After much deliberation, we have determined our family Debt Eradication plan for 2015. Here are our goals!
We are aiming to do the following by the end of December 2015:
- Put a scheduled $8316 extra towards our student loans (in addition to our minimum monthly payment of $506).
- This will require putting aside $756 a month to accomplish this, starting in February.
- This number was generated by developing our 2015 budget, and we think this is the most we can put aside a month to focus on Debt Eradication (in addition to minimum payments).
- We can’t start in January, because we need one more month of saving for our Travel Fund.
- Split tax refund 60%, 30%, 10%.
- 60% – Student Loan Debt
- 30% – Savings (Extra into sinking fund, IRA, travel fund, house fund, wherever we decide it is most needed)
- 10% – Fun money! (Going out to dinner to celebrate birthdays?)
- Pay an additional $3150 to our student loan debt, beginning in June or July 2015.
- This refers to the $450 we pay on the Citibank card. It will be paid off in June 2015. If we can manage an extra big payment in May, then we can start paying that money to our student loans. If we can’t do the big extra payment, then we will have to wait until July to start the additional payments.
- Snowflake at LEAST $600 ($50/month) extra towards our Student Loan Debt Eradication fund.
- In 2014, we snowflaked over $3000 to Debt Eradication and savings, so hopefully this goal is set low enough that we should clear it easily. (Some of the things we were able to accomplish last year in terms of snowflaking might not be in the cards for us this year, so I prefer to keep this number low.)
- This will also include any leftover money in budgeted categories to the Student Loan Debt Eradication fund.
Of course, these are all just parts of the same goal, which is basically:
Decrease our Student Loan balance by $18,138.
It breaks down this way:
- $6072 – minimum monthly payments
- $8316 – extra payments of about $756 a month
- $3150 – snowballing payments for the Citibank card (which will be paid off in the summer)
- $600 – extra snowflaked money
Considering we decreased our debt by over $20,000 last year, I have high hopes that we can do even better. I haven’t estimated our tax return, so I didn’t even try to include that.
At this rate, according to my Debt Optimizer (from Vertex42.com), we will be on our way to having our loans paid off by January 2018. That’s about three years of serious Debt Eradication. This comes at the expense of saving for trips (after our trip to France, coming up in July 2015), retirement, or other fun things. Because of this, I am only focusing hard on the 2015 goals, as other things may come up in the future. I’d like to visit friends for long weekends (not as expensive as an overseas trip, for sure) and we may have changing goals. But it would be great to knock out that debt before January 2018… and I hope we can, with the application of our tax refunds over the next couple of years.
- As I have stated before, Sallie Mae / Navient makes it extremely hard to make extra payments to your principal without advancing your due date. You have to send in a paper check along with a letter that explicitly states your intentions. Then they will often make mistakes and misapply it, and you have to email or call and nag them to fix it.
To avoid this problem, we transferred a balance from Sallie Mae to our Citibank card (which is only used to house this debt as we pay it off at 0% interest). However, it did involve a transfer fee. We are continuing to pay this down at $450 a month (and it will be paid off in June 2015, as indicated above).
In February 2015, our plan is to snowball the $500 we were funneling to the Travel Fund to our student loans, along with some extra I got from other parts of our budget, and we’ll put $756 towards our student loans. Unfortunately, Navient is such a pain that I don’t want to send those payments in and then have to worry about checking up on them every month. Instead, we will pour that money into a new category in our Money Market account (which also houses our House Fund* and our Travel Fund). It will be known as the Student Loan Debt Eradication fund! (You’re shocked, I know.) Then, every few months (3? 4? not sure yet), I’ll write a big check and the very specific letter to Navient and send it off. And worriedly check up on it every day until the payment posts properly.
- (Related to #1) If I can convince H, I’d like to open another credit card (?!) that has a 0% balance transfer fee and no interest for 18 months and transfer a huge chunk of our credit card loans over there to save on interest. H is not keen on the idea of opening up yet another credit card. He’s worried it will somehow bite us in the a**. I don’t know exactly what would happen – it’s not like we don’t pay our bills, and we have great credit. Anyone heard of a problem generated by having a high number of credit cards that you don’t use?
My biggest concern about transferring part of our student loan debt to a credit card again is that if we have an emergency (losing a job, for instance), we don’t have any recourse to stop making payments. A lesser concern for me is that having the divided goals (credit card payment in addition to student loan payments) makes me feel like I’m dividing our efforts, even though I know that it’s really all part of the same debt. The satisfaction of paying down the debt and seeing one balance dramatically lower is a pretty big factor for me – watching two or three balances slowly go down is a lot less satisfying, even if it’s not particularly the most cost-effective method.
I know I wrote a lot of stuff up above, but really, our main goal is to get rid of as much Student Loan debt as possible. There are other goals, too, such as putting aside $1200 into my IRA this year (nowhere near to maxing it out, I’m afraid, but it’s not our main goal right now). It doesn’t make it on to the goals list, because it’s just an automated payment that we’ve already set up. We will also be striving hard not to go into consumer debt and to continue putting aside money into our sinking fund each month, but those are no longer “goals” as much as a way of life, I hope!
Do you have any suggestions or insights for me based on what we’ve decided? Have you decided to make a total shift in your financial goals for 2015?