How I’m Tracking Every Dime

Mr. Money Mustache says:

Enjoying life while spending less money is a skill that develops just like a muscle, as opposed to a permanent state of deprivation.

money

One of the ways I am going to reach my goal is to build up massive frugality muscles. To begin I need to cut way down on the frivolous spending that has been dominating my budget for the past 18 months. The first step to cutting frivolous spending is to identify where that extra money is going. Identify it, recognize it, and neutralize it.

Mint.com does a good job of this already but I am looking for a little more detail. I want to be able to closely see how I am spending my money as it relates to my gross income and my take home pay. So, for the past week I have been building a badass budget tool that will track everything.

I have always been amazed at the magical powers that can be performed in Microsoft’s Excel program and I am a little bit of a spreadsheet nerd. With just a little effort I created a workbook that will track all of my income and expenses and all of my assets and liabilities. The best part is that this data is fully customizable. I can easily create summary sheets with my financial information and pull all of the data into colorful charts and graphs that give me a visual representation of where I stand.

These charts and graphs will help to re-enforce my debt pay down plan. Seeing my debts go down and my net worth go up will push me to do more and keep the process going. All I have to do is to input the data once a month (and keep making the extra payments).

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Mile One of the Debt Pay Down Marathon

Mr. Money Mustache says:

Developing a habit of small but frequent action that moves you in the right direction is all it takes to accomplish just about anything, given sufficient time.

sprinting

Today I began my rapid debt pay down plan. It was as simple as a call to the student loan department at Wells Fargo.

I dialed in the number and after navigating through a few menus was put on hold. I waited a few minutes listening to a piano play a song I have never heard before but have probably heard hundreds of times. I waited a few more minutes, each second I became more hesitant about what I wanted to do. Finally, a man named John picked up the phone. After the obligatory identity verification he asked me what he could do for me. Well, I said, I would like to make an extra payment on my student loan. He asked me which loan, and I told him the high interest one. He asked me how much, and I said $6,500. Next he asked for an account and routing number and I provided that information. Then he asked me if there was anything else he could do for me, I answered no.

Just like that the call was over. Ten minutes on hold and less than sixty seconds talking to John. Eleven minutes, my savings account was $6,500 lighter and my debt pay down marathon had begun. I didn’t have time to hesitate and there is no going back. My first step towards financial freedom had been taken.

It was a relief to actually begin the process. I have been planning this for a few weeks now and I can even go back to August when I found NMHD as the time when I started to really want to do something about my debt. However, I was a little worried that I would not follow through, that I would not even begin my marathon. It would be so easy for me to delete this blog and pretend like I never even thought about making extra student loan payments. My eleven minute call changed all of that.

I have begun to make extreme extra payments and it actually feels good. I thought I would be worried about having less cash on hand but that’s not the case. I am happy to be putting that cash to use, even more than that I am using that cash to improve my situation in life and I’m no longer tempted by it. I could have put a down payment on a new car or I could have went out and bought a bunch of new tech gadgets. I would be lying if I said I haven’t been tempted. I am particularly fond of the Ford Mustang.

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The Hard Numbers on How to Punch-Out $70k in Debt

Early Retirement Extreme says:

This is what being heavily in debt must feel like. Paying and paying and never really getting anywhere. Fortunately, there is a way out: An extreme increase in payments.

Goal Posts

Last time I talked about my outrageous goal of taking out my Wells Fargo student debt in just three years! I went into some detail about how much I owe, my new and improved budget, and the steps I need to take in order to funnel as much money as possible into my goal.

Today I am going to focus even more on the numbers. Specifically I am going to break down my Wells Fargo loans and really evaluate the steps to obliterating these debts in three years. The simple math says I need to make an extreme increase in payments.  Let’s begin.

Outstanding Debt

From here on out I am only going to be focusing on my Wells Fargo debt. I will worry about my federal loans once I am free from my private student loans.

My total Wells Fargo debt stands at $70,500. This is made up by two loans, one with a 6.25% fixed interest rate and one with a 9.49% variable interest rate. I made a total of $8,700 dollars in loan payments in 2012, that amount almost entirely went towards paying off interest. The outstanding balances on the two loans are:

  1. $36,000 @ 9.49%
  2. $34,500 @ 6.25%

The payment that is applied to loan 1 each month amounts to $403 and $326 goes towards the second loan. I will continue to make the regular payments on both of these loans. I am also going to be making large extra payments starting with the principle of the high interest loan first and moving on to the second loan. To begin, this month I will distribute my entire savings into that loan ($6,500).

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My Plan To Get Out Of Debt In 3 Years

No More Harvard Debt says:

Debt Pay-down Is a Marathon, not a Sprint … This is 26.2 miles up the side of an extremely steep mountain.

marathon

Obliterating my Student Loan debt has become my top priority. This is my battle plan.

I am embarking on the challenge of rapid debt repayment. The next few years will challenge my former relationship with money and my former lifestyle. I am doing this by choice. I am choosing to take the more difficult route, the route that will lead to financial freedom. I am choosing this because it is hard and things that are hard tend to reap the best rewards. Today I will lay my debts out on the table, acknowledge them, and form my plan.

The Back Story

After four years of college I have accumulated quite the portfolio of student loans. Unfortunately this is not a good portfolio, this portfolio pretty much represents my entire net worth (in a monetary sense) and it is a very large, negative number.

To pay for my first two years of college I took out substantial private loans through my bank, Wells Fargo. I needed the loans to cover my tuition expenses but I also used them to cover housing costs, textbooks, and food. I was also able to take out a few small Federal Loans that helped to cover a small portion of my annual university costs. However, I did not qualify for subsidized interest rates on my Federal Loans nor did I qualify for financial assistance from my university. So, Wells Fargo was there to pick up the slack and fund the rest of my education / college experience.

In 2008 the US financial markets crashed and lending from private banks dried up. I was only half way through my four years of education yet Wells Fargo informed me that I no longer qualified for a private student loan. I was stuck; I needed to graduate in order to get a job to pay off my debt that I needed to incur in order to get an education so that I would qualify for a job (follow that?).

My university told me that I did not qualify for need based aid, apparently my parents made too much money. My parents told me that they couldn’t afford the high cost of my private university education. For a few months the situation became desperate, I was on the verge of being forced to drop out of school. Eventually I was able to find a solution. My parents were willing to take out a parent loan to cover the cost of my education on the condition that I pay them pack. I jumped at the offer.

So I was able to fund my education. I borrowed the money, I went to school, I graduated, I got a job, and I started paying it all back.

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How I Got Where I Am Today

Mr. Money Mustache says:

Your Debt is not something you “work on”. It is a HUGE, FLAMING EMERGENCY!!!

mustache

“What you don’t know can’t hurt you!” they say, but it’s not true. What they really should tell you is: What you don’t know will DESTROY your future! Whoa, did that get your attention? because it finally got mine.

I thought I had a pretty good life, I thought I had my finances under control, I thought I had a great retirement to look forward to! As it turns out, I was just lying to myself through the egregious sin of ignorance. In reality I am in the middle of a DEBT EMERGENCY!!! And not just that, but I have been in a debt emergency for 5 years!! 5 YEARS! And I didn’t even know it.

How did I get here? How could I be so stupid? Why did I do it?

To answer these questions I went back to the beginning in an effort to illuminate the decisions that have lead me here.

I come from a comfortable life. My father was always able to put food on the table, sent me to the best private high school in town, and even bought me a car when I turned 16. He did this all with a high school degree having never set foot on a university campus, a model of the America Dream if I have ever seen one. Yes, life was good. However, despite this cushy existence, by the time I turned 18 and graduated from high school I was eager to leave it all behind and go do my own thing. I wanted freedom! and independence! and College was the way I was going to get it.

About that time every college in the country was sending me nifty little postcards and full color brochures that all said the same thing: We have the most beautiful campus! Our classes are the best and our professors the brightest! Your future will be better if you get your degree here! And you know what dear readers? I bought it. Hook, line, and sinker.

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