21.50
Other $377.00

Although we are not “hardcore” yet, we did change our mindset which in itself is encouraging.  On a few occasions, we turned down plans with friends or suggested less costly alternatives. We stopped ourselves from buying some unnecessary items.  We made dinner every week night and I stopped buying lunch at work, introducing major cost savings but also improving our health and nutrition. Overall, it was a successful first month. It’s inspiring to see our total debt go down and encouraging to know that we are nearly 10% closer to our goal.

Taxes, Hooray!

Mr Debt Albatross and I need to pay off over $8 grand of debt each month in order to meet our payoff goal. We’re on track to meet this month’s goal due to a hefty tax refund. Since our lives became more complicated in the past year (bought a home, started grad school, etc.), it took us three days to finish filing our taxes. Thank you, Google.  The following is what we learned in the process:

  • When you own a home with someone as Joint Tenants, you can each deduct the portion of the mortgage interest you paid.  Alternatively, you can have one person deduct all of the mortgage interest.  It may make more sense to have the person in the highest tax bracket deduct all of the mortgage interest.
  • In addition to mortgage interest, you can deduct private mortgage insurance (PMI) payments if you have them, loan origination points, and property taxes.  The PMI deduction phases out after you reach $100 grand in income. It also doesn’t matter if you paid the points or the seller.
  • You can compare the tax form you receive from your lender with the HUD form you receive at closing to ensure you’re deducting the maximum amount possible.  We found some discrepancies and were able to deduct more by using the amount on the HUD form.
  • If you don’t take the standard deduction, you can itemize.  First time itemizers like us will wish that they had categorized their expenses throughout the year. It was tedious searching through emails, bank accounts, and Mint to find tuition payments and donation receipts. Although I didn’t mind hunting for more money.
  • Education credits, tuition and student loan interest deductions phase out after $60 grand in income.
  • If your employer reimbursed you for part or all of your tuition, it can be complicated to figure out what to report. I googled this topic significantly. You need to determine if the reimbursed amount was included in your W2, if it was over the $5250 you can receive tax free, or if it was a working condition fringe benefit. Additionally, you can only deduct the dollars you actually paid, not any dollars reimbursed by your employer.
  • If filing taxes online, search for coupon codes. We received 20% off due to a promotion we found on Retailmenot. If you are under a certain income limit and filing a basic return, you can likely file for free through some of the major tax sites.

Our federal refund is currently pending. It took less than a week from filing to receive the refund. We’re still waiting to hear on the state refund. I’ve already scheduled a credit card payment for Monday. Can’t wait to see that balance go down!

A Tale of 8 Student Loans

I did the math this morning and it’s depressing.  Mr Debt Albatross and I have been paying our student loans for years and have made very little progress on the principal balance.  I feel like we’re trapped in a 5th grade math problem.  A frog falls into a well with a ladder.  He can climb two rungs every day but then must drop back one rung.  How long will it take him to get out of the well?

 

Mr Debt Albatross graduated in May of 2008.  Six-and-a-half years later, he has only paid $2,128 towards the principal balance.

 

Loan Rate Original Current Paid
1 4.17% $30,593 $32,610 -$2,017
2 6.55% $3,500 $1,784 $1,716
3 6.55% $5,500 $3,071 $2,429
$39,593 $37,465 $2,128

 

I graduated in May of 2011.  Three-and-a-half years later, I have paid $5,803 towards the principal balance.

 

Loan Rate Original Current Paid
1 6.80% $5,491 $4,415 $1,076
2 6.80% $6,500 $5,391 $1,109
3 6.80% $7,500 $6,437 $1,063
4 4.50% $2,009 $1,454 $555
5 4.50% $2,000 $0 $2,000
$23,500 $17,697 $5,803

 

Depressing.  We’ve never missed a payment and we’ve gotten nowhere.

 

The Game Plan:

1.  My loans automatically went into deferment when I started grad school last year.  I logged in to my accounts one day and noticed that my status had changed automatically.  I never notified my loan servicer that I was back in school,  it just happened.  I’m guessing that the school sends out the notification.  At the time, I was relieved to be rid of the monthly payment but I realize now it’s a bad thing.  Due to the deferment, I am losing out on the .25% interest rate deduction, making no progress on the balance, and racking up major interest. (3 out of my 4 remaining loans are unsubsidized. My one subsidized loan went to 0 interest during deferment but its also my smallest loan so its not worth staying in this status). Mr Debt Albatross’s loans went into deferment during grad school which is one of the reasons why he has made little progress on his loans.  Deferment makes no sense for me right now.  Time to change my status back.

2.  Pay off the minimums until our high interest credit card debt is gone.  As much as the loan interest is a bummer, it’s nothing compared to the APRs on our credit cards.  We need to get rid of that credit card debt first.

3.  Attack the loans with everything we have.  My car loan and our 0% interest store credit cards take a backseat.  Bye bye, loans!