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As it stands, I have $16,100 in credit card debt. The credit card debt resulted from a refinance of my HELOC at Prime + 2.5% variable (currently 10.25%) to my credit card at 3.99% fixed for the life of the balance. The interest rate on my HELOC was high because I did 100% financing. I gave up the interest expense write off on my taxes in lieu of actually having a chance at paying it off. I currently pay ~ $350 per month on my credit card with $300 going to principal. I only need to make monthly payments of $300 to pay it off within 5 years. Therefore, I am well on target to be debt free in 7 years.
My student loans are another story. I have a total of 14 student loans totaling $207k. I am prepared to pay off 2 of the smallest with a combined balance of $8k thereby reducing the balance to $199k. In 3/2008, I will be prepared to pay off an additional $5-6k with my bonus and tax return, thereby reducing the balance even further to $194k. To be honest, if I could at least pay off the $148k in non consolidated debt by age 35, I would be a happy camper. I have federal consolidated loans totaling approximately $59k at 3.5% over 30 years. The payment each month is $274 which is minimal. So, if I can knock off the $148k in higher interest student loans, I would be in good shape. I have a mountain to climb but I am ready for the challenge!
Despite my efforts to reduce debt, I am still planning to save for retirement. I will continue to contribute 5% to my employer’s 401(k) plan which they match 100%. For 2008, I will be changing my withholdings so that I don’t get such a large tax return. Instead, the extra money per month will go towards debt repayment. Lastly, I certainly don’t plan to remain in my current position but rather, I DO plan to practice law. So, that will presumably mean a higher salary in the near future and thus, more income for debt repayment.
With a salary of $90k, I will be able to pay off my loans in 7 years. With a higher salary, I can accelerate payoff. It is certainly my goal to payoff my debt in less than 7 years but right now, I am trying to be realistic. Just stay tuned and watch my progress!!
6 comments:
Hey Chitown,
You can do it!
No matter how big the mountain looks right now, as you start climbing it, you will get to the top quicker than you know. The reason why? Focus.
Another thing that will help is what you said near the end "With a higher salary, I can accelerate payoff." and you will get that higher salary now being an official lawyer (BTW, congrats!)
Would you be willing to post your current budget so we all can help you see where things can be adjusted?
That seems like an awful lot of loans to keep track of. Can you further consolidate any of them; or is it not in your best interest (because of rates) to do so?
You're right, 14 loans are a lot to keep up with. Thankfully, my student loan company lumps them together for the payment and you can further specify where you want payments to go.
The interest rate on private loan consolidation will be the same. Therefore, I think it's in my best interest to keep the loans seperate and snowball as much as possible.
Wow, that sounds like an amazing goal! But it makes me a little depressed because I've been out of grad school 5 years (already?) and still have like 30k+ in student loans. =S
But you're definitely on the right track and it's great to see your progress!
Chitown,
I just posted a comment on your other post. The problems you are sharing about credit card debt, funding your retirement account,paying down your heloc, and creating a bigger emergency fund is screaming for the solution I have for you!!!
email me at: info@financialadvantages.com and visit my website at:www.financialadvantages.com
Steve Herman
Chitown,
It looks like you're doing great even before you start earning an attorney's salary. I bet the debt will melt away pretty fast once you start earning more, if only you can keep your living expenses down and throw the higher earnings at your debt for a few years.
I'm looking forward to watching your progress.
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