DD’s Annual Debt Checkup

Tonight at dinner I told me wife that we were down to only $3500 left on her student loan. She gave a chuckle and said that she has forgotten almost everything she learned in college.  I told her that was alright since the stuff she did remember was probably out of date anyway.

I figured it being January and all that it was time I gave a look to see how we are sitting debt-wise.  Last January when I did this we still had $99,625 in debt. This was comprised of:

• $94,274 – Mortgage
• $5,350  – Student Loan

As of today we now owe……..drumroll……$96,055, which is comprised of:

• $92,534 – Mortgage
• $3,521 – Student Loan

So in the last 12 months we paid down $3,500+ of debt.

Pathetic!

Even though I’m going back to school and barely working, I still thought we’d do better than that.  But looking back, I don’t see why I should be disappointed.  You have to make payments to actually pay the debt!

When our mortgage increased, I started only paying the minimum (I use to pay a couple of bucks extra before to make it a round number).  Which meant that our only hope of seeing any improvement was in paying down the student loan.

We started out in good shape in 2009.  I routinely paid an extra $75-100 a month.  But then for some reason in the summer I stopped this and went down to only paying $20-$50 extra.  And that is how we ended up only taking a $3,500 bite out of our debt.

What’s sad is that by this time next year I’ll have my own student loan to pay back.  I really wanted to be done with Mrs DD’s loan before mine kicked in.   That definitely won’t happen with my willy nilly payback plan.

So I came up with a new one.

Starting this month I’m going use a system where I designate $500 a month for our electric bill and our student loan payment combined.  For example in January the electric bill is $380, so I paid $120 on the student loan to come up with the $500.

Last year we spent a combined $4620 on these two categories ($2575 on electricity and $2045 on the student loan). So committing to increase this total to $6000 next year is a pretty big jump.  But I think it will be worth it.

Admittedly there is a slight problem with my plan.  What happens when I get socked with super high electric bills?  If that happens (which I’m pretty sure it will next month) I plan on paying the minimum on the loan and then make up the spending difference in future months when our electric bills are lowered.  So while a few month’s total might be over $500, the total spent on the year for these two categories will be $6000.

If I stick to this plan, it would be smart to utilize the budget option that my energy company offers so my payments would be stable and I’d know what they’d be in advance.  But where is the fun in that?

So, what do you think?  Am I crazy? Or crazy like a fox?

Do any of you have any irregular debt payment/saving plans that you feel like sharing with the rest of us?  Do you think that the “goofy” nature of  a plan helps or hinders the results?

I can see it both ways.

1. By making an individual plan it could provide extra motivation by giving a feeling of ownership over the idea, instead of just using a tried and true method such as the debt snowball.
2. But I also think strange plans could be a sign of a lack of focus and discipline, so a person could find themselves getting off track easily.

Hopefully #1 will be the case for us.

Until next time,

-DD