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2015 Financial Planning & Goals

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Warning: This post is a bit of a doozy! Reminds me of when I first started blogging and would basically write a novel for each post! But everything is related so instead of breaking it up into separate smaller-sized posts you’ve got one monster post to contend with. Maybe make yourself a cup of coffee and settle in with a little snack. This is gonna take awhile!

One of the things I did over my winter blogging break was to analyze my 2014 spending and do some planning for 2015 budgeting and savings needs. I’m trying to shake up my budget categories a bit for 2015. For one, I want to do away with my “miscellaneous” budget all together. I want everything categorized. This will make it infinitely easier in future months/years to look back and easily see exactly where my money has gone (as opposed to this year…where I had to look at each month’s spending individually and start to categorize things on my own).

 

Basically, I wanted to see where this “miscellaneous” money was going and see if I could plan and budget for it. In addition to my normal budget categories (see latest budget here), here are some new categories I’ve come up with:

  • Gift-giving. I’ve greatly reduced the amount I’ve been spending on gifts since starting to blog here at BAD, but it’s not down to zero! This needs its own category.
  • House maintenance. Looking at the past year, this is mostly gardening-related stuff (some tools, plants, mulch), but it also includes things like light bulbs and cleaning supplies. There’s nothing too major cost-wise, but still enough random miscellaneous expenses to justify its own category.
  • Phone/Computer Items and Repairs. I broke my phone twice this year. I now have a serious heavy-duty case on it, but should the unthinkable happen again (fingers crossed), I decided to make this it’s own budgeted category. In addition to phone repairs, this year I had to buy a new charger for my computer and an external hard drive to back up my work, so expenses like that fall into this category as well.
  • Holiday expenses. Non gift-giving holiday related expenses. Things like Halloween costumes, 4th of July sparklers, and holiday decorations. This was also a relatively small category of spending.
  • Clothing purchases. I’ve actually successfully avoided the clothing-shopping bug this holiday season. I’ve mentioned before I’m not a big shopper in general, but I usually have one or two big shopping splurges a year where I’ll spend over $100+. This year I’ve done really well with making do with what I have and only filling in with absolute necessities (like when I had to buy a new pair of pants when my old ones had already been mended twice and were falling apart). Again – a small category in terms of money spent.
  • Work-Related. This was primarily for parking-related expenses when I would drive to campus for meetings. I haven’t been going to campus as regularly in recent months so some of these expenses have fallen away, but this also includes anything specifically work-related (e.g., licensing for special data analytic software, printer paper, ink cartridges, etc.)
  • One-Time Expenses. This was a tiny, tiny category but there were still a couple random things that came up that don’t fall within any other category. I’m calling them one-time expenses.

Please note, I will certainly NOT be spending money in each of these categories every month! For instance, I only spent money on work-related purchases 6 months out of this past year; only spent money on holiday expenses 3 months out of the past year, etc. But these will be categories that may pop up from time to time along with my regular budget categories, depending on what that month demands. Instead of having such a rigid, set number of budget categories, my new 2015 budget will be more fluid depending on that specific month’s needs. I think this will be a much better system overall.

What Else is Changing?

I did a careful analysis of all my monthly savings categories. It’s obvious that we were not budgeting enough toward dental and car maintenance, for instance. By tallying up our actual expenses for the full year, I was able to get a better picture of our real needs in these areas. Let me address each one individually:

 

Current

Saved

New

Plan

Explanation

Annual Expenses $100/mo $100/mo This is a perfect amount. It covers annual life insurance premium, car registrations, and Costco membership. It actually also left us a little bit extra leftover, but I’m not reducing the monthly amount saved because we’ll be adding life insurance for hubs soon, too.
Car Maintenance $100/mo $200/mo My calculations actually amounted to only $166/month needed for vehicle repairs, but I’m rounding up to $200/month because I know we will be needing to replace husband’s work truck at some point (probably this year), so I want to save a little extra. This will amount to $2400 saved for the year. Note that when we come up with an exact time frame to buy a new (new-to-us) work truck, this figure may need to be bumped up for a few months.
Dental/Vision/Health $125/mo $125+ ??? Our actual costs here would amount to needing $3651 for the year (just over $300/month). BUT, we’re going to purchase a dental discount plan in January and will see how much it will save us. Husband is going to go get a full exam and see exactly how much dental work he is quoted. I think we’ve covered the “big” stuff at this point (fingers crossed) and, in the meantime we’ll continue saving $125/month, but will adjust this number depending on his dental appointment with an in-network dentist.
Christmas/Travel $25/mo $25/mo Of course, this doesn’t fully cover our travel and/or Christmas-related expenses, but it was never intended to fully cover those costs. It does what it needs to do, which is to off-set some of the costs incurred. Any extra money needed will come from that month’s budget.
3-6 Months Expenses $25/mo $25/mo Ugh! Still owe you guys a post about the emergency fund. Right now, though, the amount being contributed will remain the same on a monthly basis.
Dog Expenses $10/mo $500/year Previously, I was only saving for potential vet expenses. I’m changing this category to cover food costs for the full year (about $50 every other month), plus the pet registration required by our county, and a couple hundred dollar buffer for potential vet expenses. I’ll likely fully fund this savings in January and just draw from it all year long.
Girls’ Birthday $10/mo $10/mo Staying the same
2014 Roth IRA $100/mo $100/mo Staying the same
TOTAL $495/mo  

$585/mo

 

(+ one-time $500 expense from the dog expenses category)

 

This brings me to…

My 2015 Financial Goals

In 2014 I paid monthly debt payments that equaled $25,091!!! This is actually a conservative number because it only includes the planned debt payments. Remember that before I was living on last month’s income I would often make debt payments bi-monthly: once was the planned debt payment (which this figure represents), and then I’d make a second payment at the end of the month with any extra “surplus” money from the month. (Side note for new readers: I did this because we have a variable income so I made conservative debt payments initially, then when I figured out exactly how much income we had for the month, I’d put any money leftover toward debt. Now that I live on last month’s income I know exactly how much money we have at the beginning of the month and, thus, have eliminated the need for any extra payments because I do a zero-based budget so there is no money leftover at the end of the month).

So my goal for 2015 is to pay at least $30,000 toward debt payments.

Whoa. That’s a big, huge number. $30,000 is a full annual salary for many people! To say we’ll put that much toward debt is certainly a lofty goal. But you have to shoot for the moon, right? ; )

What debts do I plan to eradicate from our lives with that $30,000???

Well, some of the money will be going toward minimum payments for all of our debts and interest, of course. But with extra debt money I plan to eliminate the license fees, car loan, and highest interest unsubsidized student loan. Then our only debts remaining will be medical bills and additional student loans. Don’t get me wrong – we’ll still have a ton of debt (I have almost $100,000 in student loans, alone), but it will feel so good to knock out some of these smaller debts in their entirety! So, so good, indeed.

How Will I Do This?

I’m a firm believer that all goals require careful and strategic planning. If you just pull a goal out of the air its really more of a hope or a dream. Goals, in my opinion, require more careful calculation than that.

So it might surprise you that my answer to this question (How Will I Do It?) is….”Who Knows!?” ; )

This year could potentially be full of many big changes. If I land a job here in Tucson then my salary will double and we won’t have any moving costs. Win! If I land a job elsewhere then my salary will more than double, but we lose husband’s salary and incur moving expenses. If I don’t land a job then I keep making what I’m currently making, try to find additional work, and husband focuses on building his business. Oh yeah, and I’d love to start saving for a house down payment at some point (once we know where we’ll be)! There are so many unknowns!

What I do know is that I want to keep working as hard as I can on reducing our debt. BUT, that being said, I do still plan to let up a little steam (just a teeny, tiny bit) in March 2015. Remember this whole post about finding balance??? It still stands. I don’t think I’ll give up the blogging (I love it and you guys too much), but don’t be surprised if you see a “date night” pop up in the budget every other month or so. That’s a big expense that we’ve done without for the majority of this past year (honestly, for the majority of the last 2.5 years since we had kids!!!). But I also think it’s important to nurture our relationship and while our kids have been infants/toddlers our marriage has taken a bit of a back seat. Don’t get me wrong – there’s no trouble in paradise or anything like that!!! But I think it’s time to make dating my husband and nurturing our relationship more of a priority in our lives. And even if we do so cheaply, it still costs money.

I’ve got one more curve-ball….

I’ve spoken before about retirement savings and how we’d like to start funding a Roth IRA. Although our contributions for 2014 are pretty measly, I’ve been talking more to hubs about it and we’ve come to an agreement about the matter. Once the highest interest student loan and license fees are paid in full, I want to bump up our Roth IRA contributions. Ideally, I’d like to work toward having fully funded Roths for both hubs and myself. We haven’t committed to an exact number yet at this point, so it may be that we double our current savings (go up to $200/month) or triple them (up to $300/month), or we could even aim to have fully funded Roths (about $458/month x 2, for each of us). We’re not there yet so I’m not sure how comfortable I’d be with saving that much while our existing debt is still incurring so much interest. It’s something we’ll think about more moving forward (and feel free to weigh in on the topic). But just let it be known – once these two fees are paid in full (license fees and highest interest unsubsidized student loan), our Roth contributions will be increased…while still trying to hit the $30,000 mark for debt payments this year.

So cross your fingers for us or wish us luck (or call us crazy).

No matter what 2015 holds in store, I feel like it will be a very good year!

What are your financial plans for 2015? Any big budget changes? Any lofty financial goals? What do you think of our goals and plans?


Consolidation Station???

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The title of this post has nothing to do with anything, except it reminded me of the lyrics “conjunction junction, what’s your function” (from the School House Rock theme song).

This is a quickie post, but something that may solve some of the high student loan APR issues that I’ve been talking about recently (see discussion here, see list of debts and APRs here).

Any readers consolidate their student loans?

Have good experiences? Bad experiences? What are your thoughts??

I’ve heard that you can only consolidate a single time, but that would be okay with me. My credit has vastly improved across the last year as I’ve paid down my debts so I think I’d qualify for a lower APR. I don’t know the ins-and-outs. Would this impact my income-based repayment? Can I consolidate through the same company I already have or do I have to use some outside company? How does all this work???

For the record, IF (big if) this happens, I would absolutely 100% only do this in order to lower my APRs. I would not start spending money elsewhere or think this means I can pay less toward my student loans. It’s strictly an interest rate thing.

Thoughts? Experiences? Advice?

I assume I’d need to start by calling and speaking to a representative at one of my loan companies (I have two companies:  Navient and ACS). Before I even take that next step I’d just like to poll the audience (YOU!!) and get your opinions on the matter.

Thanks in advance!!!


Double-Charged

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I mentioned that last month was the first month of my IBR payment for my ACS student loan, but this month (August) would be the first month of payment for my Sallie Mae loan. When I looked online at the beginning of the month, it said I’d been approved for IBR (income-based repayment), but still showed my loan status as in deferment. I called to get it straightened out since I wanted to go ahead and start the IBR program immediately. The representative I spoke with switched “off” my deferment so my payment would be due this month (as I’d wanted). I asked if I could go online and enroll in the auto-pay program (if you enroll, they offer .25% off the APR). The representative said I could do so, but it would be too late for this month and wouldn’t go into effect until September so I would still need to make my normal payment online and the auto-pay would begin the following month.

Sounds great!

So I did just as I was instructed. I signed up for auto-pay which did, indeed, say the processing took several days. As my due date was imminent, I also made a one-time payment for my August IBR payment.

A few days pass. And then Sallie Mae auto-deducts $250 (my IBR payment) from my checking account. In other words…I got double charged.

Fortunately, since we’re living on last month’s income we had enough funds in my checking account that this wasn’t a problem in terms of causing us to overdraft or anything. However, this means that instead of the normal $250 payment, I paid TWO $250 payments this month (= $500!!)

What would you do?

I was hoping to have about $250 leftover at the end of the month, which I would have applied as an additional debt payment anyway….but I would have applied it toward the car, NOT the student loans. Is it worth the time, effort, and hassle to call Sallie Mae, argue with them, and try to get reimbursed for the charge (which will probably take a week to straighten out and an additional 2 weeks to get a check in the mail…just in time for me to turn around and have to give it back to them for my September payment).

If I didn’t have the money I would certainly call and argue over it. But we are fortunate to have the extra money at this point and would have used it toward debt anyway. Soooo, do you just live with the double-charge knowing that at least you’re making progress on your debt? Or do you fight it out?

Either way, at least the money is going toward some form of debt payment but its frustrating when things like this happen. I’m already pressed for time in my life, I hate when things like this pop up that require more time and attention.


Ashley’s August Debt Update

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It’s been awhile since my last debt update! (See previous from 1.5 months ago here)

Updating all the numbers really makes me feel at peace with my decision to switch my student loans from deferment into income based repayment (IBR). We’ve been putting so much money toward debt, and yet the overall figure of money owed has barely dented because the student loan balances have been continuing to rise (since they continue accumulating interest). My ACS loan IBR went into effect in July, but August will be the first month of IBR for my Sallie Mae loans. So hopefully this will put an end to the climbing balances since unpaid interest will be forgiven (on the subsidized loans).

With that said, let’s look at my big debt picture. Note that the balances reflect the amount owed at the end of July/beginning of August (after July payments had been made, before any August payments have been made).

PlaceCurrent BalanceAPRMinimum DueJuly Payment Made 
Capital One CC$017.9%--
Mattress Firm$00%--
Wells Fargo CC$013.65%--
BoA CC$07.24%--
License Fees$40152.7%551069
PenFed Car Loan$223772.49%411411
Sallie Mae - Federal Student Loans$44598.25%6262
Sallie Mae - Dept of Ed$56668.5%00
ACS Student Loans$211647.24%246247
Sallie Mae - Dept of Ed$661147%00
Medical Bills$69310%150150
Totals$1307269241939

*Note: The “July payment made” in the license fee category only reflects the regular snowball payment for July. An additional $500 was put toward license fees from June’s surplus funds that are not included in the monthly payment figure.

I asked for your feedback regarding focusing my snowball toward my car loan (what I’m calling my “race to 20K“) or my higher-interest Sallie Mae student loans. Although there were advocates of each, I think most people were advocates of focusing on the student loan debt first. However, ALL said that whatever I decide to focus on (either the car or the student loans), that I should not split my causes (and try to pay money toward each). Everyone was pretty much in agreement that I should pay minimums of whatever is the non-focus and put all extra money toward the one current priority.

I think I still prefer to pay the car off first (and be free of consumer debt forever!!!!!!!). I mentioned that I have been making minimum payments toward 3 different medical entities for bills incurred during my husband’s mystery illness (from back in Nov-Dec 2013 timeframe). Two should be paid in full within about another 4-ish months and will free up $150 in payments. Instead of snowballing that toward the car, I may move that money toward the student loans. That way I’m not putting extra money toward the student loans, but its like I’m just moving my minimum payment from one entity to another. I’m not married to this idea, but its something I’ve been batting around.

But before I can turn my attention to the next debt down the list (either the car or the student loans), we first have to eradicate the license fees. Husband and I are having a budget meeting tonight to see where we’re at financially after such a painfully expensive month of July. I plan to have a budget update up by Monday.

Hope you all have a great weekend!

Let me know what you think if you haven’t chimed in yet – focus on student loans or on the car? I keep going back-and-forth (obviously), but I’m still leaning toward tackling the car. I know its a higher amount and lower APR, but it just feels like something tangible that, once paid, we can say is OURS (as opposed to student loans….which I pay and feel like nothing has changed since I’ve got my degree either way). I think the psychological boost of crossing another debt off the list is nice, but I also think the car is a much more rewarding goal. Decisions, decisions…

 


Ashley’s Financial Goals

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With all my making and changing goals, I wanted to give a quick re-cap of my current financial plan of action (see last full plan of action post here, and an update with details about my race to 20K here).

So here are my current goals, in order of priority:

  1. License fees. We still owe approximately $4,000. The original goal was to try to have it paid off by August 2014. I’m still holding onto hope that this could happen, particularly if we reduce our checking account buffer. (Goal date = August 2014)
  2. Car loan. This is my officially named “Race to 20K” since we owe a little over $20,000 on the car still. My goal is to pay approximately $3,000/month toward the car after the license is paid in full, which would take about 7 months after it becomes the focus (Goal date = March 2015)
  3. Sallie Mae 8.5% and 8.25% student loans. About $5,000 is owed toward each of these loans. Since I’m starting to make payments toward my student loans now (the ACS student loans started this month and Sallie Mae repayments start in August), I’m hoping I can actually have these loan paid off while I’m working on my race to 20K. I don’t know what the “rules” are with income-based-repayment, in terms of if I can choose where the money goes (e.g., focus it on one loan, or if its equally dispersed across all loans). My guess is the latter (equal dispersement), but I’m still hoping to add a little extra money here and there and chip away at these higher interest rate loans concurrently with my race to 20K goal. (Goal date = ???)
  4. ACS and remaining Sallie Mae student loans. These loans have a lower APR than the above loans, and they also have much higher balances (ACS was a single loan for over $20,000 for example). So they get prioritized slightly below the higher interest/lower balance loans above. (Goal date = ???)
  5. Remaining medical bills. I have diligently been making our monthly payments (remember, I have monthly payments to 3 different entities), and have realized that 2 out of the 3 will be paid off in just a matter of months. Once paid in full, I plan to snowball those funds toward whatever debt I’m focusing on at the time (likely the Race to 20K). My guess is that by the time we get down to paying off the remaining medical bills, only a single bill will remain and it will hopefully have shrunk down to only a few thousand by that point. (Goal date = ???)

So that’s my thinking.

One question – what would you do about the higher-interest student loans (item #3)? Would you put any extra toward those loans while still working on the Race to 20K or do you think I should focus exclusively on the car loan race? I know Ramsey suggests one thing at a time (focused attention), but those interest rates are pretty high for student loans and the balances are low enough that I’d like to still chip away at them here and there….still putting the majority of our funds toward the car, but maybe an extra $50 or $100/month toward the student loans, if we have extra funds available???

Thoughts? Opinions?

Also – a quick update…. I got notice that my Skype interview is going to be TOMORROW! Eeek!!! I’ll probably peek in tomorrow afternoon to let you know how it went. In the mean time, fingers crossed!!!


Ashley’s June Debt Update

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Happy Monday! How about a little mid-month debt update, shall we?

I’ve listed things in order of our planned repayment schedule (according to my new plan of action):

PlaceCurrent BalanceAPRMinimum DueJune Payment Made 
Capital One CC$017.9%--
Wells Fargo CC$013.65%--
BoA CC$07.24%351005
License Fees$55432.7%5585
Sallie Mae - Federal Student Loans$44748.25%6262
Sallie Mae - Dept of Ed$55788.5%00
PenFed Car Loan$227422.49%411411
ACS Student Loans$213887.24%2525
Sallie Mae - Dept of Ed$652367%00
Medical Bills$81030%150150
Totals$1330647381738

I’ve been snowballing payments as I go and the snowball has reached a pretty good size!

$450 (from Capital One CC)

$350 (from WF CC)

$100 (from Mattress Firm account)

$60 (from refinancing the car, which now has a lower payment)

$35 (from Wells Fargo)

= Total “Snowball” payment of $995 (we’ll round up to $1,000/month)

The first debt I want to focus on is the license fees. We have been paying $55/month toward it, so our payments starting in July will be $1055. In addition to that, we’re still expecting to have “leftover” money at the end of June so hopefully we’ll be able to make additional snowflake payments in addition to putting some away for savings (an as-of-yet undetermined amount).

Per this conversation, we’re going to start stashing a little money aside, using leftover funds from the end of the month (as opposed to writing a line-item into the budget). At this point, I’m just going to store it in my Capital One 360 savings account. I want some time to do a little research into various options, but my intent is to open a Roth IRA at some point and begin planning for retirement. I want to gain a little better traction on our current debts right now, but I don’t want to put the Roth off too long either. So at some point retirement will, indeed, become a line item in our budget. Currently, we’ll just keep stashing a little here and there into our CapOne360 savings.

Also – and this is random – but on Sallie Mae’s website I decided to click on the “payment history” tab to see more info about my 8.25% APR student loan. I have always only looked at the overall number (total debt due), but when I clicked on payment history it tells you, broken down, how much of your monthly payments are going toward principle (principal?)  versus interest. Can I say how disgusted I was to see that out of every $62 payment, approximately $32 went to principle….the other $30 toward interest?!? WTF? How is this even possible? I know they stack the interest up-front so I’m sure it all makes sense numbers-wise, but that feels like a 50% APR!? Disgusting. I cannot wait to target those two high interest student loan debts. Can you believe – when I’ve worked my way through them (and am down the list to the car in terms of the order of repayment), my monthly snowball payment for the car will be over $1500!?! The power of the snowball is real, my friends! Very, very real! Never did I ever think I’d be making regular monthly car payments of $1500!!! At that rate (along with an extra snowflake payment here and there), it really is reasonable to have it paid in full within a year from the time we start focusing on it for debt repayment (remember, that’s the goal….I plan to start focusing on the car debt in February 2015 and the goal is to have it paid in full by February 2016). Of course, my other loans come out of deferment in February so we’ll see what happens. If we can’t make all the minimum payments the funds for the minimum obligations will have to come from our snowball. : (

I don’t want to see that happen. I want these debts gone with a  quickness! I know we still have an unfathomable amount of debt, overall, but it really feels like we’ve been making great progress. It’s very encouraging!

 

 

 


What’s Next?

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Did you catch the big news that we are credit card debt-free????

A couple of commenters asked the same question: What’s Next?

I have struggled with this and gone back-and-forth with the various options about a dozen times.

Even though I had committed to a plan of action, I really secretly wish I could target the car next and have no more “consumer” debts (though still plenty of student loans and other debts). But after talking to the husband, I think we’ve made some decisions.

First, we are not going to focus on the car yet. It’s just too scary. My student loan deferment ends in February and I don’t want to get stuck in a situation where our minimum obligations are so high that we can’t make them (which would force me to go into forbearance on my loans or get a deferment extension…neither of which I would like to do). Also, there is a huge difference in interest rates. My highest APR debt right now is for 2 of my student loans (at 8.5% and 8.25% respectively), versus the car that is only at 2.49% after I refinanced. We are still going to make the car priority over the student loans, in general (and will have it paid off well before the student loans are paid in full), but I want to knock out these two high-interest student loans to lower my monthly payment so, once deferment ends, we’ll be looking at a more reasonable payment. Additionally, the car loan is still pretty large (over $22,000) compared to the two smaller student loans (about $5,000 each), so I think I’ll benefit from the psychological “boost” of paying off another couple of smaller debts more quickly than I’d be able to pay off the car.

Second, husband wants to bump the license fees up our priority list. This is one of our lower “APR” debts (no actual APR, but small service fees that amount to 2.7% each transaction). I definitely support this and wanting to put that part of our lives behind us (more information in this post). It’s time to close that door.

Just FYI – I plan to do another debt update on Monday to give you more specifics on where we stand with everything (last debt update here).

Given all this, the new plan of action is as follows:

  1. License fees (goal date = August 2014)
  2. Sallie Mae 8.25% student loan (goal date = October 2014)
  3. Sallie Mae 8.5% student loan (goal date = December 2014)
  4. Car loan (now through PenFed; goal date = January 2016)
  5. Remaining student loans (will reassess in January 2015 to determine goal date)
  6. Remaining medial bills (will reassess in January 2015 to determine goal date).

If you read my old “plan of action” post (or even if you didn’t), you may be wondering why I have the 8.25% student loan prioritized above the 8.5% student loan (given that the two loans are comparably priced – about $5,000 each).

The reason is that the 8.25% student loan is a rare loan that is NOT in deferment. That means I’ve been making minimum payments toward it this whole time. I want to knock it out first so I can snowball those payments toward the next loan. If I were to focus on the higher interest loan first, its about the same amount so would be knocked out in about the same period of time, but I like the idea of having that monthly payment be added to my debt snowball (whereas, there is no current monthly payment on the 8.5% loan, so nothing to add to the snowball).

So that’s what I’m thinking in terms of our current plan of action, and an answer to the question “What’s next?”

However, I should caution that this is obviously subject to change. It seems that we keep changing our minds as things change (like when I prioritized my Bank of America credit card above the higher interest student loan, so I could have the psychological benefit of being credit card debt-free). So, we’ll see what happens but I feel pretty good about this plan.

What do you think? Would you change up the order of repayment?

Again – I’ll have a full debt update on Monday with fresh numbers but if you want rough estimates of debts you can check out this post from about a month ago.