Debt reduction/payoff.

[Pop_Rivit]

Congratulations. You have recognized the problem and are starting to correct the mistakes you made in the past. But unless you acknowledge all of your debt you are being disingenuous to yourself.

The car loan most certainly counts, as does the mortgage. You said you're 43 and have a 30 year mortgage-do you really want to be making mortgage payments when you're in your 60's and early 70's? You won't be truly debt free until you have every bit of debt paid off, including the house and car(s).

You've taken a bigger step than most here are able to do-you've recognized the problem. It's astounding to see some folks here look at debt as a good thing, not understanding that until they're completely free of debt they'll never know true freedom.

 

[99Saturn]

^ If it were me, I'd certainly keep the mortgage @ 4.5% and take the write-off. Refi the car loan (assuming it's possible) and carry it.

It astounds me that any mention of carrying debt around here automatically gets converted to someone must think debt is good. Personally, I don't like paying interest but if the opportunity exists to invest at a higher yield than the debt I'm carrying, it's worth considering IMO.

 

[andrewg]

Debt as high as yours certainly isn't impossible to pay off in the slightest. It'll take commitment. You certainly seem to have that. Sometimes a spouse or significant other can make paying off debt an even harder task. Hopefully that isn't an issue for you.
Keep focused....write the debt subtraction each month out on a paper and put in on the fridge. It helps to keep a tally and bring ones hopes up. Stay away from tempting items that you've been known to splurge on. It helps to visualize what it will be like to be debt free (or close to it). I've had the same problem in the past. Well over $30,000 in debt at one time (not including house). Lots of overtime, determination, focus....and yes, sacrifice. Fortunately my girlfriend and I are BOTH of the same mindset as well.
Good luck to you and just remember how great you'll feel not owing so much....and having extra money to put away for the future. And trust me, the future will arrive far too quickly.

 

[bvance554]

You're right OP, this is something that affects a lot of people but yet everyone is too ashamed to admit it or talk about it. I'm a few years younger than you and was carrying the same amount of debt a few years ago when i realized something had to change. I really think this is a generational thing. When we turned 18 and went off to college we had banks giving us credit cards. It was easy money. Recovering from 22k of debt is certainly doable. Its painful but manageable. I approached it as an extra car payment. I've known people who have had this same realization after many more tens of thousands of dollars of debt and i don't know how they manage to crawl of that. Probably won't. Of course you've already gotten plenty of the 'what i would do' scenarios even though you weren't asking for help. All I really wanted to say was kudos to you for broaching a topic that so many don't want to talk about or admit to, yet it affects so many. Someone may read your post and decide to improve their own situation.

 

[Kuato]

Originally Posted By: dernp
As unfortunate and negative as this may sound (no offence to OP), statistics show that once you have accumulated that kind of debt, you will never pay it off. Kids education, vehicles, home repairs and other life's expenses will crop up and you will be back where you started. I'm not saying it can't be done but it is extremely difficult. As long as folks have mortgages, then living with debt is pretty much the norm.


All the more reason that OP is standing tall and taking action. It can be done, I've done it.

 

[Shannow]

Get rid of it...if they say that money can't buy happiness, then debt can buy so much less of it.

 

[bustednutz]

Originally Posted By: Pop_Rivit
Congratulations. You have recognized the problem and are starting to correct the mistakes you made in the past. But unless you acknowledge all of your debt you are being disingenuous to yourself.

The car loan most certainly counts, as does the mortgage. You said you're 43 and have a 30 year mortgage-do you really want to be making mortgage payments when you're in your 60's and early 70's? You won't be truly debt free until you have every bit of debt paid off, including the house and car(s).

You've taken a bigger step than most here are able to do-you've recognized the problem. It's astounding to see some folks here look at debt as a good thing, not understanding that until they're completely free of debt they'll never know true freedom.


Mortgage has 20 years left. I will tackle that later. But right now I truly enjoy taking my Mortgage interest deduction. I really need it at my tax bracket. And I'm not whining at all about it. I've been very fortunate to be in this position. Thats why I need to capitalize on it now and ditch the debt. Especially high interest.

Avalanche thru the high interest debt first, then finish off the car. Don't owe much on that. Then pack money away for the future.

 

[Quattro Pete]

Originally Posted By: bustednutz
But right now I truly enjoy taking my Mortgage interest deduction. I really need it at my tax bracket.

So you enjoy spending a $1 in interest so that you can get 30-35 cents of it back at tax time?

 

[TrevorS]

If the net cost plus property tax and insurance is less than renting than yes, why wouldn't you enjoy the deduction?

OP - list all your debts by highest interest first. Pay minimum on all if them then the maximum you can on the top one. When that is paid off, move to the next highest one.

Are there any possessions you can sell on eBay or Craigslist? If so put that money straight to the debt with the highest rate.

Can you borrow against your 401k? If so, the repayment interest owed on the loan you give yourself is paid to yourself. You may be able to use 401k money to instantly remove your debt and not have to get a line of credit or balance transfer offers and pay any more interest to the banks.

 

[TrevorS]

Originally Posted By: Boomer
Cutehumor has hit the nail on the head. Keep more of your money and give less away for things that have no long term meaning. Cable TV is a great start. Go to a cheap phone plan as well. The Wall Street Journal a few years ago had an article about people worth one million or more. The one thing many had in common....almost no spending at all on things related to electronics (cable, expensive Internet, cell phone plas, etc).

I admire your effort to get this paid off. Bravo!!


Lol. Older folks (who saved) make up the majority of millionaires because of time and stock market gains. They don't have electronics because they're old!

There are always things you can spend your money on. It may be electronics now, it was something else before. But they are not millionaires because they don't buy electronics now.

On the other hand they are probably a miserly now as they were before because that's a habit of many people who have saved themselves into financial security.

 

[TrevorS]

Originally Posted By: bustednutz
Mostly credit card debts. I don't want to roll any of it into a refi'd mortgage, or a Heloc. I'd rather just slam it every month till its done. Half of it is at zero interest for a year. Not sure of the costs with a HELOC, may not be beneficial. But I may look into it.


Sounds like you understand money better than most.

In which case I am sure you're not touching the zero interest debt but slamming everything else, starting with whatever has the highest interest rate.

 

[bustednutz]

Originally Posted By: TrevorS
Originally Posted By: bustednutz
Mostly credit card debts. I don't want to roll any of it into a refi'd mortgage, or a Heloc. I'd rather just slam it every month till its done. Half of it is at zero interest for a year. Not sure of the costs with a HELOC, may not be beneficial. But I may look into it.


Sounds like you understand money better than most.

In which case I am sure you're not touching the zero interest debt but slamming everything else, starting with whatever has the highest interest rate.


Exactly! I'm "avalanching" the highest interest ones first. Then onto the zero percent one. If that zero percent offer expires before I can get it paid off, I may just move it to another zero percent offer if the terms are right.

Plus you were right about my mortgage....Mort, ins, prop. taxes all combined are cheaper then renting here. Therefore I like having that deduction.

 

[Hollow]

I'll be graduating within a year. My student loan debt...not pretty. Makes looking for a mortgage a difficult thing, carrying a large debt already for education.

 

[supton]

Originally Posted By: Pop_Rivit
You said you're 43 and have a 30 year mortgage-do you really want to be making mortgage payments when you're in your 60's and early 70's? You won't be truly debt free until you have every bit of debt paid off, including the house and car(s).


This is one of the reasons why I don't want to put an addition onto my house, nor move: I really don't want to restart a 30 year mortgage at age 37. I could, but I'd like to be a bit less tethered when the kids move out and I'm 50--I like to think at some point I could transition that mortgage payment into college payment, and help the kids on that front. It took me ten years to pay off college, and it was not a help when I bought my house (as I had college, auto and mortgage payments to deal with).

 

[Quattro Pete]

Originally Posted By: TrevorS
If the net cost plus property tax and insurance is less than renting than yes, why wouldn't you enjoy the deduction?

But you're still paying a $1 in interest just to get 30-35 cents back on your taxes. So, you're losing 70 cents. Wouldn't it be preferable to not have to pay interest and not be losing 70 cents? What I was trying to say is that keeping your mortgage outstanding just so that you can take a tax deduction does not make financial sense.

With that said, I agree that he should pay off his highest interest rate debt first, which probably means credit cards and not the mortgage.

 

[Mykl]

Outside of my mortgage, I've been debt free for about five years now. We recently financed the Camry, but I estimate that it'll be paid off within six months. We would have paid cash, but we wanted to preserve our emergency fund.

The next big milestone should be in paying off the house, which will happen in 5-10 years.

I'm looking to reach complete financial independece by 45. At that point I shouldn't need to maintain employment to cover the essentials.

 

[supton]

Wouldn't paying off the one that accumulates the most interest charges first be the one? Usually that is the one with the highest rate; but a mortgage is the one that has you paying a crazy amount of money over a 30 year span, so knocking that down aggressively seems to me to make big dividends.

By all means, I'd get rid of the credit card debt first. I'm just not sure that paying off a car in short order is better than socking away money into a mortgage. It's more comfortable to have but one loan. Anything happens, it's one loan. But I'm quite happy now that my mortgage interest is now less than what goes into principle. That is money you don't see again either.

Kinda have to play with scenarios in Excel to find the "best" answer, be it to save the most money or be out of debt fastest. Which I suspect is one and the same but I'm not going to run some tests to see that.

 

[Mykl]

I think when you're trying to decide which loan to pay off first and the interest rates are all fairly close, just go with the one that feels right to you. There is something to be said for simply appeasing one's own sense of security.

Personally, when I was in a lot of debt and I had to pay it all down, I liked going after the accounts with the smallest balances first. It gave me more frequent feelings of accomplishment, which is critical when you're just getting started paying everything down. You get some momentum in seeing how having less debt hanging over you affects you positively and helps to move you forward to the bigger pieces of debt.

 

[hattaresguy]

$22k isn't a big deal. I'd look for some 0% balance transfer offers, remember the less interest you pay the faster it goes away!

Typically whats more important than paying off your debt is changing your lifestyle. Think of it this way, if some distant relative left you $22k tomorrow and you paid it all off in one swoop, whats to prevent you from being in the exact same place in 5 years?

Paying off debt is like losing weight, its the lifestyle adjustment that's really important. Adjust that and the $22k will go away forever.

A low interest rate mortgage really isn't a big deal. Up here in the land of expensive houses and taxes and insurance even if you pay the house off its still going to cost a lot to keep it. Your far better off plowing money into investments than worrying about a sub 4% note.

 

[supton]

Originally Posted By: hattaresguy
Typically whats more important than paying off your debt is changing your lifestyle. Think of it this way, if some distant relative left you $22k tomorrow and you paid it all off in one swoop, whats to prevent you from being in the exact same place in 5 years?

Paying off debt is like losing weight, its the lifestyle adjustment that's really important. Adjust that and the $22k will go away forever.


This is a really good point. I'm not convinced that if I was given that much money that I wouldn't be back to where I am today, eventually.