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Tag Archives: Debt

Status: Ahead of Schedule!

  • Extra Payment: $1,435
  • Total Pay Down: $1,740.66
  • Total Pay Down Since Start: $8,482.46
  • Total Outstanding Balance: $62,690.29
  • Percent Complete: 11.9%

Feb13_Goal

*These numbers are for my Wells Fargo Private Loans only.

Month two of my rapid debt pay-down adventure is complete. Overall I did very well in February. I was able to make a pretty large extra payment thanks to low rent this month and modifying my 401(k) deduction.

Again I have tracked every dime I spent during the month and graphed it all out to give myself a visual representation of how well I am doing. I love seeing how my new habits are having a positive impact on my financial health.

Outstanding Debt & Goals

This chart plots my high interest rate Wells Fargo loan. The black bars give you my outstanding balance goal each month and the red line is the actual monthly ending balance I achieve.

Click to enlarge.

Click to enlarge.

I ended February $600 below my goal! Thanks to a special rebate on rent during the month and a clever adjustment to my 401(k) deduction I was able to make a much larger extra loan payment than anticipated. The best part: the adjustment to my 401(k) will allow me to keep making larger than expected extra payments. This means I will be well ahead of my goal in the coming months and this graph is going to keep looking better and better. Stay tuned.

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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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