As I said last month, was an awesome month for debt reduction. We met our goal two months early, and now we’re pushing on to drive down more debts.

Debt Reduction Progress in October
We reached our primary goal of paying off $38,567 in debt on September 22, then we couldn’t decide what else to do. At this point, our cash cushion has ballooned, although we have to use some of that for taxes. Now that he’s gotten into this whole idea of paying off debt, my husband went ahead and paid another $1,000 toward the small student loan we had slated for an early 2009 pay-off. We’d like to pay it off before we buy a house because it reduces our debt-to-income ratio another $78 a month.

Financial Plan Update
Even without my December paychecks, we’ll be on track to cover the remaining tax balance and our vacation debts. Depending on the final balance of our cash cushion, we may open a savings account or leave it in the checking account as a cushion.

We’ve also decided it’s time to update our annual budget – which is really just a summary of expected monthly costs. But we have a conundrum – how do we calculate the gas costs? We typically average expenses over the last six months, but gas prices have been all over the place the last six months. We could do three months average for gas prices, but which three months? On top of that, we had a lot of travel this summer, some of it driving, so expenses were higher than average anyway. We may just use the summer anyway, because we’d rather over-budget for gas than underestimate the cost.

Progress on Other Goals
Our emergency pad has grown to $6,000 in anticipation of the taxes and vacation.

We’ve discussed the plan to open Roth IRAs in January. We can’t open them now because we’re not sure whether the windfalls have pushed our AGI over the limit for this year. As soon as the IRS releases the draft 1040, I’ll have a better idea of whether we can start funding it for 2008, or designate those payments for 2009.

We’re also arguing about when to buy a house. I’m looking at late summer. My husband is looking at early spring, mostly because he’s sick of listening to me fuss about our blasted kitchen, the horrible stove, the leaking ceiling, and the drumming neighbors.

How’s your debt progress coming? Share your successes and roadblocks in the comments.

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