Comments on: Our next step…

By: Beks

Beks — Thu, 10 Sep 2009 03:27:56 +0000

Ann – Oh my goodness! I completely forgot! We write off that interest every year! I would have lost that write off. Thanks for the reminder!!!

By: Ann

Ann — Sun, 06 Sep 2009 15:26:25 +0000

You can also deduct student loan interest on your taxes, but there is no such benefit for an auto loan. The benefit to leaving student loans until the last debts to be paid off is that you can take advantage of that longer.

By: John

John — Sun, 06 Sep 2009 06:34:07 +0000

In response to Donna’s comment I can see how paying off the smaller debt first can have a psychological effect and motivate people to keep going. So if that’s what it takes to get someone motivated I say go for it otherwise, pay off the higher debt first. I also think the current economic situation is what it is because of the pyschological effect of everyone worrying they are going to lose their home or job and keeping people from spending money. Psychology can really effect people when it comes to money.

By: Nicole

Nicole — Sat, 05 Sep 2009 22:55:33 +0000

Good call! As long as the debt is going down, it will all come out in the wash:)

By: Donna

Donna — Sat, 05 Sep 2009 01:10:40 +0000

Emmi–because as Dave Ramsey likes to say if you were doing math, you wouldn’t be in debt in the first place! ;P He recommends paying off debts in order of smallest to largest because (especially in the beginning) when you SEE progress happening (by paying off that first debt) you want to keep going because you see it happening. This process is more about behavior than it is math. (so says Dave Ramsey).

By: Beks

Beks — Sat, 05 Sep 2009 00:02:57 +0000

Thanks for the encouragement!

John – We already rolled our credit card payment over to the truck. We have three years of payments left at the minimum payment. No credit card debt cut that by more than 2/3. Woo Hoo!

By: Chitown

Chitown — Fri, 04 Sep 2009 16:31:35 +0000

Congrats and Good Luck!!!

By: njsm

njsm — Fri, 04 Sep 2009 13:51:39 +0000

Not to mention… you actually get something out of the education from a student loan, where you can say that the education itself is an appreciating asset. The truck, on the other hand, is definitely a depreciating expense. Good idea to start working to get rid of that truck loan first. The less you owe on it, the better, since cars, trucks, etc.. get cheaper to operate the longer you own them as long, as you own it outright!

By: John

John — Fri, 04 Sep 2009 02:57:23 +0000

I believe you should pay off the higher interest loan first. Also, try and put the extra money you have now from no longer having credit card debt and put that towards the truck as well. You will be able to pay it off in less time. Then take the amount you were paying towards the credit cards and the truck and put it towards the student debt. You will really be cooking after that.

By: emmi

emmi — Thu, 03 Sep 2009 22:33:00 +0000

Doing highest interest first makes too much math sense to me too. In the end your debts will be gone sooner. Why pay more in interest total while doing it? That’s just odd.

By: John

John — Thu, 03 Sep 2009 21:01:14 +0000

I also like to think of debt reduction as it relates to quality of life, and stress levels.

By paying down the debt with the much higher monthly payment, you’ll knock that off the list, and more quickly loosen your monthly cashflow… to a larger degree that is.

When that money is freed up, I would imagine, a lot of your stress will be lifted over money… at that point, you’ll only have ~$8300 left on the student loan, and can pour ALL of your money toward that remaining account. I bet you can kill in in 5 months then! Easy.

Being in debt is a big stresser in our lives… reducing the stress is just as important as reducing the balances! Life is about living.

By: Cynthia

Cynthia — Thu, 03 Sep 2009 17:49:09 +0000

I would have done the exact same thing. In fact I did the interest order instead of balance order philosophy the whole time we were working our way out of debt. I’m a numbers girl though and had to do it that way, lest my head explode. Heh.

By: David@Dinks Finance

David@Dinks Finance — Thu, 03 Sep 2009 16:41:53 +0000

That’s a good idea. Student loans are the last debt you should be paying down. Get that truck paid off and you will feel even better about your financial situation!

By: Michelle

Michelle — Thu, 03 Sep 2009 15:32:54 +0000

You are making some great progress Beks! Congrats!

By: proverbslady

proverbslady — Thu, 03 Sep 2009 15:20:32 +0000

How exciting to have all your credit card debt gone! Paying off the truck in 10 months sounds amazing and I long for the day we can do that too!

By: fern

fern — Thu, 03 Sep 2009 14:56:34 +0000

sounds like you’ve thought it through. Makes sense to me!

By: creditcardfree

creditcardfree — Thu, 03 Sep 2009 14:00:14 +0000

Great plan! Keep moving forward.

By: Sallie's Niece

Sallie's Niece — Thu, 03 Sep 2009 14:00:02 +0000

Obviously paying the truck off next is the right way to go. Good luck!

By: Donna

Donna — Thu, 03 Sep 2009 13:03:44 +0000

Don’t you know you’ll get burned at the stake for doing the baby steps differently?! (kidding, of course!)

Get that truck paid off, you’ll feel a huge sense of relief when it’s done. Keep up the great work!

By: brooklynchick

brooklynchick — Thu, 03 Sep 2009 12:17:59 +0000

Sounds smart! Good luck!

By: a.nonymous

a.nonymous — Thu, 03 Sep 2009 10:44:58 +0000

I don’t think there’s anything wrong with changing the order as long as you are confident that you won’t stray from the path of getting out of debt.
Add your excellent arguments to that, and I’d be surprised if Dave would care to give you grief about not following his plan to the tee…

After all, Dave’s main aim is to keep morale and motivation high up there by knocking off smaller debts sooner to receive some positive feedback.
Especially for starters, the motivational issue is the big problem. Math is only a good (nay, better) guideline to go by if your motivation won’t drop off – in that case, even the best math skills wouldn’t help you get out of debt, after all.