Tuesday, February 23, 2010

No More Car Loan!

No more car loan! La La La!

I am super excited. I love my car and now it's really mine! Not the bank's!

So most people won't talk about their finances, but this is something that I think people can benefit from seeing how possible it is to get out of debt, and how rewarding it is!

I've been working hard the last few years to get out of debt. I'm loosely following Dave Ramsey's program.  I say loosely because I still do a fair amount of luxury spending, like the TV/DVD I bought for my kitchen last month and the new vacuum cleaner in December. I also use credit cards for my daily expenses instead of cash.

I am currently still on Baby Step #2- "The Debt Snowball," but so far I've paid off over $10,000 in credit card debt. It's kind of embarrassing to admit I had that much debt in the first place, but it was a product of a time in my life that I needed to grow out of. Paying off the credit card debt made it possible for me to not be so dependent to my salary.  I am now putting 35% of my salary toward paying off debt.

I am a huge fan of not having car payments. I hadn't had a car payment for a couple years, but last summer when my car's A/C went out, the car wasn't worth the cost to get it fixed. So, I got a brand new car, a cute little Scion xD that makes me feel cooler just driving it. I was able to throw 15-20% of my salary to my new car each month. Now I've paid it off in ten months- four years ahead of the loan schedule! It was mostly possible because I received a very nice bonus this year, but I've been consistently hacking away at it since I got the car.

I still have my second mortgage (29.5% of current salary) and my student loan (39.9%) to go. I'm lucky that my cooking classes count towards letting me defer the student loan payments so I can chunk the little extra at the second mortgage.  The interest rate on the second mortgage just irks me when I see the balance creep up every day.  The current plan is to pay off the second mortgage by June 2011 and the student loan by December 2012. As I focus on the second mortgage, I'll be allocating a third of my income to it. It's still a long road to go, but I've hit a major way point in getting there.

When all of this is over, I'll be able to live on a little more than half of my current salary. It means being able to max out retirement contributions. It means being able to travel. It means I am no longer chained to an IT salary.  It means that there are many other possibilities.  Now THAT is freeing.


Amanda said...

Second mortgage? I didn't know you owned a house?? Or am I misreading that?

We will start having to pay off Jason's school loans soon now that he's graduated. It's the first time in a couple years that we've had any debt beyond our mortgage. We've worked really hard to not have credit card debt. There are times when it's been necessary, but as soon as we have jobs again we pay that stuff off. It helps that we don't do a lot of luxury living stuff. With three kids a lot of that stuff is impractical anyway. But I'm real worried about what our finances are going to do as soon as our new school loan payment is going to hit us. :/

Faith said...

Congrats! And I think honesty and talking about those taboo subjects are important. Thanks for sharing!

Meghann said...

Hey Ann! It's been forever since we've talked but I saw your post and it intrigued me because we too are Dave Ramsey followers. We just finished paying off our student loans in December for a grand total of over $120,000 paid off in three years- woo hoo! We're now saving for a house and hope to be able to put down a huge down payment and then pay off the mortgage as fast as we can.

I'm glad to hear you are doing well and keep up the good work!

Ann said...

Amanda - yup! I've had my own house since 2007. It was a bit out of my range at the time with all the other bills I had, but I've learned to work through my finances. Having roommates along the way helped some too.

Faith - Thanks for stopping by!

Meghann- Good hearing from you! Congratulations on paying off the student loans! It really is a weight off the shoulders, isn't it?

TheresaLo said...

Good Job Ann. I know this is jumping ahead a bit, but how are you going to spend your salary when you have no debt?!!? This is just a hint, you have two beautiful niece and nephew who want to see the aquarium in Atlanta ;).... I know they are less than 2, but they told me that I swear. haha. Just kidding. Go reward yourself with a Cadbury Egg for a job well done! I think his Mr. Ramsey would approve.

Ann said...

Theresa- I love aquariums! And I adore the niece and nephew. Sounds like a plan! Do I have to drag you along to? :)

It'll be at least two more years before I get it all paid, off but it feels like it's on the downward slope now!