Monthly Archives: February 2010

Family Pays Off $90,000 Of Debt In Two Years!

The following article is a guest post from Ben at Trees Full of Money. Ben has written a great series on his website sharing the personal details of how his family paid off over $90,000 of debt in less than two years.

When I started blogging about personal finance matters over two years ago, I knew I had to share the story of how my wife and I overcame $90,000 of consumer debt in less than two years. After all, the focus of my website was to help people get control of their finances and lead less stressful lives.

I had read many great debt free success stories myself and each one kept me motivated until we eventually achieved our goal of becoming debt free! Telling our story would allow me to “pay it forward”.

What I didn’t realize was how challenging it would be to write about our success. Several times I started our story, but each time I lost focus eventually hitting a road block. I wanted to “spill the beans” of exactly how we did it, but I was apprehensive about sharing such intimate details of my financial shortcomings with the world.

Fortunately, I got over myself and finished the series! What follows is a brief summary of the seven articles I wrote detailing exactly how we got into our financial mess and how we eventually dug ourselves out from it!

How We Accumulated $90,000 of Consumer Debt: As the title suggests, part #1 of the series details exactly how my wife and I were able to accumulate $90,000 of debt in only a few short years. From graduating college in 1999, to hitting our financial bottom by the end of 2003, this series explains every major financial decision we made leading up to our realization that we had to do something drastically different.

Starting Our Debt Snowball: My wife and I utilized the “debt snowball” technique for repaying our debt. Part #2 of the series explains how we cashed out some of our non-retirement savings to get our snowball started with a bang.

Starting a Family Budget: Part #3 of our story details how we tweaked our family budget and cut back expenses to maximize how much money we had available each month to pay off our debt.

Essential Debt Repayment Tools: In Part #4, I explain the debt snowball spreadsheet I created and how valuable it was in keeping me motivated. I discovered that if I sold my motorcycle and applied the proceeds to our debt, our debt free date would arrive months sooner! As a result, the motorcycle went bye bye!

Keeping Motivated to Repay Our Debt: With no more savings to cash out and no more personal property to sell, my wife and I had to focus hard on our “debt snowball payments” as we worked our way through a mountain of credit card debt. Part #5 of our story looks at how cutting expenses, sticking to our budget, and working tons of overtime, enabled us to pay off our credit card faster than we ever imagined!

Everybody Has a Car Payment. Right?: Part #6 explains why the debt snowball technique was the right debt repayment method for us and how we would probably “always” have a car payment if we hadn’t discovered the snowball concept.

Almost Debt Free, but We Get New House Fever!: Part #7 looks at how the “new house fever” nearly derailed the momentum we had built to become debt free! Fortunately, we came to our senses and paid off our two remaining debts (student loans) to complete our quest to become debt free!

Ben’s story is very inspiring and I’m glad he shared it with my readers.  If you have written about your own debt reduction success and would like to share, contact me and let me know.  Ben, you and your family, ROCK!

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What Will It Take To Pay Off Our Mortgage Early?

In a few weeks, we will make our first mortgage payment.  Our mortgage is a fixed-rate 15 year mortgage.  Obviously, I’m not a fan of debt – and I’m going to work very, very hard to pay our mortgage off early.  Using a mortgage calculator I calculated the following the scenarios for paying the mortgage off early -

15 years and zero months = mortgage payment + $0 extra per month

12 years and 3 months = mortgage payment + $250 extra per month

9 years and 3 months = mortgage payment + $500 extra per month

7 years and 9 months = mortgage payment + $750 extra per month

6 years and 8 months = mortgage payment + $1000 extra per month

5 years and 10 months = mortgage payment + $1250 extra per month

Looking at our present financial situation, and keeping our retirement and education savings goals in mind, the $750 extra per month appears to be the most reasonable amount for which to shoot.

Here’s my current plan -

1.  I will make regular monthly mortgage payment each month.

2.  I will make an extra payment, each month, with a minimum goal of $750 extra per month.  Apply To Principal will be in the memo line of each check sent for extra payments.

3.  I will make additional extra payments, throughout the year, as I earn and / or save extra income, with a stretch goal of $1250 in total extra payments per month.

Hopefully, we’ll be able to turn our 15 year mortgage in to a (less than) 7 year mortgage.  Obviously, situations change, priorities shift, and life happens, but, as of today, this is our plan.

It’s been a long time since I typed this, so here goes – Debt Reduction Rocks!

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Quick Reminder And This Week’s Carnivals

I want to thank all of you for visiting No Credit Needed.  Once in a while, I like to encourage folks to subscribe to the site, via RSS or Email.  Once you do, you’ll have the very latest NCN content, delivered directly to your feed reader or email inbox, absolutely FREE.  Also, if you use Twitter, feel free to follow me and then say hello to me @NCN.  Now enough with the self-promotion – on to this week’s financial carnivals:

Len Penzo is hosting this week’s Carnival of Personal Finance

Simply Forties is hosting this week’s Festival of Frugality

Reduce Debt Faster is hosting this week’s Carnival of Debt Reduction

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The New House And New Goals For 2010

It’s been a full week and we are loving our new home.  We are still waiting for the new furniture for our living room to arrive, along with some bar stools for the kitchen, but other than those items, we are all settled.  (If you ever want to find out just how much stuff you have – move!  Whew.)

Obviously, now that we have a house payment, our goals and plans for 2010 have changed.  Instead of aggressively funding my retirement account, like I did for the past two years, we now plan to aggressively pay down our mortgage debt.  That being said, we still plan to save for retirement, kids’ college funds, and other long-term goals.  Here’s the breakdown -

Retirement Savings – 15% of household gross income

Education Savings – $2000 per child, for a total of $6000, per year

Cash Reserves - Increase from current 6 months worth of expenses to a full 12 months worth of expenses

Automobile Replacement Fund – $250 per month

Debt Reduction – Pay mortgage payments early and on time, with a goal of paying off 15 year mortgage in 7 years, or less

As first time home buyers, we will receive the first-time home buyer tax credit.  This money, once received, will be immediately deposited into our ING Direct Orange Savings Account. We dipped into our cash reserves in order to make a larger down payment, and I want to rebuild those reserves as soon as possible.

As for retirement savings, a portion of that will be in my 403(b), a portion will be in my wife’s pension plan, and the rest will be in our Roth IRAs.  For the next 5 to 7 years, my primary focus will be on paying off the mortgage, but I’ll also work hard to invest wisely and save for the future.

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