Tuesday, September 23, 2008

My Debt Reduction Strategy

Jim over at My Debt Blog asked me on one of my September updates what our strategy is going to be for paying our debt down.

Here is what I am currently thinking about:

The credit cards are getting absolutely pounded, and should be dealt with by Summer 2009.  That will leave student loans and two car payments.  One of the car payments is at 0% interest, so we are just going to let that one pay out as it will.  By August ‘09, I’ll have 3 years left on it.

The truck payment will be the lowest balance left, but the student loans will be the highest interest rate (and balance).  At this point, there may be a pregnancy involved, so our current plan is to just start piling up cash.  Once I get a good emergency fund going (somewhere around $12,000), I’ll probably re-assess where we are, and go from there.  One direction I’m considering is attacking the student loan after the credit cards and emergency fund, since it is the largest financial drain on our finances (interest-wise).

On the other hand, I could eliminate a car payment by paying off the truck, then drop the Comprehensive & Collision insurance I have to carry (or at least raise my deductible), and trim the amount of money going to insurance.  This will also allow us to add another $200 or so per month to our student loan reduction.

At that point, barring a change in living circumstances (no house, no pregnancy, no increase in rent), we will be able to lump over $900 per month against the student loans, paying them off in about a year and a half.  When the student loan is paid off, there will be an avalanche of less than 6 months, and we’ll be finally debt free…


  1. Our plan is no house, no baby until we are debt free because we dont want to get stressed with suppose to be " during happy events (baby, house)" I know being patient is difficult but it is worth it.

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  3. Sounds like a great plan to me. You guys are doing great paying off the credit card debt so quickly. A year and a half on the student loans will get rid of those quickly. We don't have car payments so it's hard for me to relate to that one. If you have a kid somewhere in the middle of paying off debt, it would be a good idea to stop and pile up cash, and then continue on later. It’s great to have a plan in place and a goal in mind.

  4. Ghastly student loans! That will be great to have them PIF! (can't wait for that day) You have great debt reduction plans. ;)