$37,000 Success: September Debt Reduction Progress

We did it! We’ve paid off $37,787 in debt in ten months. As I said last month, August was an awesome month for debt reduction. We eliminated one student loan and cut another one in half. Despite that, we thought we wouldn’t get the balanced paid off before the end of the year. Fortunately, luck was on our side in September.

Debt Reduction Progress in September

Done! On September 22, we paid off a grand total of $37,787 in debt. We were able to do this for two reasons:
1. We spent much less than we budgeted for travel in July and August, which meant we had an extra $1,000 to put towards debt.
2. A windfall came in two months early, which gave us another $2200 to apply to debt. All told, we paid off that last $4500 in student loans, as well as an extra $1,000 toward a small student loan we had scheduled to pay off in 2009.

The Ten Month Debt Plan

In order to achieve this goal, we had to dedicate ourselves to it. At first, my husband was hesitant, but he came on board once he saw the progress we were making. The progress was slow at first, but accelerated as our incomes rose and we received additional windfalls. This is our specific plan of attack:

1. List our debts by type, balance, and interest rate.
2. Rather than highest rate first, we started with credit cards first because student loans affect mortgage applications differently.
3. Next we tackled the medical loan, which appeared on his credit report as a student loan.
4. When those were gone, we moved onto two small, high-rate student loans.
5. To be able to put more money toward debt, we cut some expenses. My husband started taking his lunch to work more. We went out to dinner or the movies only rarely. We cut back the cable bill. I cancelled a couple subscriptions.
6. When the windfalls arrived, we had a plan in place so we weren’t tempted to do something else with the money.
7. We set a date and a number as our goal so we had a firm target, not an amorphous plan of “paying off debt.”

Certainly, we couldn’t have reached this goal unless we knew that at least two of the windfalls would arrive, but we didn’t know exactly how much they would be or when they would arrive. Even without them, we still would have paid off around $17,000 in debt. That’s no small feat indeed.

Debt Plan Update

Now that we’ve accomplished our goal three months ahead of the original schedule, we have to decide how to proceed. First, we’ll pay off the zero interest Goodyear card early to ensure that a shorter term charge doesn’t start collecting interest. Second, we’ll start saving the money toward year-end taxes. We plan to have my salary withheld in December to get ahead on the balance due. We also have to ensure that the money for our January credit card bills is saved up, since our December vacation charges will appear on that statement.

Progress on Other Goals

Our emergency pad has grown to $2,000 in anticipation of the taxes. We could move it into a savings account for two months, but it doesn’t seem worth the effort to earn a buck or two in interest.

Once we know the final total for our tax balance, we’ll then look to contributing to our Roth IRAs. The tentative plan is pay $500 a month toward the small student loan and $500 toward retirement. Any overages will be applied to the small student loan so that it’s eliminated before we apply for a mortgage. Every little bit helps.

The loathing we feel toward our apartment grows with each passing day. This month it experienced a huge surge when our upstairs neighbor got a drum set and formed a band. At this point, I expect that we’ll be leaping into housing market by late spring/early summer if only to save our sanity.

How’s your debt progress coming?

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