Looking at my 2014 goals, you may notice I made no mention of debt-related goals. Even though as of today I have $4,5k still to go, and the payments for all of them combined are a little over $120/mo, I will be paying as much as $900/mo over the course of the next 5 months to get rid of it all and be debt free by May (unless I get restless and pay it off my combined savings). I don't have to pay off all my debt. It's extremely manageable at $120/mo. Heck, is as little as my food fund!
Could I spend the $780 elsewhere, somehow? Sure. Could I save it? Absolutely. But I started a journey and I want to finish it, even if the crunch is not as harsh as it was at the beginning. Also, I've planned for this for 3 years, and there's no sense on "taking a break" when the goal is right in front of me. Who knows, Murphy may come about and crash things, leaving me stranded. I wont even give him the chance if I can help it.
And what a better way to begin the year than with a 3 paycheck month! Yup, those bi-weekly employees who get paid tomorrow will have their 3-paycheck months in January and July. Normally, I've used these funds for vacation funds, but no more. If I want a vacation, I need to work it. Right now, my move-out fund is priority.
Tanner, I did notice that it wasn't one of your goals but I knew you had a plan. May isn't so far away. That will be a good feeling to complete your debt free journey.
ReplyDeleteThanks! It sure will be exciting, if I don't skip around just to get there.
DeleteHeck, I'd put it down as a goal especially since you KNOW you'll knock that one outta the park by mid-year. 8-))
ReplyDeleteBesides, the momentum/good feeling it will give you to have something accomplished from your list by May(or sooner)are bonus points to your psyche.
I felt it was a bit of a cheat to do so. Is it still a goal if it will be accomplished without the shadow of a doubt, and with minimal extra planning/effort?
DeleteTanner you've come so far kiddo! I can't believe the end is in sight. Not that I ever doubted that you would conquer your debt. Slow and steady wins the race my dear and you are a winner!!
ReplyDeleteRemember, you need savings! If the interest rates are reasonable (no 24.99% APRs), then you might want to save some money, and leave May as the payoff month. That's still an awesome plan, and you will feel soooo good when that last check is mailed!
ReplyDeletePeace <3
Jay
Well, the remaining interests are all below 5%. Do you mean to save the money from here to May, then make a bulk payment? That'd work if I was getting more than .80% interest on savings... I am still saving the $35 increase I got a while back, at your request! Haha.
DeleteCongrats to be so close. That's totally a goal to list even if you know you'll get there.
ReplyDeleteGood thinking. I don't have a debt goal this year either. My debt to equity ratio changes depending on my career stage and interest rates so it's always a moving target. That's pretty cool how you'll be debt free soon :) Looks like your debt counter progress bars can use an update when you have time.
ReplyDeleteThanks! What do you mean about moving target on the debt to equity? If you have no debt, how does it change that much that often?
DeleteMy debt bars only get updated twice a month (shortly after payday, which is when I pay stuff), so my next change wont be until mid month. I have to add in the savings goal though. Thanks!
I have $2.50 of debt for every $1 of net worth so my ratio is 250%. Debt to equity ratio is a way to measure someone's financial risk, not unlike the popular debt to income ratio. The ideal ratio for me changes depending on economic conditions, interest rates, and my personal risk tolerance which will fluctuate over time as I start a family, go through periods of unemployment, or due to other life changes. If the average interest rate on my current debt doesn't change this year I'll probably be around 200% by early 2015. But if interest rates fall I will choose to pay down my debt slower as I may be able to use my savings for something else I value more like buying new glasses for work, finally getting braces, investing in a rental unit that's cash flow positive, or eating out with friends more. However, if my interest rates jump higher, I may choose to pay down my debt faster to get it to 150% or lower because otherwise the higher carrying cost would cause too much strain on my income and risk my solvency.
DeleteWithout debt I wouldn't have my home, my car, or my college diploma and the earning potential that comes with it. Debt has improved my life for the better. But too much debt is unnecessary and not smart. So I try to maintain the right balance, which I referred to as a moving target because it can change :) Businesses call it the "optimal capital ratio," which is simply the best debt-to-equity ratio for a company that will maximize its value. Not too much that it can bankrupt the firm, but not too little either that it's holding back the company's ability to expand, grow their sales, hire more employees, etc, all of which are commonly funded by debt, eg: bonds.
Of course most people do this on a personal level already :) They make conscious, calculated choices when going into debt, weighing the benefits of a better education compared to the associated student loan debt for example, and decide if it's worth it.
If one doesn't have any debt then their debt to equity ratio would be zero and it would stay the same despite changes to a person's net worth :) One of the best things about being debt free is you don't owe anyone anything, and it's a great feeling. Plus you also eliminate any risk to you of higher interest rates in the future :)
Have you set any goals of when/where you'd like to move? Your progress is a true inspiration!!
ReplyDeleteI had set goals to when/where I had wanted to move. But they've changed, so I made 2 goals for this year to re-figure things out, because I really have to. Haha.
DeleteIn my opinion, being in debt is the greatest challenge a person can have. It may be tough, but I guess the tougher the problem we have, the more we strive to persevere. Keep it up! Just keep your focus on your priorities, and you’ll achieve whatever you want in life for sure.
ReplyDeleteCharlena Leonard @ WeidnerLaw