Back in December 2015 we hit a big milestone. We had officially paid $50,000 toward debt!!!
What a huge thing! Just thinking about paying $50,000 toward debt in two years (a rate of $25,000/year – nearly half our annual income when we first started blogging!) is mind-blowing.
And just last month we hit another big milestone. One that I have mixed feelings about.
We have now decreased our debt by $50,000.
When we hit the first $50,000 milestone, that was money that we’d paid toward debt. But, obviously, most of our debts have interest attached to them. So just because we paid $50,000 toward debt didn’t mean we’d actually decreased our debt by that amount because a good chunk of our money was going toward interest on the debt.
It took another FOUR MONTHS to finally decrease our debt by the same $50,000 that we’d celebrated back in December.
It makes me sick to look at the size of our student loan debt and realize how much we’ve paid that has only gone toward interest. Nothing toward any principal reduction at all. And to see the calculations that say “if you pay the minimum payment, by X time you’ll have paid X amount.” You all know what I’m talking about. Credit card statements have the same statement on them. So you’re looking at your current debt number, but then you see that if you only pay the minimum that in the end you’ll end up paying MUCH more than the original debt amount. After all the interest is included, it can be close to paying 2X! Two times as much as the initial debt!
I had a couple people comment on nearing the $50,000 debt reduction mark and ask whether I was excited.
Yes, of course I am! That’s a huge reduction in debt!
But I have mixed feelings. It’s also a little kick to the gut. Knowing we’d paid $50,000 back in December, but our debt numbers didn’t actually reflect a $50,000 decrease until 4 months later. Four long, grueling months of making major debt payments. All of which was consumed by interest. Boo!
It’s a valuable lesson, though. The debtor is a slave to the lender. Another reason to never, ever go into debt again (*ahem* except for a mortgage).
When you think about debt payoff, do you tend to think in terms of dollars toward it (including paying interest), or in actual amount of debt reduction? I report both in my monthly debt updates, but I tend to think more in terms of dollars spent toward debt (including interest). It sucks that there’s such a lag behind dollars spent & dollars in debt reduction.