Mortgage Debt Reduction Goal Revisions
I decided to make a few changes to my mortgage debt reduction goal.
First, I realized a flaw with how I was counting progress. Before, I had looked at it, said I wanted to pay off $10k, and then any payment I made was being counted against that total. The problem I spotted was that amount paid does not equal amount reduced. I could pay $600 one month, but during that month, I maybe got $100 in finance charges. As a result, the total balance only went down about $500. Before, I was counting the $600, but I need to count it as $500. So now, my counter is “amount reduced” rather than “amount paid”. As a result, my current progress dropped a tad, but it is in the interest of accurracy.
Secondly, I am having a slight change of maintality as far as our timeframe. Before, I was thinking that it was the amount that I wanted paid off by around the end of the year since then we were going to buy a house. However, I want the $10k debt gone more than I want the house at the end of the year. Therefore, I am now looking it without some fixed timeframe. When the $10k debt is gone, we will buy a house. If it is the first of the year, then great. If we need to wait another month or two to get there, then that is fine. Ultimately, getting the debt gone will do more for us, so want to ensure that it is gone before we buy.
Third, I am adding paying off Dell Financial Services to the debt reduction goal. Previously, I’d kind of said “ohh, yeah, I’ll pay them if I have stuff left over”. No, I’d like all my really high interest debt gone. I’d like to have a balance remaining on only one account. It is only an extra $1,000. So this brings my total debt reduction goal to $11k.
And finally, I am going to be attacking the order using the debt snowball method. So with this, paying off my wife’s car loan will be the last one on the list, but over the span of the next several months, it would save us more money on finance charges. Getting the high interest debt gone instead of building up the money to pay off the loan makes more sense. Also, it will allow more pay-off gratification as I go along instead of waiting to save up $4,000 early on. So my order will be Chase ($430 left), Dell, Citi, then my wife’s car loan.
So my current progress is the following:
