Looking At My Debt: The Big Picture

Looking At My Debt

I’m in debt. It’s not something I am proud of, but it is a fact of my life. I currently owe on three loans other than my house, which, while I also owe on, I am not counting towards my personal debt. Here’s what my debt looks like:

Type Of Debt Amount Owed Interest Rate Maturity Date
Student Loan $14,397.30 6.8% 04/2024
Car Loan $14,905.64 2.9% 11/2022
Personal Loan $8,531.51 12.99% 09/2020

 

In total, I am $37,834.45 in debt. This is a large number to me, but it doesn’t seem insurmountable. Actually, I am making progress.

Borrowing Money To Invest In Cryptocurrency

Earlier in the year, it was closer to $52,000 of debt because I took out another personal loan of $8,000 and invested in Ethereum and Steemit and had about $10,000 in credit card debt on top of that. Getting the second personal loan was a stupid choice, especially because I was speculating with the money. The good news is that it paid off–I made a little over $10,000 profit on my initial investment in three months. I am completely devested from Steemit and Ethereum, and I used what I made to pay off the second personal loan and all of my credit card debt. While it was a stupid move on my part, one that I made money on because of sheer, dumb luck, I did the right thing with the proceeds and have decided never to invest in that manner again.

That is, I won’t be borrowing to invest. It was a wild ride, and initially, it looked like I was going to lose about $3,000. The way Steemit works, though, is such that, once you’re vested, you can’t instantly devest. The price of Steem rose during the time that I had to wait to sell, and I ended up making $10,000 when I wanted to panic sell and lose $3,000. It was an emotional rollercoaster, one that I am never going to subject myself to again. When I thought I had lost the money, I went into a fairly deep depression that took months to overcome, even after selling all of my Steem for a profit. I’ll take the good fortune, though, because it put me closer to my goal of becoming debt free.

The Plan From Here

I know a little bit about debt repayment, mainly the debt snowball, which requires you to pay off all of your debts from the lowest to the largest, increasing what you pay toward each debt as things get paid off. I have never read one of Dave Ramsey’s books, but I have listened to him on the radio and read his website, learning about the snowball method. One thing that is interesting about my current debt load is that the snowball method lines up perfectly with the more logical and mathematical method of targeting the highest interest debts first. My highest interest debt is my personal loan–an attempt to pay off credit cards without cutting up the credit cards (I’ve since sliced all my credit cards in half and made the personal decision not to use them again)–but it is also my loan with the lowest balance. The same is true for my Car Loan–the largest of all my loans–and my Student Loan, the second largest of all my loans. They both have interest rates of 2.9% and 6.8% respectively, and I can follow the snowball and mathematical methods simply by making the payments every month.

 

Paying Down The Debt Faster

By only making minimum payments, assuming I acquire no new debts in the future, I will be completely debt free (except the house) by 2024, six years from now. Six years isn’t a long time. It’s actually kind of comforting to know that I will be completely finished in that time only by making minimum payments. Still, I’d much rather be done in two or three years time, but I don’t know how possible that is.

I know that by paying the extra money I used on my personal loan toward my student loan, I can pay the loan off faster. I plan on doing that, but we will have to wait until my personal loan is paid off to begin that process.

Saving for Taxes and Emergency Fund

Right now, I am not paying off anything extra toward my debt. I want to first save $5,000 in an emergency fund and save another $6,000 for taxes–I’m going to owe on the $10,000 I made on Steemit, and I also have a website that generates $7500 dollars a year that I will owe on when taxes are due. Additionally, my wife under-witholds, and I make up the difference, something that is fair considering she contributes more to the overall annual budget than I do (we keep our finances separate, btw). I need to save $11,000 total this year to make this possible. As of now, I’ve managed to save up $3,000 leaving me needing to save $8,000 is the next five months or $1600 per month. This is equal to my monthly surplus after all bills, so I will make the goal as long as I don’t spend any of my surplus for the next five months. After that goal is reached, I will work on paying down my debts faster, but until then, I’m just going to save.  

 

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